In this article and related podcast, we discuss an effective practice for building client relationships and driving sales. This is a critical article if you run a smaller boutique consulting firm or running a weaker consulting practice and trying to conduct more impactful studies.
The issue I want to discuss today is related to what consulting firms would call sales but also related to building client relationships. Sales is not a common term at the elite firms, but ultimately that is what is done.
A very common strategy for a consulting firm to displace an incumbent consulting firm and serve a client is to show an insight/problem/opportunity that the client has not seen before. Yet, this does not work that well in building client relationships and driving sales.
This is because the new consulting firm makes one critical mistake. In fact, the mistake may lead to the incumbent consulting firm securing the work the new consulting firm pointed out!
Many consulting firms try building client relationships and driving sales by presenting an insight or presenting an issue, or presenting an opportunity that the client didn’t know they had. And by providing this unique viewpoint that no other consulting firm is providing they assume that this gives them permission to then serve the client.
What I am going to point out to you today is why, even if the problem you pointed out is valid and significant, the insight may often not lead to you serving the client.
Think about this, imagine you work in a consulting firm and you are generating all these insights for the client or the potential client that you want to serve but it is not leading to new work.
Why is that?
I will explain that through a story. When I was a consulting partner the resources practice was not as significant as it is now. It was OK in some parts of the world but it was not as established as the financial services practice, insurance practice or the public sector practice. We were still building out the resources practice at that point.
And I remember being sent to Santiago office to help with a discussion that we were going to have with a very important potential mining client. It’s a company we had not worked with. One of our primary competitors was there. And we wanted to get our foot in the door.
This company had these very complex liability problems sitting in their mining operations and they wanted to know how to deal with that.
We had a long discussion. They loved our ideas. They thought it was “amazing”, it was “just brilliant”. But, the problem is, while they liked our ideas we had zero experience of doing this type of work. We have not even done anything close to this. It was a completely new area for us.
And the issue here was that while this potential client liked our thinking and they liked our insights they didn’t believe that we could do it.
It was something that they felt was better to be given to a firm that had done this before or, at the very least, understood their operations even if the firm had not done this before. So in this particular case, we came up with the idea, we identified the problem and we ended up basically giving the work to a rival consulting firm.
Now, what is the insight here?
The insight here is just because you have identified a legitimate issue does not mean you have convinced the client you are the best firm or the best person or the best partner to solve that issue.
Think about it for a second. When most firms go to a client and present this really interesting concept or idea, they kind of take it for granted that because they introduced the concept the client is going to link their key competencies to solve the problem to the fact that they brought up the issue. And it does not always work that way.
Most times it does work if you are a firm like McKinsey or BCG, or another major consulting firm. I remember when we used to go into client situations the stature of the firm meant that 9 times out of 10 we would get the work even though we may have never done it before because the brand of the firm was so strong. But there were times we lost. This is one example where we have lost.
Let’s assume you work at a consulting firm that is not known for strategy or corporate finance work, and you want to do the strategy or corporate finance work. You could very well come up with a legitimate issue for a client that needs to be fixed that they have not identified. But unless you prove that you can do it, it does not matter how important the issue is. The client will likely go to someone else. You just created work for a rival consulting firm.
So how do you overcome this problem? How do you show you can do it?
After that disastrous meeting in Santiago some of the changes I made, when I used to represent the firm when going to client meetings, is I used to propose a phased-out approach.
Its very simple. You can offer that in the first phase you will simply sketch out what needs to be done. For example, you can offer a two-week phase where you say, “Ok, in two weeks we are going to sketch out the problem in more detail and we are going to help you understand the problem.”
Then you can have another phase to sketch out how you going to solve the problem. And so on and so forth.
So what you are doing here is you are breaking down a potential project into smaller pieces. While client may be able to say “No” to a 5 million dollar 12 week project, they are less likely to say “No” to a two weeks 300,000 dollars project, because they know if it does not work out over two weeks they can just gut the entire thing and only lose 300,000 dollars.
The smaller project fee is like an option. At the end of the project, the client has the right but not the obligation to move to the next phase. And if they choose to go to the next phase they are exercising their option. If they choose not to go to the next phase then the cost is quite small to write-off.
So the first thing here is to recognize that identifying the problem is not enough. It is not the same as proving that you are the best person or the best consulting firm to address that issue.
And the solution here is to break projects into small phases. Have a front end piece where you sketch out the problem. Another small piece where you design a high-level approach you are going to take. You get the idea.
It is all about educating the client and getting them comfortable. That is what you are doing. You are showing them through these multiple phases that you understand the work and you are helping them to understand it and you are showing them you know how to take this forward.
This is not exactly a new way of building client relationships. But this insight that identifying an issue is not the same as showing credibility to solve the issue is something you have to keep in mind.
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