Six Barriers to New Business Success
Even after understanding and trying to adopt the philosophies from Win Without Pitching, Blair sees many creative firms struggling to increase profit because of these six obstacles involving their people and processes.
Links
Mastering the Value Conversation
The Complexities of Commission Culture
Debriefing After a New Business Call
Is Your Firm Addicted to New Business?
Transcript
David: Blair, today we're talking about six barriers to new business success. I went over this a few times and the last time I read through it, I thought, "You know what, let's make something clear here." There's a lot of reasons why you might not have new business success. Maybe your positioning isn't any good, maybe you're not disciplined, whatever, but you're talking about some other stuff. Let's just pretend that all of those things are pretty good. You have an addressable positioning, you're disciplined, all that, you've got the money to spend and you're still not successful. Why is that?
Blair: Yes, this is a post I wrote a little while ago that we're going to talk about. It was one of these-- I don't know if you do this.
David: If it's good, I do.
[laughter]
Blair: All right, I'll just skip the question. It's one of these posts as therapy. Do you ever write posts for yourself from time to time, "I just need to write this"?
David: Yes. Unfortunately, then I send them.
Blair: Yes, right. This was me a while ago working through-- oh, it's a while ago, I'm constantly working through this, the question of we work with some firms and some are just like-- they just take off right away. They take these ideas, these principles and frameworks and they're able to have some significant success. We're looking for big success. We're looking for a revolution in what they do, and their mindsets, and their culture, not evolution. Then some don't.
I and we have been in search of the answer, the reason why is changing the culture of your firm from cost-based to value-based, changing your mindset from that of a vendor to that of an expert, why is this easy for some firms, seems to be easy, and difficult for others? I'll reference actually two different posts that I've written on this, one more recent than the other. That's the thinking behind this topic, me thinking about why is this hard for some people.
David: It's too easy, but in a good way, to get attached to your client's success. It just doesn't feel good if you're working with a client that doesn't achieve success because you're always saying, "Is that me or is it them?" whatever. It's really up to us to figure this stuff out. There's nothing off limits here in terms of just being honest with each other, with our clients, and so on.
There's two assumptions, though, that we need to get out of the way first, right? The first one is that they bought 100 copies of your book and gave them away to all of their best friends. No. Oh, sorry. That was just me projecting that they read The Win Without Pitching Manifesto and they understood it, they nodded, all of that.
Blair: Yes. It's not like the leadership team isn't philosophically aligned with how we think about selling creative services. It's an inability to execute on the ideas when they are philosophically aligned.
David: As opposed to getting in the conference room with the leadership team, you've all read the manifesto and two of the people think, "I just don't think this is workable. This isn't how this should work. We're way beyond that. We all want this." That's the first assumption. The second assumption is what?
Blair: The second assumption is you have at least some knowledge of what you need to do. You've listened to some of these podcasts. You've read my blog posts. You read some books, whatever. You have some idea of this four-conversation framework. We've done an episode on that, the four conversations I've written about it extensively. Maybe you've been through a workshop, a boot camp, a seminar, or something. You have some kind of experience of like, "Oh, these are the nuts and bolts of this."
Number one, you're philosophically aligned. Number two, you have a general idea of what needs to happen, "I believe that this is possible. This is how we want to show up, and I have a basic understanding of what needs to be done, but still, we can't do it. Why can't we do it?"
David: Right. Here's how I envision these six possible barriers to why this isn't happening. It's like you're busy or you're doing whatever and you send somebody who's very capable, very observant, and you say, "All right, go there, check these six things off, and tell me what the problem is." That's how I want to think about this. The first one, the first possible reason why, even after they're philosophically aligned and they have a basic understanding of how to do it, still not happening, the first possible reason is someone's in the way. This is where, "Wait a second, is he talking about me?"
Blair: Yes, so the first question, is someone in the way? The first sub-question is, is it possible it's you? Are you the leader of the firm even though you're philosophically aligned? You might even be driving this from a philosophy point of view. You might be the one saying, "Let's spend some money on this." It's still possible that you might be in the way. What form might that obstacle take?
