The Top Revenue Growth Methods in the Professional Services Industry
Highlights
- The two dimensions to grow your business are services and markets; improving or expanding your services or markets in various combinations creates business growth.
- Research shows there are nine methods that deliver the most significant revenue growth. 92 percent of the Best-in-Class service providers (the top 15%) executed at least 7 of these 9 methods. The top 5 percent of the Best-in-Class executed at least 8 of the 9 methods. These methods are the source of the Johnny Grow Professional Services Growth Formula.
- Services industries are mature. Slow to moderate growth is the norm. But the highest growth firms are clearly not content with growing at the pace of the economy and instead employ best practices to take market share from competitors. Competition is growing faster than the industry.
Services Company Growth Levers
An Extract from the Professional Services Business Growth Report
The top question we receive from services CEOs is how to most effectively achieve business growth. To provide a data driven, fact-based answer to that question, we do two things. First, we look to the source. The industry's top performers grew more than 2 times faster than their lower performing peers.
Second, we curate data and insights from our most recent Business Growth Report and filter the results for the services industry. This view allows us to learn from the industry's top performers and replicate the methods that drove their success.
Strategic growth takes a two-step approach that starts with the right strategy and follows with the right execution.
First, the strategy identifies where growth comes from. Then the execution defines the methods or best practices to achieve that growth.
Strategy validates you're doing the right things. Execution ensures you're doing things right.
Where Growth Comes From
The two dimensions to grow your professional service business are service growth and market growth. Improving or expanding your services or markets in various combinations will reveal up to four choices.
You can advance your existing services in your existing markets. This incremental innovation generally focuses on finding increased differentiation and may include new simplicity, flexibility, capability, support, performance, reliability or risk reduction. Most professional service firms do this as a matter of routine by continuously improving their services and value proposition.
Benefits are short term and minimally competitive. Incremental innovation success may correlate with customer loyalty. If customer retention is in decline, your incremental investments are likely delivering capabilities considered irrelevant or unimportant to customers. Since virtually all professional service organizations improve their services, companies that succeed in incremental innovation at a pace less than their competitors incur market share loss. For this type of innovation both risk and payback are low.
You can expand your existing services to attract additional business with your existing markets. This type of service innovation is most often accomplished when applying core skills to create complimentary services or solutions. The goal is to create a new service category and increase customer share with existing clients. Some common examples include management consultants or accountants getting into IT consulting, IT consultants getting digital marketing services or digital marketers getting into IT consulting. For this type of innovation, service risk is moderate to high, but market risk is low. Service risk can be mitigated with customer co-creation and a proven prototyping process backed with customer acceptance testing.
Another option is to enter new markets by adapting your existing services to those sectors. Market innovation extends core services to new customer markets for market expansion. For new market expansion, be sure to examine not just if there is a gap in the market, but if there is a market in that gap. For this type of innovation, service risk is low to moderate, but market risk is high. Market risk can be mitigated with market research and a firm understanding of buyer and customer insights.
A big bet option is to create new services for new markets. Disruptive innovation generally produces immature and inferior services that deliver new client value propositions and are followed by successive, quick iterative evolutions. This type of innovation may create a new category or market and often disrupts or eliminates one or more existing categories or markets. Examples include the Gig economy and crowdsourcing companies.
For the innovator, this creates a new business model and when successful, delivers a first-mover advantage. Disruptive innovation is the most difficult and incurs the most risk. But as part of the risk-reward equation, it often generates the breakthrough services that create new high margin revenue streams and deliver skyrocketing growth.
The optimal growth strategy will be based on market, competitor and customer insights. Your growth strategy is only as good as your customer and market intelligence. Partial intelligence increases risk. Your Growth Strategy explores, models and identifies the optimal combination of these growth options.
Which option is the best? Every professional service organization's appetite for risk and reward is different, but for most service firms a balanced mix of options makes the most sense. A well-structured innovation portfolio allocates resources to innovation types in a way that each collectively contributes to the company's growth strategy.
An orchestrated combination of incremental to transformative innovation lowers risk, creates synergies, delivers a steady stream of new services, and produces the greatest financial upside.
Services Company Growth Methods
There's no limit to the number of ways professional service firms attempt to grow their businesses. However, findings from the Business Growth Report quantified which methods deliver the biggest impact for the top performers.
Below are 6 of the strategies used to most accelerate revenue growth for the highest growth professional service companies.
Corporate Culture
Services is a people-driven business. Acquiring, motivating, training and retaining top talent are essential to deliver knowledge and capabilities that create client value.
As mentioned, there are a lot of things a services company can do to drive growth. But the one thing that will directly impact everything else is corporate culture.
Corporate culture is the human performance engine that directly impacts the level of success, or failure, for every business strategy, revenue initiative, operational performance and change transformation. Culture is a precursor and top contributing factor to anything and everything that requires effort from staff.
Until you achieve a high-performance growth culture, you will not achieve your company's potential. Your business strategies, operational initiatives, employee productivity and staff tenure will remain at comparatively low levels and permit any competitor with a high-performance growth culture to outperform your company. A high-performance growth culture is not easy to achieve, which is why those who do achieve, outperform those who do not.
Innovation
There is an evidence-based, undeniable correlation between innovation and business growth.
Innovation is a risk-reward business growth equation. When successful, innovative services create differentiation, revenue growth, high margins and customer loyalty. Innovation isn't easy, but it's also not optional for companies seeking differentiation, revenue growth, high margins and customer loyalty. Growth and comfort do not coexist.
Innovation adoption is accelerating. Growth leaders view innovation as a strategic, non-negotiable imperative. Growth laggards view innovation as tactical, opportunistic and episodic.
