Expertise Marketplace - Professional Service Firm Marketing Blog

Would Market-Based Management Work for PSFs?

Most PSF marketers spend their careers working to move their companies to embrace more nimble marketplace practices.  (Some have wailed to me that their companies are like barges in an ocean of speedboats!)  Indeed, in these consensus-driven micro-societies, new ideas often get watered down to the lowest common denominator in order to be accepted by all the fee-earning professionals. 

In the past, I've been skeptical of management theories that glibly promote new operational constructs as if they were the true panacea for growth.  "These folks obviously aren't thinking of professional service firms," I usually cluck.

But wait a minute.  Could there be merit to the theory called "Market-Based Management?" I saw it referenced on Paul Gladen's Innovation blog, which he picked up from a fascinating Wall Street Journal interview with Charles Koch (registration may be required).  Koch leads "a $60 billion, 80,000-employee empire, which just recently became the largest and most profitable privately held company in America."

You can read the WSJ article (I recommend it), but if you can't, take a look below at just a few of Koch's ideas, which ought to quicken the pulse of any professional services marketer: 

• Free markets and economic liberty should be studied as sciences (including the political aspects of these).  It appears Koch eschews traditional management philosophies and academic preparation.  Instead, he adheres to what he calls "the basic laws of economics."
• "Long-term success entails constantly discovering new ways to create value for customers and building new capabilities to capture new opportunities," he instructs. "In this sense, maintaining a business is, in reality, liquidating a business." Mr. Koch likens the cycle to Schumpeter's "creative destruction" -- where the old and inefficient are ruthlessly swept away by the new." 

• As a way to crystallize the concept above, Koch has trademarked the term "market-based management," which encourages a company's employees to think and act like owner-entrepreneurs, always seeking to provide new value to customers and always seeking to capture new opportunities.  Take a look at the text from this 1996 speech to get a sense of the underpinnings of Market-based Management. 

Most professional services marketers will find some of Koch's points familiar:   vision, integrity, humility, tolerance, responsibility, desire to contribute, and more.   For sure, PSF marketers have a keen understanding of the organized chaos that's involved in "herding cats" to market and sell a firm's services.  Some of us wish we had what Koch espouses:  practitioners who earnestly seek to build profitability, and who continuously put forth their most critical efforts to maximize new marketplace opportunities.  (Some of us have so much of it that we have to rein in the cowboys who go off on tangents and screw up our brand's equity!)

Nevertheless, I can't recall before seeing such a market-focused management construct as this, or one that so succinctly articulates how a business could maximize the opportunities that can be had from a shifting marketplace. 

Could this construct work in your firm?  (Admit it:  wouldn't you just love to have a legion of marketing-focused professionals whose dedication to growing the firm could be harnessed under the principles of Market-based Management? )

But could it work if it were applied without the charisma, energy and savvy of a person like Charles Koch? 

Luck AND effort

I'm intrigued by the issues laid out through Steven Levitt's and Stephen Dubner's Freakonomics blog and other writings regarding "how people get good at whatever they're good at" (by practicing it!).  Their May 7 2006 New York Times magazine article discusses research that says practice really does make all the difference in the eventual outcome of an effort.  "Of course!" I said smugly to myself.  "That's why building one's expertise is such a competitively astute thing to do . . . and creating the infrastructure to support the renewal of expertise is critical . . . " (blah blah blah - can you just hear me getting on my soapbox?). 

Not surprisingly, almost immediately the critics started pointing out the role of randomness and luck in success.  In this case, I think we should distinguish between dumb luck -- the kind that is so coincidental that effort had nothing to do with the lucky occurrence -- and designed luck.  Dumb luck is finding the $100 bill on the sidewalk.  Designed luck happens when you have intentionally put yourself into a favorable situation, and you were prepared to succeed. 

Designed luck happens when you bump into that unbelievable prospect because you were at that unbelievable conference because you proposed a fantastic speech to the conference planner a year ago. 

Designed luck happens when you continually put out a series of thoughtful blog posts and a respected influencer posts an endorsement comment, all because you made sure you linked to all the right blogs and utilized the many networking tools available to spread your virtual marketplace footprint.

So, yes, I believe that professional service firms have to "deliberately practice" their marketplace strategies.  This means knowing when to pursue "dumb luck" and when to stick with the original designed strategy, which you know will put you in line to capture the coincidences that will inevitably occur.  Whether you're a professional services marketer or practitioner, think about how this looks in real situations, when a seemingly fantastic marketing opportunity comes up that actually fits in nowhere.  I've seen many practitioners argue strongly for hopping on board with on these "coincidences," even though no one saw them coming.  Savvy marketers need to offer some critical thinking here, asking themselves and their colleagues: "Wait a minute, if we truly didn't see this one coming, is it really so significant that we need to derail our intentions?  How come we've never considered this so-called marketing opportunity before?" 

