Tuesday, April 30, 2013

Social Media: Beyond the Hype (Reprise)

I first wrote about social media in July 2010 when its measurable marketing impact in our industry was yet unproven. Since then, many A/E firms have seen their social media activities produce tangible results, but most firms still struggle with the challenges I alluded to in my original post. Recently, PSMJ requested that I update that post for inclusion in their newsletter:

The frenzy over social media has been fascinating. It seems to dominate virtually every conversation about marketing. But is it overhyped?

Clearly it's helped companies expand their marketing bandwidth. But what about bottom-line results? That's the one aspect of social media that doesn't seem to be getting as much attention, at least not in our industry. I think I know why.

For one thing, most A/E firms have never been inclined to measure marketing results. The reason I hear most often is the difficulty in linking marketing activities with tangible outcomes. No doubt that can present some challenges, but low expectations probably also come into play. If firms don't expect tangible outcomes from marketing, why bother trying to measure them?

Most firms do track marketing activity, and social media can amp up the activity meter. That's where I suspect much of the excitement comes from. When you read about the phenomenal growth of sites such as Facebook, Twitter, and LinkedIn, it's hard not to get excited about the potential for reaching a lot of people.

In that sense, social media is much like trade shows 15-20 years ago. We set up our exhibit booth and waited expectantly as hundreds strolled past. Several, in fact, stopped to talk with us. We left enthused because we had engaged in more conversations with potential clients in two days than two months of sales calls could have produced.

But the shortcomings with trade shows were much the same as they are with social media today. You see, most firms failed to do the hard work to turn those conversations into sales. And most firms still fail to do the hard work to make social media actually generate new business. But enthusiasm will run high, at least for a while, because of all the connections (the modern substitute for conversations) being made.

According to a recent study by Hinge, A/E/C firms generate only 8.3% of their sales leads online, the lowest percentage among the professional service sectors they surveyed. Ironically, our industry is second only to technology services firms in recruiting new employees online. So it's not that we don't know how to use the internet to promote our firms. We just don't seem to be using it effectively for marketing our services, and social media constitute the largest share of our online marketing activity. So what's missing?

You need good content to drive social media marketing. Not long ago, content marketing became the rage among professional service firms. Except in the A/E business, where most firms generate little in the way of articles, white papers, webinars, videos, podcasts, etc. Why did we bypass the last wave—the efficacy of which is better demonstrated in the research—only to jump enthusiastically into social media?

I suspect it's a matter of convenience. It's easier for marketers to create a presence on social networking sites than to try to extract useful content from their technical colleagues. Yet we need to recognize that content marketing hasn't gone away; it has spread to the internet and social media.

A study by Business.com looked at business usage of social media and confirmed that content is still king. The most common business uses for social media were: attending webinars, listening to podcasts, reading user ratings and reviews, subscribing to feeds from business information and news sites, reading articles and blog posts, and searching for business information. 

With so many firms staking a claim on social networking sites, the question you should ask is: Why should folks pay attention to us? It's obvious that good content is the key. It doesn't necessarily have to be your own (although I strongly recommend creating some of your own content). You can link to others' content if your cupboard is bare. But that still takes time finding it, which leads to the next point.

You need to commit the necessary time and resources to get consistent results. A little more marketing is certainly better than a little less. So if you find social media a convenient and efficient way to broaden your marketing reach a little bit, so be it. But if you want to have some real impact, it's going to require some substantial effort. Is it worth it?

A study by the Social Media Examiner found that 59% of marketers spent six hours or more per week on social media. But it was the 15% who spent more than 20 hours who saw significant improvement in sales directly attributable to social media use. In our business, however, the bigger question is how much time you invest in creating good content that can be shared through social media.

I confess to being only a casual user of social media (oops, there goes my credibility). But I produce significantly more content than most of my A/E firm clients. That can make even my modest time on social media pay off. For example, I recently wrote a blog post on "Common Strategic Planning Mistakes" which I tweeted about on Twitter. That got picked up by others who collectively have tens of thousands of followers. Within a few days, the Twitter buzz had driven almost 7,000 people to my post, generated a few email conversations, and appears to have resulted in a new client outside our industry.