The classic example is just not leading by example. Your old behaviors are so highly ingrained, so even though you're philosophically bought in, you find yourself saying, "Yes, but on this one I'm going to effectively default to the old way." If you are not leading by example, if you are not making the difficult decisions, like say qualifying somebody out or pushing back on budget, or moving the conversation from, "This is how much money I have to spend to the value to be created here," if you are not doing this, you're sending all the cues to your people that, "This was just another thing that the principal got enamored with, the next idea that they're bringing in, but they don't really mean it, so I'm just going to wait them out."
I've seen a whole lot of, "I'm just going to wait them out. "This moment will pass like the last management fad that they brought in. I'm just going to wait them out. Next time he goes to a conference, he'll come back with another idea and we'll be onto that."
David: Yes.
Blair: This is you around the conference table looking the principal in the eye asking, probing if this is their behavior, and all the other people around the table are looking at each other nodding, but he or she doesn't see that, so is it you? Or it could be someone else, right? Who's the someone else?
David: It could be somebody else. I'll just say, if it is you, to the point you just alluded to, is your people know. If you could ask them and get an honest answer, "Why isn't this working?" Your people know that the problem is you. You probably don't. You might just be relying too much on gut instinct. Whatever it is, your people will know the answer. If the problem is somebody else, your gut probably knows this to be true, and that other person may or may not.
Typically, this idea of someone being in the way, if it's not you, typically, it's another senior player who gets away with pushing back on culture because they have this history of being a top performer. This idea, when it comes to personnel, if you do this 2x2 matrix, plotting their cultural fit, good and bad, or high and low, and their performance level, good and bad or high and low, and you get the person who is a high performer but a poor cultural fit and you continue to tolerate them--
There are lots of schools of thought out there coming from different advisors in this space, including one, David Baker, that say that's the most dangerous person on your team. The high performer is not a cultural fit. I have quite often seen that the single-person barrier or obstacle is a senior person who wields a lot of power. Often, it's a senior account manager who manages the largest account. Maybe it's the CFO. We'll come back to that one in a bit. Maybe it's a partner or a creative director, but it's a senior person who's just pushing back on this.
Usually, it's because, contrary to what we spoke about at the top, they are not philosophically bought in, or maybe they started out as philosophically bought in, and then when it got to the nuts and bolts of how to do this, they thought, "No, I'm going to keep doing things my way. I've got enough power here that they can't make me do anything."
When we say the word culture, we often think about how people are treated, the level of transparency, respect, all those other things that just come to mind when we talk about culture. You mentioned something in passing just a second ago. I just don't want people to miss it. How you approach new business is a cultural issue. Culture is not just about people.
Blair: Totally.
David: That needs to change, and if it hasn't changed, that might be part of the problem starting with leadership, yours, or the key leadership right below that. The second possible barrier to success is this, is the team makeup oriented to old behaviors that you're trying to shed. In other words, are the people or the structure-- there's all of these things there that are still supporting the old way of doing it and not the new way, so dive into this a little bit more.
Blair: One of the outcomes of applying the Win Without Pitching principles and frameworks is you get out of the length of your proposal writing business. Those 50-page decks that you used to build, you just stop them cold turkey. We point out how they're just not helpful at all. They're a waste of resources.
At some level, the firm owner or the leadership team might look at that and think, "Oh yes, that's great," but they still have dedicated pitch teams or dedicated proposal writers. If you think those people are going to go along nicely, even if philosophically they buy in, it's a threat to what they do. You have to ask the question, is this new way of working going to change people's roles to the point where they're going to feel threatened?
David: Right, or have you burned the canoes, or are they still an option if this war doesn't go the way you want, so pitch team, dedicated proposal writers, the whole culture of pitching. The one that makes me laugh there is I asked somebody one time about their new business efforts, and their mind went immediately to how many pitches they wrote as if that's the best sign of measuring that, right? All of a sudden, you're not going to measure that unless the whole intent of measuring it is to drop the number of pitches you participate in.