I remain a fan of the Freakonomics term "deliberate practice," and fact-based intentional marketing plans that are worked on, day in and day out.  I don't think marketers should "believe in the future," as much as they should "believe the future in."  Luck does happen; but the best future requires luck and effort.

So how come it appears that so many professional service firm leaders appear so willing to drop or derail their intentionally developed marketing plans to run toward the "lucky marketing coincidence?"  Is it because they don't put as much stock in the firm's marketing strategies as they should?  (If so, why not?)  Is it because they don't believe that dumb luck is usually just that - dumb?  Is boredom a factor here, and pedantic implementation of a (probably very good) marketing plan is just dull? 

Folks, how well do your firms do at the "deliberate practice" of marketing? 

Are we having fun yet?

I loved B.L. Ochman's recent post that marketers are not having enough fun.  Isn't it the truth!  Sometimes I think we are too harried, stretched too thin from travel, and too grim from internal political machinations in order to simply enjoy the ride. 

I interact with a lot of very successful professional service firm senior marketers and leaders.  I don't see enough spontaneous smiling and laughing.  When I do see it, oh what a relief!  One of my favorite CMOs does a great job of joshing her global marketing team members.  She's light hearted, affectionate and real.  I'm convinced this is partly why she's enjoyed her long tenure at her firm. 

I've also seen a professional firm CEO inject some fun into his very serious work.  He does it through a hilarious form of self-deprecation that instantly makes everyone relax and focus.  Clients and employees alike know it:  it's a refreshing jolt to be with him!

Of course, competition is fierce . . . the stakes are high . . . we have to be politically sensitive . . . yada . . .  yada . . .  But isn't there a place for being real, being lighter, enjoying the roller coaster thrill of business?  Are you having enough fun? 

Innovation is like an avocado

I loved reading Sergio Zyman's comments on The Innovation Illusion in the latest e-newsletter from CMO Magazine.   He hits the nail on the head when he says companies "get hung up on core competencies (what they know how to do) instead of core essence (what consumers will buy from them).  Zyman encourages us to think about the innovation issue as if it were an avocado -- a very effective metaphor, actually.

Even though he's talking here about consumer-oriented companies, his point is extremely appropriate for professional service firms as they endeavor to evolve ahead of marketplace shifts.  Yes, an increasing number of professional service firms are designating a specific innovation leader or innovation process.  But innovation, indeed anything related to developing new value propositions for clients, is still significantly under-resourced. 

I'd like to throw this question out to the CMOs who read this blog: what's your involvement in your firm's creation of new value for clients?  Is innovation stuck in a committee of retired practice leaders?  Does your firm's market research incorporate anything related to clients' unmet needs?  Is innovation being managed effectively at your firm?  What are you doing about it? 

Strategy and Positioning in PSFs

This 2004 article, "Strategy and positioning in professional service firms," is composed by Ashish Nanda, a Harvard Business School professor who also teaches in HBS's executive education program.   The first half of the piece is a rather elementary rehash of the differences between PSFs and other business entities.  The second half, however, offers a refresher on some of David Maister's principles of managing a professional service firm, with a good reminder of market segmentation, professionals' skill alignment and practice strategy.   
 

We Didn't See it Coming!

Has anyone else noticed how many "we didn't see it coming" situations there have been recently? Examples from our government abound (Condi Rice's comments on Hamas' winning the Palestinian elections two weeks ago; almost anyone related to our administration, when commenting on Katrina disaster response).

But let's be honest: this "we didn't see it coming" scenario happens all the time within the confines of professional service firms! (If you don't believe me, read Chapter One of my book Marketplace Masters for an uncomfortable number of examples.)

In thinking about this situation, I've run into two recent blog posts that beg the question: how can we, as professional services marketing leaders, better help professional service firms to "see what's coming?"  The first is Steve Shu's remarks on Schools of Thought in Management Consulting.  Steve says: ". . . consultants should lay out the options for clients with the qualitative and quantitative tradeoffs, risks, and benefits.  It is the client's responsibility to make a decision."  The second is David Maister's remarks on Exit, Voice, Loyalty and Principle. David notes how important it is to 1) take time to relate to your colleagues as real people, not just as functionaries, and 2) take time away from daily activities to ensure that you're doing the "right" thing for tomorrow.  Both are excellent points. 

And yet, it appears to me that professional service firms leaders (yes, even leaders of management consulting firms!) jump way too blindly to considering the "options," without really taking the time to develop a good understanding of the connections between events, and the way those events fit into larger patterns and trends.  I've seen oh-so-many professional service marketers watch, almost fearfully, as their firms' executive committees, practice leaders, or geographic heads make company-wide strategic decisions without having really taken the time to consider the patterns, connections and even possible marketplace scenarios that will affect their collective future.  Most of the time, these significant decisions end up being lowest-common-denominator choices, designed to appeal to the broadest number of partners as possible. ("We took the time to really listen to our colleagues!")