Some people (and a few companies) attract a following through social media because of their celebrity. You and I have to earn their attention. So what's your plan? Dabble or dunk? Make sure you align your level of activity with your expectations. Social media isn't an excuse to cut corners; like any good marketing, it requires a commitment of time and resources.

You should have specific objectives in mind. Marketing needs to be more than enriching the atmosphere with positive vibes about your firm. It should deliver tangible, measurable results. The truest test that marketing is working is when clients are contacting you in response. So surely you should be tracking who contacts you through your social media marketing efforts. Even better, how many sales does it lead to?

I'm also an advocate for tracking leading indicators, results that you can reasonably expect will eventually deliver to the bottom line. Some leading metrics to consider:
  • Google PageRank
  • Traffic (visitors, followers, fans, etc.)
  • Interactions (comments, discussions, messages)
  • Mentions (use Google Alerts to track when your firm's name is mentioned on the web, retweets)
Obviously, your objectives and level of effort go hand in hand. That's why it's important to weigh both together. Many firms have dived into social media without clear objectives in mind. So how do they measure whether it's working?

You need to determine if you're reaching prospective clients, specifically decision makers. You can certainly raise your firm's visibility with social media, but are you reaching the right audience? Are you getting to client decision makers? Until recently, the answer seemed to be generally no. But evidence suggests that this is changing as more people—including business executives—are using social media. 

One study found that 60% of B2B decision makers use social media, compared to only 50% for the average internet user. Does that include decision makers in our business? Well, the Hinge study found that A/E/C marketers ranked social media among their best tactics for generating sales leads online. So they must be reaching the right audience at least some of the time.

Of course, there's value in connecting with people who might not be making buying decisions, but can influence those decisions—or at least connect you to decision makers. The new clients I've generated through online marketing often have resulted from someone further down in the organization recommending me to his or her boss.

Besides more decision makers using social media, another positive trend is the decline of companies blocking access to it. When I first wrote on the topic in 2010, over half of companies blocked access because of security and productivity concerns. But a recent study projected that the number will be below 30% by 2014.

These are some of the requisites for success in social media marketing. Which of these is your firm doing? The average A/E firm is more likely to have a social media policy than a social media strategy. But that hasn't quelled the hype about it. Perhaps it's time to convert some of that enthusiasm into measurable results. The potential is there if you're ready to make the commitment.

Tuesday, April 23, 2013

Can You Escape the Commoditization Trap?

Over the years, I've heard a lot of angst expressed about the growing commoditization trend in the A/E industry. Yet I've not seen many firms do much about it. Firm leaders are often quick to blame our profession for much of the problem ("we're too eager to discount our fees," etc.), but too many of them seem to think there's little they can do to escape the commodity trap.

The fact is that in every industry overtaken by commoditization, there are always companies that have found a way out. Take personal computers, for example. While most computer manufacturers have been grappling for their piece of a shrinking market by continually offering more for less, Apple has resolutely balked at joining the fray. They've charged significantly more than their competitors and yet have seen their U.S. market share grow from 4% in 2006 to almost 14% in 2012. And this while the performance differences between Macs and PCs have narrowed.

Commoditization occurs when a service or product is widely available and generally interchangeable with that provided by other suppliers. With few meaningful differences between them, buyers choose a particular supplier's service or product primarily based on price. Most A/E services are not in this sense real commodities as the majority of clients still use some form of qualifications-based selection. But most firms are feeling the pinch of increased pricing pressures and declining client loyalty, especially as strained budgets have pushed clients to shop for better value.

So the secret to beating the commodity trend is largely summed up in two connected strategies—differentiation and delivering added value. This is nothing new in concept, but has proven elusive for most A/E firms in practice. Indeed, I sense that most firm leaders believe these to be either impractical or beyond their reach. Rather than take commoditization head on, firms are more likely to seek relief in new services or geographic expansion, or simply to succumb to the pricing wars.