Blair: Yes. For a lot of people, they think new business defaults right to that number of pitches. Forrester this week published a paper where they quantify the waste in the ad agency pitch industrial complex, and it's 12 and a half billion. They quote somebody in the study who says in the first six months of a given year, his team spent 90,000 hours.
David: Wow.
Blair: 90,000 hours on pitching new business.
David: Unpaid pitches to possibly unqualified clients. Think of how that time could have been used if they had been developing their processes, writing insight that would have been consumed by thousands of people rather than one unqualified client.
Blair: Yes. If your firm is pitching that much every year, you're attracting to it people who they love the pitch. The idea that a firm spent 90,000 hours pitching is going to suddenly decide, "You know what, there's a better way to do this. We're going to get out of this business," even if the firm is large enough, that number of hours, it would be a large firm even though it was unnamed.
Even if the ownership group and the senior leadership team decided they wanted to get out of this, that would be like moving a mountain to get all of those people who are still addicted to the late nights and the thrill that comes with pitching to get them to down those tools and pick up different tools. It's just culturally hard to do.
David: Right. The first is someone in the way, either you or key leadership team member. Second is a team makeup oriented to old behaviors. The third is around specific incentives. I do want to draw folks to an episode we did back in November of 2017. Wow. We were doing this six years ago. Anyway, the complexities of commission structure. Talk about the incentives being properly aligned.
Blair: You want to look at what people are going to do, look at how they earn their money. If your salespeople, that might be business development people, it might be account people, but if they're bonused or commissioned on total revenue without qualifying how that revenue is composed, like a minimum level of engagement or certain client types, if there are other parameters around client fit and they're just bonused on revenue, then you are driving them to bring in anything. Any dollar is a good dollar, and you find yourself in these competitive situations, or just sales pursuing opportunities that aren't a good fit.
We explored that more in that episode back in 2017, as you said, and just commissions in general. Anytime you're offering any incentives, commissions, or bonuses, you have to look at how those commissions or bonuses are earned. The more leveraged the compensation model is, with that I mean the more of the total compensation is made up of incentives, commissions, bonuses, or others, then the less authority you have to actually tell those people how to do their job.
If you have people on full commission, you basically have no authority. They are effectively running their own business within your business. You don't even really have the right to ask them to attend a meeting. At least that's the way they'll think about it, and I tend to agree with them because it's like, "You know what, you're wasting my time. I can be out selling. If I'm in meetings all day, those are hours when I'm not putting bread on the table for my family."
You just have to be careful with bonuses and commissions. Any incentives have to be aligned to your strategic goals. If they conflict with how you're proposing to do new business, then you're going to have a problem.
David: All right. The fourth one, this one is the least obvious to me but maybe the more interesting one. If I understand this correctly, the way you're describing it, the possible barrier is workflow processes or software systems that might be standing in the way, they're looking for some sort of efficiency in how all of this is managed. You're saying that the desire for efficiency isn't all that bad, but there can be unintended consequences by seeking efficiency in a way that limits the right choices down the road.
Blair: Yes. We've alluded to this a couple of times. We did an episode on the inofficiency principle and inofficiency problem, which is this theory of mine that says that innovation and efficiency are mutually opposable goals, you cannot increase one without decreasing the other. We talked a little bit about this in the episode, I think it's called The Enemy Within, and I wrote a post on the same topic called The Complex Battle for Margin. People can look that up at winwithoutpitching.com. What am I talking about here? As the firm grows larger, it puts all these systems in place to fight chaos, to increase efficiencies. One of the costs of increasing efficiencies is decreasing innovation.
Some of these systems I have encountered as an advisor going into larger but still independent firms that when we're trying to change things, particularly pricing, moving away from strictly time and materials pricing to pricing deliverables or pricing based on value, I've found that the systems keep pushing back on that. What do I mean by that? Your accounting system or project management system, does it conflate price and cost, or do you make the distinction between price and cost?