Isn't helping our firms to better navigate their future marketplaces exactly what professional service marketers should be doing?  If we can't find a way to do this, aren't we all still in the "we didn't see it coming" boat?  I don't think professional service marketers need to become expert futurists, but I do think we need to find resources that will help us bring practical, more fact-based scenario planning into our firms' corporate and marketing strategy efforts. Yes, it takes time, and it will require professional service firm leaders to recast their previous notions of strategic planning. 

Gambling on growth

Last night I listened to a friend as he worried aloud about his ability to help achieve his company's 2006 strategic growth goals.  As a senior manager of the company, he is charged with leading his troops to implement the company's announced plans.  He knows full well how stretched his staff is, and he fears that he'll have to deploy some of his less-capable team members on this latest growth initiative.  He thinks the decisions (that he helped make!) are too aggressive. 

I asked him a simple question: "Why are you pursuing this plan? " His simple answer: "We've decided it's time to grow." When I pressed him, he admitted that he was concerned about the growth path that had been embraced.  He felt strongly that the company should concentrate on its core market, and that this new growth initiative seemed like a big gamble -- too risky for a less-than-certain return.   

I couldn't help wondering about what I know is a typical activity at year-end: a management embrace of challenging growth goals, usually built upon incomplete marketplace data and less-than-thorough firm wide  discussions.  I've been there myself: sitting in meetings with senior peers, all feeling less than 100% certain (regardless of enthusiasm) that a particular growth goal is appropriate. 

So, why do so many businesses, including professional service firms, try so hard?  Why this determined pursuit of growth, when other competitive opportunities could possibly be smarter (beefing up a firm's infrastructure comes to mind)? 

I call upon PSF senior marketers to lead their firms to make better growth decisions!  Encourage -- insist upon if you have to -- more rigorous analysis, better competitive intelligence, improved due diligence.  Growth is a good idea, but I question whether it should always look the same each year (that is, the pursuit of ever-bigger market share, more revenues).   

Here's a book that may be helpful: The Growth Gamble, by Andrew Campbell and Robert Park.  It offers an interesting tool based on a "traffic lights" model that marketers might use to help guide their firms' growth decisions.  Yes, it's not big on professional service firms, but I think it's applicable nevertheless.

(Soundview Executive Summaries sells a summary of the book.)

Blue Ocean Strategy

After I participated in a survey, I received a complimentary copy of Chapter One of the new book by W. Chan Kim and Renee Mauborgne, "Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant" (Harvard Business School Press, 2005). 

It's an easy read, and it offers some powerful points.  The key points include: 1) too many businesses approach strategy in a limited, militaristic way; 2) strategists spend too much time mimicking the moves of companies, and do not attend enough to the Lessons Learned from blue oceans that have been previously created; 3) blue oceans occur when companies create differentiation and low-cost simultaneously; and 4) blue oceans are often found "in between" the boundaries of known industries. The rest of the book presents an overview of the six principles to build blue ocean strategies.    

As usual, I'll be curious to see if these theories can apply to professional service firms, and if the authors have done enough research on professional sectors to back up their principles.  Also, I'll be looking to see how much of the work of Joe Pine and Jim Glmore (co-authors of 1999's "The Experience Economy") appears relevant. 

Unveiling the Obvious?

Before it was published, I received an advance uncorrected proof of "The Big Moo." It's a compliation of more than 75 short essays that are authored by 33 business thought leaders and best selling writers, including Malcolm Gladwell ("The Tipping Point," "Blink"), Tom Peters, Guy Kawasaki, Christopher Meyers, Fast Company's Alan Webber and Booz Allen Hamilton's Randall Rothenberg; all edited by Seth Godin. 

I had been warned by some of my CMO clients that the book was lightweight puffery.  In many cases, I can't help but agree.  Although many of the essays offered entertaining anecdotes and stories, the ones I reviewed didn't appear to provide substantive advances in competitivley astute management or marketing strategy.   Nevertheless, this book may be helpful for those readers who seek a quick set of examples that illustrate simple axioms, or for marketing leaders who need quick ammunition to make a point with senior management.  It could also be good as a meeting- or conference starter. 

Examples include, illustrated in my own words:

• "Don't let anxiety paralyze you from focusing on truly important business issues;" 
• "measure what's important;"
• "remember the effectiveness of the less-is-more strategy;" and
• "sometimes it's better to replicate successful strategies in other industries than it is to innovate from scratch."

I didn't find any examples that were specifically focused on the professional services sector. 

It's unfortunate that the book's Table of Contents doesn't provide a quick illustration of the axioms featured within.   The titles for the essays, though, are certainly not boring: "Periodic Table of Differents," "They say I'm Extreme," "The Fearless Flight of Little Max," and "Bob Wears Pantyhose."