If you'd prefer to break from the pack and take meaningful steps to escape the commodity trap, here are some things to consider (most drawn from previous related posts, to which I provide links for more information):

Meet strategic needs. Most client organizations exist for other purposes than doing engineering, environmental, or architectural projects. The projects we do are ultimately driven by the need to achieve important business objectives. Yet technical professionals are prone to ignoring the business context and focusing on their areas of technical expertise. If you want to add value to what you do, solve business problems. Connect your work to meeting your clients' strategic needs.

Deliver exceptional client experiences. Evidence suggests that clients value the working relationship as much as they do your technical expertise. Yet the typical A/E firm gives far more attention to technical work than to providing superior service. Companies that excel in delivering exceptional customer experiences, one study found, do two things consistently: (1) they define a delivery process for ensuring quality customer experiences and (2) they solicit customer feedback on how they're doing and what they can do better. This becomes much easier when you create a culture of client focus.

Develop great project managers. You can't deliver exceptional client experiences without great project managers. These individuals are the primary conduit through which you serve clients. Unfortunately, mediocre project managers outnumber the extraordinary ones by a substantial margin. In one client survey, only 7% of clients gave their A/E service providers an A grade for project management. And in my own interviews with hundreds of clients over the years, the majority of criticisms have been aimed at project managers. Among the complaints: poor communication, slow responsiveness, broken promises, and failing to understand client needs and expectations.  

Master relationship building. Every firm I know touts its commitment to strong client relationships, but I've encountered very few that take the process of relationship building seriously. What this means is being deliberate about creating the kind of distinctive client relationships that add value to your work and keep you from becoming a commodity. Start by identifying the qualities that characterize your best client relationships. Then determine what specific actions are involved in building those qualities into your other relationships. Of course, not all clients are interested in having this kind of relationship. That's why you should consider screening prospective clients for relationship potential, and considering where you are in the relationship life cycle with existing clients and how you might take it to the next level.

Bundle and rebrand services. I was in the environmental business in the mid-1990s when firms were scrambling to take advantage of a promising emerging market—using insured fixed-price contracts to transfer environmental liabilities from responsible parties to companies interested in redeveloping contaminated properties. It involved a complex suite of services across several areas of expertise, which presented challenges in marketing it to clients. But one of our competitors, TRC, bundled those services and branded them with the trademarked name of Exit Strategy. They remain the market leader in this area.

When I've suggested a similar strategy to my A/E firm clients, I usually get push-back. "If we use different terms to describe what we're doing, clients won't understand it," is a common rebuttal. So educate them! As branding experts have long espoused, when you name it, you own it. I don't think TRC did anything different technically from what we and other firms did, but they became the market leader because they differentiated their service in the minds of clients.

Focus on a few target markets. In a tough economy, there are advantages in diversifying across multiple markets. But that can also lead to commoditization of your services. How? As noted above, you add value when you help clients solve business problems. But this requires that you are familiar with your client's business. A/E firms that offer their services to multiple markets often lack a deep understanding of those markets. That makes it much harder to connect their services to meeting strategic needs.

That doesn't necessarily mean you should exit the markets you're already serving. But I would suggest selecting perhaps two or three markets to really concentrate on. Get involved in relevant trade groups, become an advocate for those industries, write articles for their journals and make presentations at their conferences, and specifically tailor your services to their distinct needs.

These are but a few of the strategies you can follow to escape the commodity trap. The key is not to resign yourself to the status quo. If Starbucks can turn a commodity like coffee into a premium product, can you not do something similar with your services? It won't be easy, but neither is trying to stake your share of a highly competitive marketplace with an undifferentiated service offering.

Saturday, April 13, 2013

The Benefits of a Single Profit Center

One thing I've learned in 15 years as a consultant: The more organizational subdivisions you create, the more hurdles you have to jump to promote collaboration and consensus across the organization. This can happen in a single office with multiple departments. It's certainly a challenge with multiple offices. But the problem seems to escalate when you add multiple profit centers to the mix. 

