I make my living these days as a strategy advisor to technology and advisory firms eager to leverage their intellectual property for scalable growth. A strategy advisor is part priest confessor listening to the concerns and sins of the client, part heretic challenging the current business strategy or management thinking to help them see with fresh eyes, but the best service I perform for my clients is to engage them in a strategic conversation about scalable growth possibilities to get them out of the mental rut they are in and see the opportunities to grow where their clients are going— not where they are now.
The Amazing Power of “what if?”
There is something liberating and magic about giving clients permission to imagine a different future. This is not squishy science. A good strategy advisor will get you talking about your business, your customers’ needs, about the hot buttons and horizon issues that drive the markets. This is the power of brainstorming and crowdsourcing rolled together. Using scenario analysis to rehearse ideas, stress test opportunities across alternative views of the future, and assess critical infrastructure and other risks can be a powerful tools to make ‘what if’ actionable.
Turn the correction stage of the business cycle into a strategy advantage
Most of my clients are software or information services companies in the energy vertical. They are accustomed to the energy boom and bust cycles and know that the correction side of that business cycle is often the best time to plot their strategy for growth as the inevitable recovery and build up stages unfold. They do this because they need the lead time to build the products and services their customers tell them they will need when “things get better”.
Time is never an ally for a technology company. The typical R&D process for new product development means that bad timing can result in going to market too soon before risks exposing your strategy to competitors giving them time to add features or functionality that better meets customer needs. Take too long and you miss the sales window as competitors beat you to market sometimes with an inferior product.
For pure consultancies where revenue depends upon billable hours and utilization find the correction side of the energy business cycle to be ‘hell’ because they have only one recourse to right size their business—cut costs which means cutting people. When demand recovers these firms must train new hires before they can actually do the work and many miss their growth opportunities or disappoint clients. Playing ‘what if’ is a powerful way of managing the uncertainty in the business.
The Time to go for Scalable Growth is NOW!
My advice to clients eager for scalable growth is to focus on how best to leverage their intellectual property, customer needs and relationships, and expertise to find the “sweet spots” in the market that enable them to scale organic growth through recurring revenue products, leverage their IP with applications and services to offer more complete solutions, and fill the gaps in their product or services menu by partnering, acquisition or new product development.
Recurring Revenue Products. For a pure consultancy which sells those billable hours mentioned earlier, the intellectual property of the firm goes home every night. As the owner, you must find a way to keep it coming back the next morning jazzed about taking on your customers business problems and solving them. It is one-time revenue and once booked, you must re-earn it again every month.
Recurring revenue business models seek to build it once, use it often and sell it many times. A classic recurring revenue product is a software license. You build the product and support it, but revenue flows each year from the annual renewal of the license to use it. The more licensed users the more revenue.
But what if you are a consulting or services company? You still have IP that often goes un-monetized living as databases, as often repeated consulting services, as business processes or best practices developed over time. Look in the in-baskets on your consultants desk and you will find a wealth of great ideas being hoarded for use on some future project. Consulting firms all have core competencies and speciality practice area. By focusing on standardizing the business process that makes those practices more billable, more productive and mining the shared learning from all those research products to create consistent, repeatable solution templates enables the firm to assign lower cost resources to prep or set up high value added projects for senior consultants and partners to improve profitability.
And even more important, productizing research and repeatable solutions creates an institution memory for any consulting firm and dramatically reduces the risk that any one consultant or team can walk out the door with a book of business or clients when delivering for those clients depends upon leveraging the copyrighted IP of the firm.
Recurring revenue products dramatically improve the quality of earning and thus the valuation of the business. Like an annuity, they create a stable base of revenue to weather the ups and downs of the business cycle. Build a product menu that works across the business cycle and you have a winning formula for scalable growth.
Repeatable Solution Applications. If you have a software product or solution in place today, there is another opportunity for scalable organic growth from looking at the patterns of how your customers are using your product. See a repeating pattern then look for the opportunity to build a repeatable solution to make using your product faster, easier and more convenient for your client.
‘Yes, there’s an app for that’!
Apple is the most famous but certainly not the first to use apps as a way of scalable growth in revenue, and anyone with an iPhone will immediately appreciate the power of the repeatable solution business model. So look for those opportunities in your business and exploit them with the same ruthless efficiency Steve Jobs is doing today.
Apps do one more thing that is extremely powerful for your business. They make your products sticky and irresistible to customers. Faster, easier to use, consistent, transparent, cheaper than homemade—what’s not to like with that ROI calculation? Get you customers hooked on your apps and they will be visiting you own iTunes-like store often.
Go for Complete Solutions. Did you ever buy a product and get it home only to discover, it needs another part to make it work. Frustrating isn’t it? The explosive growth of start-ups in cleantech, smart grid, renewable energy and energy information technology over the past few years is now being harvested for just that reason. There are many new products from these start-ups but few complete solutions. As a result even successful product start-ups need to partner with others to give customers an end to end solution that actually works to solve the business problem. Today the recession and changes in market demand have accelerated the consolidation across the value chain so if you have gaps in your solution set take stock. The calculation is to buy it unless it’s cheaper and faster to build it yourself. But hanging out there with a product that is not sufficient to actually solve your customers’ business problem is asking for trouble. The bigger technology and energy market players love this consolidation stage of the market cycle because it represents a buyers’ market for products and capabilities to be tucked into their solutions.
Now is a perfect time for information and technology companies to focus on scalable growth strategies for the expected recovery ahead. So play ‘what if’, talk to your customers and position your strategy and your products to help those customers go where they must.
Recurring revenue advisory or analytics products improve best practices, focus on the client satisfaction that comes from actually making a business task easier, faster and cheaper to perform thus improving the clients ROI by using your product. Standardized research or analytics products take on the cachet of independent, transparent, consistent representations of the research specially and powerfully different your firm from competitors.
Productizing repeatable solutions not only improves the profitability of a consulting or services firm, it creates value from the community building process of users interacting and collaborating with the consultants, it improves EBITDA by making the consultants more productive, and it improve time to market for services enabling the firm to use speed to competitive advantage.
In a market place where cost control and ROI are key to success having complete solutions that are industry accepted, market tested, and fast and easy to use will attract customers who want fewer vendors, better products from someone they trust.
And that is the last lesson to scalable growth, when your customers use your products, services and expertise to make their own decisions actionable YOU become their trusted advisor and supplier of complete solutions that work to meet their business needs.
Build it once, use is often, sell it many times—the formula for scalable growth.