In most agencies, there's an hourly rate. They use that as a function of cost and they multiply the hours or the day rates by the hours of the days, and they give that to the client as the price. They see cost and price as the same thing. In normal businesses, we have this difference between cost and price, and it's called profit. We're pricing the profit into the price based on our cost. We're either starting with price, subtracting profit to get to cost, or we're starting with cost, adding profit to get to price. In a typical creative firm, we have these systems that just track-- it's all about hourly rates.
If there's a $100,000 deal, let's say you have a client with a budget of $100,000, that number itself is meaningless for this example, you can use any number. Let's say the client has a $100,000 budget and you put forward a three-option proposal and you close them at $150,000 for effectively the same services. Theoretically, there's $50,000 in pure profit that you should be able to take off the table in addition to the expectation of profit that is priced into your hourly rate. Let's forget about that second one.
There's $50,000 in POTT, profit off the table. Your systems should allow you to take that $50,000 and hide it from the delivery people, and just put it in a fund somewhere that's hidden and say, "That is profit. You have $100,000 in cost to get this job done." There are a lot of systems that just don't allow for the hiding of profit from the delivery people. Then there's this culture of delivery people and this culture across the firm of conflating price and cost. If your delivery team can see that there's $150,000 in price, they assume that's $150,000 in cost too, so they will spend that time. Does that make sense?
David: Yes, because if they were thinking in their mind $100,000 and it comes in at $150,000, they're not excited about the extra profit, they're excited about the extra opportunity to do even more for the client.
Blair: Yes. It's back to incentives, and the incentive you want to consider is this profit off the table. You want to incentivize that. We have this term, we call it RAB, revenue above budget, or lowest price option. In your proposal, you want to incentivize your prices and your delivery people to hold onto that excess amount as profit, and most systems just aren't built for that.
David: The big point here if you're struggling to see what we're trying to say is, are your systems, your processes which are designed to be efficient, to bring profit out, are they actually just reinforcing bad behavior? The way we started when we described this is are workflow processes or software systems in the way. Many of those are efficiency-seeking and they're not necessarily going to point you to a different way of doing things.
We're really talking about-- all of these six are around people, or processes, or whatever. We're just saying it's not enough to be inspired to do the right thing and to know basically how to do it unless you look at all the supporting systems and people underneath it. That's the fourth. The fifth is are accountability mechanisms in place. We're trying to decimate some of the old ways that are just keeping us in the old ways of doing things and are we putting new accountability systems in place? I'm interested to know what those look like if they're not just going to do the same thing of reinforce bad behavior.
Blair: There's a saying "Practice makes perfect", and another saying that says "Practice doesn't make perfect. Coached practice makes perfect." You practice and you have somebody look at your technique. Let's say you're trying to hit a golf ball or a baseball and you get some coached feedback, so you're able to adjust and then you practice more properly. I went on Twitter about 21 hours ago and asked the question, "Does your organization record sales conversations? As of this recording, the slim majority, 51% say "Never" and then a bunch say "Rarely". I'm actually a little bit surprised by that number.
A year ago, it wouldn't have surprised me. Here we are, we're recording in May 2023. It's over three years since the start of the pandemic. One of the things that has changed when it comes to doing business is the use of Zoom. Almost all of our meetings now are not face-to-face, they're over Zoom. For the last couple of years anyways, there have been some great tools available that allow you to record Zoom conversations. Zoom does it natively, but there's Otter AI, there's Fathom AI. There's a few other third-party applications that allow you to record and analyze your conversations.
What's interesting to me is how few people are recording sales conversations. I know there's a question of, "Oh, what's the client going to think?" I've tested this and I can tell you the assumption is we used to ask people, "Are you okay if we record?" Now we don't even ask. If somebody objects, we turn it off. We're recording everything. We're recording internal Zoom conversations because we are not far from the day when we will have an AI within our own organization that analyzes everything that exists in our Google Drive and our Slack channel and our systems, et cetera, including transcripts of recordings.