Yet this is by far the prevailing model in the A/E industry, and professional services in general. Why? Some believe it promotes entrepreneurship. Others actually think the inherent internal competition is a good thing. The most common reason I've heard for favoring this model is that it supposedly enhances accountability among office or business line leaders.

Count me in the small minority who believe the disadvantages outweigh any advantages. I continue to encounter situations where it's apparent that having multiple profit centers has contributed to significant organizational dysfunction. One of my favorite examples is the large A/E firm that submitted four proposals for the same contract, each coming from a different office or subsidiary. Other problems I've seen that are related to this structure include:
  • Communication and coordination issues
  • Reluctance to share people and resources
  • Lack of consensus on corporate strategy
  • Poor cooperation on company initiatives
  • Limited sharing of market knowledge and client contacts
  • Difficulty promoting cross selling 
Of course, there are many firms that have thrived with multiple profit centers, finding ways to counter the kinds of problems mentioned above. My intent is not to try to discredit this business model. Instead, I want to propose an alternative to those firms that are struggling to make multiple profit centers work as well as they hoped—the single profit center model.

I worked for ten years for RETEC, a national environmental firm organized as a single profit center. I saw firsthand the benefits of such a structure, combined with a culture that highly valued collaboration and sharing across the organization. We stressed the value of community, of acting as one company in each of our 25 offices. Some of our distinctives:
  • We had no organizational impediments to pooling our best resources to serve clients, especially on larger projects. There was more collaboration between offices than I've seen in any other firm.
  • We worked hard to balance workload among our offices, sharing people to avoid too little or too much utilization in any location. Any local hiring decision involved an assessment of how it impacted other offices.
  • There was no lack of accountability among branch managers without the profit metric. We were measured by utilization, revenue factor, sales, staff satisfaction—and how well we worked with other offices.
  • We shared technical, market, and client information in part through various adhocracies designed to keep us at the forefront of our industry.
  • Despite lacking the supposed benefit of pushing the profit motive down to the local level, we routinely produced profits that were two to three times the industry average. As you might expect, those profits were shared with all employees based in large part on overall company performance.
There are a few notable firms in the A/E and environmental industry that similarly are organized as a single profit center—Carollo Engineers, Kimley-Horn, RK&K, Canon Design, and Haley & Aldrich are examples. Each of these firms seem to share more than a similar organizational structure; they have a common philosophy about the business. Kimley-Horn president John Atz summarized it this way in an interview:
We believe that a structure of multiple profit centers creates silos, with each group motivated to place their group’s performance ahead of the overall firm’s performance. We establish goals for each operating unit, but we only track profit for the firm as a whole. It is our experience that this approach increases efficiency, as we are not tracking charges between groups. It also increases teamwork and collaboration across the entire organization. We often shift resources to wherever the client needs are the greatest, regardless of location, which also allows us to balance our staff and workload across the firm. Operating as one profit center makes this easy. We also encourage staff to make decisions “one level up:” as an individual, make decisions that are in the best interest of your group; as a group, do what is in the best interest of the region; as a region, make decisions that are in the best interest of the firm. At the end of the day, we are one team, working toward one common goal.
If your firm aspires to have similar outcomes but has found them difficult to achieve with your current structure, maybe it's time for a radical rethinking. The recession has brought new challenges and opportunities that belie a "business as usual" approach. This business is tough enough without having to contend with unnecessary organizational barriers.

Saturday, April 6, 2013

Tracking Your Time Can Be a Real Wake-Up Call

Shortly after being appointed operations manager several years ago, I enrolled myself and my management team in an intensive productivity training program. It turned out to be one of the best decisions I ever made. We learned a lot about ourselves and each other, and acquired several techniques for maximizing our productivity and performance.

One of the exercises we did was particularly revealing. We tracked how we spent our time over the course of a work week, recording our activities in 15-minute intervals. One of the goals of the program was to do a better job of blocking time for specific tasks. We had learned that multitasking results in a net loss of productivity. The time tracking exercise would show how far we had to go.

