Rainmaking Problem # 7: Innovation or Overreach
Here is another of the rainmaking problems that I offer as topics for discussion. I hope you’ll offer your suggestions in the comments.
One way to make it through this recession, when clients are no longer buying what you have to sell, is to innovate. That is, you figure out what they do want and create a service to deliver it. Doing this not only improves cash flow, it also strengthens the firm by diversifying your offerings. It will help your firm come out of the recession stronger than it is today.
Maybe. But hunger spoils our judgment. Eager to avoid a financial crisis, professionals sometimes overreach, taking on business they shouldn’t. If the work goes poorly, they lose the client and dent their reputations. That makes it harder to get other clients. As the old saw goes, among our most important decisions is deciding what business not to take.
So, how do you tell an opportunity to innovate from an overreach which you will regret making for the rest of your career? How do you know when your need is compromising your judgment?
(Got a problem selling professional services? Feel free to email me your problem and it may become a future “Rainmaking Problem.”)
January 7th, 2009 at 2:25 pm
[...] Rainmaking Problem # 7: Innovation or Overreach [...]
January 7th, 2009 at 5:07 pm
The way I look at it is like this: if we need to hire someone new to design/develop the new thing, and someone else new to support it, then it’s an overreach. But, if our current stafff can handle the design/development/support of the innovation then it’s in line with our core business strenghts and should be pursued.
January 7th, 2009 at 5:21 pm
Good thought, Martin. That’s an efficient and straightforward way to make that decision.
One change I’ve made recently is to restructure the way I sell my products and services without affecting my rate. In the past, a prospect might have a $24,000 budget, which translates to a $2,000 monthly retainer. My business model requires a minimum of $2,500 as a monthly retainer. My recession solution? Structure the $24,000 budget as eight $3,000 monthly retainers. The benefit to the client is that we choose the most effective, possibly non-consecutive months, to do the public relations work. This works beautifully tying the work to trade shows, etc. The benefit to me is not taking monthly retainers below my profit margins.
January 7th, 2009 at 5:49 pm
Do a CBA, short-term and long-term, best and worst cases. Add a cushion for yourself in the delivery terms (by adjusting timing or volume, not quality). Offer incentives to sign up now, and possibly offer payment terms. If your inovation product or service will also be seen by the client’s customers as something new, help the client leverage that advantage by offering ad sharing (or similar) in a pass-through agreement with your client.
Have hard check-points with “go or no-go” options and exit strategies.
Cross your fingers and put a frog in every corner.
January 7th, 2009 at 6:25 pm
Andy,
To me, your response assumes that the overreach problem has been decided in the “No, it’s not” vein. If so, then you make good suggestions, but if one carefully reviews the question at hand, it’s being asked how/when does a company decide if an “innovation’ is not really at innovation but an overreach of their capabilities.
Martin
January 7th, 2009 at 9:02 pm
Liz, Martin, Kathryn and Andy:
Many thanks for all your comments. Martin, I like the simplicity of your idea. It’s a good rule for a small firm like mine. Do you think it applies to large ones with deep pockets, too?
Kathryn, your comment is a good reminder that innovation may be in the way we structure and price traditional services.
Andy, your comment implies that even if we decide that it is a go, we should recognize that the judgment be faulty and we should hedge. Where do I get the frogs?
Ford
January 7th, 2009 at 10:28 pm
Recently, a client presented us with a ‘wired’ bidding opportunity outside our scope of business/work. I considered the implications and opportunities, and decided the best way to handle it would be as a separate (but related) business. Then I phoned a few people I knew with expertise in the specialized areas required and within a few days, we agreed on a joint venture. (I structured things so my business controls the money!)
The project has proven to be successful, creating new opportunities for my business and some valuable cash flow. With the JV partners we have ensured the client is receiving a top rate product/service, without disrupting or risking my core business opportunities.
Sometimes the ’stretch’ is solved by bringing in others — a really good spin off of course is this also really enhances your network and creates even more opportunities for the future.
January 7th, 2009 at 11:39 pm
Martin -
Thanks for your comment. Actually, my assumption was that “we won’t really know unless we actually try it, so…” and then hedges, as Ford noted…
Good question, Ford. I hope our group doesn’t have to go there…
Frogs…??…ask the feng shui crowd…
Andy
January 8th, 2009 at 7:15 am
Mark
Great story! Helpful, too.
Ford
January 9th, 2009 at 9:35 am
Good AM. Happy New Year. I don’t know if this is on-topic or not, but can’t innovation to a firm simply mean a new market? (Applying your expertise to a new field that has similar characteristics to the one you’re used to serving.)
Here’s some context that moves this point beyond 101:
I have a client with deep expertise in one specific retail category. But there are contiguous categories that would find relevance in their offering. The principles, technology and strategic chops are the client’s engine. But the company can sub-contract the language intricacies of the new category (on a short-term basis). Sadly, our economy has put a lot of smart people on the street. This is now for sale. New people to the firm - even on a sort term basis - can bring relationships, new contacts, etc. All of which can be leveraged by the hiring company. So long as the new staffer is fairly compensated.
While it may not be possible to go after the really big guys in a new category, there’s nothing wrong with honing the story by working on smaller players. Then tackling the biggies!
January 9th, 2009 at 12:10 pm
Steve:
Logically, and has been said by others over the years, you can take new services to old clients, old services to new clients, or, with more of a stretch, new services to new clients. Replace the word “clients” with “markets,” if you want a broader perspective. The old services to new clients and markets is an excellent way to extend one’s offering. You point our that you may need someone with market knowledge in the new industry to help with language and other differences.
Of course, one can overreach here, too. A company that has worked on supply chain for retailers and manufacturers, who tries to extend the market to pharmaceutical companies and hospitals must learn fast how to deal with such concerns as the potential for a stockout to cause someone’s death, the need to meet FDA standards and many other differences, which are consequential. So, it can have many of the same overreach risks that developing new services for old clients has.
Thanks for the comment.
Ford Harding