It was Peter Drucker that said "because a business's purpose is to create a customer, it has two and only two functions, marketing and innovation. Marketing and innovation create value, all the rest are costs." Drucker's words are heeded by the top performers in the services industries.
Innovation is not prescriptive but follows proven patterns that can be repeated. Johnny Grow has applied data patterns and results from the top producers and decades of field experience to create the Professional Services Innovation Methods Framework.
Marketing Transformation
The Best-in-Class (top 15%) professional service marketers did several things different than their lower performing peers. Before the first campaign was launched, they acquired customer insights, defined their sustainable competitive advantages, used these advantages to solidify their brand and unique value proposition, defined their ideal customer profile (ICP), and then launched precision marketing campaigns. About three-quarters of the Best-in-Class also implemented Voice of the Customer programs.
Less mature marketers used marketing software automation to cast a wide net. While techniques such as email marketing broadcasts maximize outreach and produce plenty of lead generation metrics, they also decrease conversions, increase cost per lead and do little to engage clients. When clients mark generic and non-relevant marketing messages as spam the service provider is then cut off from future engagement.
For the Best-in-Class, the upfront investment in planning delivered several performance benefits.
- Using ICP and customer segmentation they pinpoint target markets, apply precision campaigns to reach fewer but more focused prospects and achieve 4-14% higher lead conversions. These methods also lower their cost per lead by 6-21% and cost per customer acquisition by 8-25%.
- The combination of customer intelligence, customer insights (by persona) and brand development based on sustainable competitive advantages increases digital marketing offer conversions by 22-55 percent.
- Best in Class marketers leverage marketing automation and lead lifecycle management. These two programs also facilitate sales and marketing alignment, which fixes lead leakage and creates a synergistic working relationship.
The highest growth service companies applied marketing transformation techniques to increase lead conversions by 4-14%, reduce cost per lead by 6-21% and cost per customer acquisition by 8-25%.
Click to TweetSales Acceleration
In the professional service industry customer affinity is a sustainable competitive advantage that directly contributes to increased customer acquisitions, customer share and customer retention.
The research shows that customer affinity is best built on the two customer strategies of Customer Relationship Management (CRM) and Customer Experience Management (CXM).
More so than other industries, professional service leaders recognize that CRM is not software. It is a business strategy aimed at growing mutually rewarding and profitable customer relationships. Software is essential in managing customer relationships at scale but is only part of the solution. And the easy part at that.
To systemically grow customer relationships, services leaders were 2X more likely to have a CRM strategy that was documented, measured and routinely improved. In addition to achieving client revenue objectives the strategy was also influential in advancing client relationships which had been based on the interpersonal skills of any particular partner or executive to a framework that is repeatable, semi-automated, metrics measured, outcome-based and scalable. This creates a discipline that can be pushed down to junior associates or mid-level managers.
CXM is complimentary but separate from CRM. CXM is the business strategy to deliver customer experiences that go beyond basic satisfaction and achieve more emotional goals, such as making customers feel delighted, valued, engaged, special or rewarded, and making those experiences memorable.
Many professional service organizations naively believe that good work speaks for itself. It often doesn't. CRM software for services companies provides the customer data and process integration to create relevant, personalized, contextual and predictive customer experiences – and achieve CX goals.
Delivering tailored and differentiated customer experiences drives customer affinity, which one of only four sustainable competitive advantages because it is not easily copied by competitors or displaced by new technologies.
Other sales techniques routinely used by the Best-in-Class included the following:
- Relationship Plays were routinely used to achieve full client potential. Some people call them land and expand strategies, but they are much more than that. Relationship plays are orchestrated and repeatable steps to cultivate key client relationships. They are designed to strengthen critical relationships over multiple years.
- The top producers were 64% more likely to implement strategic pricing at least annually.
- The top producers also knew that communication and collaboration were very big drivers of customer relationships and included these techniques in their CRM strategies. The research was clear in showing that increased collaboration leads to improved client relationships and revenue growth.
Mergers & Acquisitions
Mergers and acquisitions (M&A) can leapfrog competitors and catapult revenue growth.
The primary drivers for M&A are acquisition of new talent and geographical expansion.
Unlike other industries which move more rapidly to tuck acquired brands into the parent company, there was a clear trend in the services industry to maintain the acquired company's brand for a longer period. Some of the largest consultancies such as Accenture and IBM do this routinely.
The primary difference between the top performers and their peers is that while most professional service firms achieve a one-time revenue growth event, the Best in Class were able to execute their post-merger integration to achieve strategic synergies and accelerate growth rates well beyond the year of acquisition.
Growth by acquisition is not limited to the largest services companies. While 52% of acquisitions were done by firms with more than $100M annual revenues, 33% were completed by firms of $5-100M revenues with the remaining 15% done by firms with less than $5M annual revenues.
Technology
The highest growth professional service organizations adopt professional services technology strategies and supporting tech stacks and invest in software technology 2.2 times more than their peers. And their software technology program isn't standalone. It's the enabling technology to deliver information, automation and scale for each of the prior five growth programs.
Most of the top service firms started with an Information Systems Plan (ISP) that included an enterprise-wide application architecture. Most recognized they needed to eliminate data siloes, ensure data integrity and maintain information security before they procured new software systems.
They also did not want to pursue a path of purchasing fragmented or departmental systems based on short term needs but instead pursue technology investments holistically and pursuant to a longer-term plan.
Two stand out IT capabilities among the Best-in-Class professional service firms were data transformation and predictive analytics.
The explosion in the volume, velocity and variety of data has made data a business phenomenon of our time. The most successful service firms are defined by their ability to collect and curate the right data, use data to create differentiating customer experiences and apply analytics in order to make insights actionable at every client interaction or decision point. Customer and services delivery dashboards were the top analytics tools to get the right information to the right person at the right time.