That week was an atypical one for me, and I initially feared it would skew the results of the exercise. Out of the 63 hours I recorded at work that week, 42 were spent on a single task—a major proposal. But to my amazement, I only had one block as long as two hours on a task (the proposal). There were several one-hour blocks, mostly after hours. But the bulk of my time was expended in blocks of less than an hour, despite the fact that two-thirds of it was on a single task!

Most of my colleagues had similar results, as have my clients who have since taken my advice to conduct the exercise themselves. We are all prone to multitasking—switching back and forth between tasks in a short time period—and it costs us, not only in productivity but in mental acuity. So it not only takes longer to complete tasks, but we don't perform them as well.

For this reason, I strongly encourage you to inventory how you spend your time at work. I have developed the Time Tracker to help you record your time. I conceded to 30-minute intervals, which doesn't capture task switching as well, but is easier to keep track of. I also added another element—assigning your tasks to Stephen Covey's Time Management Matrix.

Covey researched how managers in various organizations spent their time. Those in the top performing organizations spent most of their time in Quadrant II, activities that are important but not urgent. Those in typical organizations spent the bulk of their time in Quadrant III, activities that are urgent but not important. Do you know where you spend most of your time?
The difference between the two groups reflects the natural tendency to be controlled by urgency. The most successful managers resist the pull, focusing most of their time on what matters most. Typical managers are so influenced by urgency that they end of spending most of their time on things that aren't important. Any wonder that there's a difference in how their respective organizations perform?

The pull of urgency no doubt inhibits our ability to block time as well. We are constantly yielding to whatever tasks are most urgent, at the cost of those that are less so (and often more important).

So how do you decide what is important? It's often not an easy question to answer. If something needs to be done, does that make it important? If it needs to be done now, does that make it more important? Not necessarily. Let me suggest a few guidelines on how to distinguish between Quadrant II and Quadrant III activities:
  • Quadrant II activities typically have a future, long-term payoff. They are the things you know you should be doing but keeping putting off. Quadrant III payoffs are more immediate, which is why we're attracted to them.
  • Quadrant II activities are often tasks that you can't delegate. Quadrant III activities, by contrast, may seem to demand your immediate attention, but could probably be handed off to someone else.
  • Quadrant III tasks are usually imposed on you by others or by circumstance. Quadrant II tasks are more often something you undertake of your own volition. Saying no is key to preserving time for Quadrant II activities.
Time is your most strategic asset; you can't do anything without it and it's of limited supply. How you spend it certainly deserves your attention. Understanding how you currently spend your time will help you determine what improvements are needed. And tracking your time usage could provide the wake-up call you need to get you started.

Monday, April 1, 2013

Create Value by Meeting Clients' Strategic Needs

Most likely you're aware that A/E firms don't command the magnitude of fees that most professional service firms do. I've long pondered why this is. Our industry has probably been more willing to discount our fees. What we charge is often limited to a percentage of the cost of the facility we're designing (especially in architecture). Simple supply and demand may come into play; we do seem to have a lot of competitors!

But I suspect there's another key factor that is usually overlooked: Most professional service firms do a better job meeting their clients' strategic needs. These are high-value needs that relate to the client's overall business success. Think about it—lawyers, accountants, management consultants, advertising agencies (to name a few)—are directly involved in helping their clients achieve bottom-line business objectives.

What about A/E firms? We talk about helping clients succeed, but often fail to make the direct connection between what we do and our client's strategic goals. I believe the connection can be made, but we're prone to focusing on technical issues and overlooking how they impact business results. If you can make that connection, I'm convinced, you add value to what you do.

It's helpful to think of three levels of client needs: strategic, technical, personal. A/E firms naturally gravitate toward meeting technical needs. But meeting strategic and personal needs is more valued. Their relationship to corporate and personal success is more readily established. They typically require more customized (hence more valued) solutions. There is a stronger emotional connection to strategic and personal needs.