We're not far from that day where if you want to find out what happened in a meeting or what we agreed to do, you don't even have to remember the meeting, you can just type it into the narrow AI and it will pull it from those transcripts, et cetera. We're in this place where culturally, everybody understands we're recording these things, everybody's using these things and yet half of the people out there aren't recording sales conversations. Speaking to the point of accountability mechanisms, we spend a lot of time at Win Without Pitching reviewing our clients' sales conversations.
Your sales conversations are the place where your business development strategy, your pricing strategy, your positioning strategy, all these things go to die. It's in the conversation. You can be bought in philosophically, you can train people, but if you're not observing what's happening in those conversations, which previous to a couple of years ago wasn't really possible, you are not catching and correcting bad behavior. We can come back to this topic in a year and almost everybody will be doing this. This is just my nudge to the audience. You should be doing it now.
David: Jonathan, who's with me full-time now, sometimes we're on a call together and very frequently, right after we're done, we'll text each other and ask, "Hey, what would you have done differently?" or "What did I blow," or "What did I do well?" We'll ask each other that question. It stems from an episode where I interviewed you on After Action Reviews back in January of 2019. I thought it was a really great episode, so our accountability mechanisms in place, that was the fifth.
The sixth is a pretty simple one, is client retention the real problem? This assumes that you want this, you know enough about it. Some of the other stuff is sort of fixed, but you're receiving all kinds of pressure for sales success because you have a client leakage problem. Would that be a fair description?
Blair: Yes, and we don't need to go too deep into this because we did an episode on it recently, February 2023, Is your firm addicted to new business where we were talking about are you actually pretty good at new business bringing in today 25% of your revenue target for the year via new business and everything is leaking out the back end? Just ask yourself that question. Is the real problem? Maybe you don't even have a new business problem at all. Maybe you have a retention problem.
David: Right. Once again, you're just trying to one-up me with another bonus little issue. I never do these. My outlines are so good, they don't need bonus things. They just need better names. All right, so you've got a bonus. Everybody's been good today. They get a bonus. What is that?
Blair: Yes. This post we've been talking about, I wrote a few months back now, and a more recent one was titled Who's Going to Own This? When I look at the failure to execute among our clients, the number one biggest reason why there's a failure to execute is somebody needs to own this.
Let me flip this around. When I look at our clients who have achieved incredible, even to me success, who have just I cannot believe how they have changed the culture and the financial fortunes of the firm, there is a universal commonality. That is a senior leader took this on, this idea that we're going to do this new approach to how we sell. They took it on and it was their rock. It was their priority for at least a quarter.
I think, in most cases, maybe every case, it was their biggest priority for the year. We've been talking about six obstacles to new business success, and the real key to overcoming the obstacles is a senior leadership team member doesn't have to be the owner, doesn't have to be the CEO, or managing director, but they would have to have the support of those people. A senior leadership team member says, "Not we're going to buy some training." They say, "We're going in this direction. This is going to be my rock. I'm responsible for it. I'm going to be measured on this, and this is my number one priority."
When that doesn't happen, the other barriers prevent the level of success that I look for in our clients.
David: Yes. For those of you who aren't familiar with the term "rock" that comes from the entrepreneurial operating system language, EOS, I would just reemphasize this and say assigning this as a top priority to the leadership team and the executive team, that is not going to cut it.
Somebody asked me the other day, "What do you mean? What's the difference between this being a priority of one person or the team?" Well, somebody's ass has to be on the line at the end of the year. If it's the leadership team, that's not going to mean anything. It needs to point to one person who needs to build enthusiasm for this among other people, but it's hell or high water this is going to happen.
Let me just give you these six again; is someone in the way? Is the team makeup oriented to old behaviors that you're really trying to shed, but the behaviors support the old ways? Third, are the incentives properly aligned? Fourth, are workflow processes or software systems in the way you try to seek efficiency? Fifth, are accountability mechanisms in place, and sixth, is client retention the real problem? If you see yourself in this, you would assign this to one person and then expect change to happen. This has been great, Blair. Thank you.
Blair: Thanks, David. The reason for this episode is I'm just going to point all our new clients to it. It'll save me a conversation.
David: All right.