Yet while these different levels of needs are distinct, they are necessarily intertwined. A/E projects are almost always driven by strategic needs. Personal needs are met (or not) largely in the how the client is served in the process of doing the project. When you can envision the project as more than a technical problem to be solved—but as a means to achieve corporate and personal success—you are on the path to creating added value.

So how can you do a better job connecting your technical solutions to meeting your clients' strategic needs? Here are a few suggestions:

Learn as much as you can about the client's strategic needs. Most strategic needs fall into one or more of the following categories:
  • Financial issues
  • Competitive forces
  • Political issues
  • Regulatory drivers
  • Operational issues
  • Management directives
  • Public relations issues
You might find this list of strategic needs questions helpful in asking clients about these needs. The more familiar you are with your client's business, the easier it will be to identify strategic needs. Firms that specialize in a few targeted markets tend to be more profitable in part because they better understand their clients' strategic needs and are better able to meet them.

Uncover the project's particular strategic drivers. As noted above, our projects almost always are driven by strategic needs. Yet I find that technical professionals are often unclear as to what those needs are. When I work on proposals, I routinely ask the question, "Why is the client doing this project now?" It's amazing how seldom I get a satisfactory answer from those who supposedly know the client best. Many seem satisfied simply to address the technical scope of work.

But from the client's perspective, there is more to the project than its technical scope. It meets one or more strategic needs. Fail to recognize that and you've effectively devalued your work. Remember the old fable about the quarry workers? When someone asked what they were doing, one saw only the work's technical scope: "I'm cutting the stone into building blocks." Another saw the strategic value of his job: "I'm helping build a beautiful cathedral!" Be diligent in uncovering specifically how your work meets strategic needs.

Define how you will meet project-related strategic needs. Raising the value of your work involves more than simply making a conceptual connection to strategic needs. You need to demonstrate how you will specifically meet those needs. Sometimes this is largely perceptual. In other words, your firm is meeting strategic needs but it may be overlooked unless you point it out. For example, showing how projected energy savings will reduce overall operational costs.

In other cases, you may need to sell the client on complimentary services that meet strategic needs. When I worked in the environmental industry, community relations were sometimes a critical facet of a successful project (and the impact could extend well beyond the project itself). Because of our firm's track record for successful community relations programs, we could enhance the perceived value of our remediation expertise.

Even if you don't have such complimentary services in-house, you can still take steps to connect your work to meeting strategic needs. You might subcontract the services needed, or show how your project strategy will enable the client to better satisfy those needs.

Document your contributions to achieving strategic objectives. How we write project descriptions says a lot about how we view our work. We focus far more attention on what we did than what we accomplished. In my last position as head of corporate marketing, I set out to compile new descriptions of our most important projects. Besides the usual information about project scope, I asked project managers to describe what primary problem(s) they were solving (strategic drivers) and how they added value. Most of them struggled mightily to offer more than a technical scope of work.

That experience probably illustrates a part of the reason that we aren't compensated more. We don't tend to think of our projects as solving business problems or adding strategic value. If you want to be more valued by the client, you need rethink how your projects create value—and document it. Not just for the marketing department, but for the client. And in reviewing project performance with the client, ask about how well you're meeting the strategic needs associated with it.

Help your client contacts succeed within their organization. Those professional service firms that are making more money than you? They almost certainly aren't working for the same client contacts that you are—they're working for their bosses. That's because the people highest in the organization are typically the most concerned about strategic needs, and are willing to pay appropriately to have them addressed.

It may be quite difficult to get an audience with senior client executives, in part because it can strain the relationship with your primary contacts to have you go over their heads. So what can you do? First, understand what strategic needs impact your contacts the most. How do those strategic issues affect their jobs? Which strategic objectives affect the assessment of their job performance? Then outline how you can help them succeed in meeting those strategic needs through your project work.

Once you demonstrate your firm's ability to address strategic needs, you may be able to gain access to key decision makers higher in the organization—through your current contacts. This is particularly true when your contact can see the personal benefit in making the introduction. In this scenario, you are meeting both strategic and personal needs...and creating added value.