Monday, September 22, 2008
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Tuesday, September 16, 2008
The Next Step: Becoming a Professional Services Maturity Topographer
Now that you have a better grasp of the framework, it's time for some plotting. By the end of this exercise, you are going to be an expert professional services assessment topographer - and your value to your own firm will have just doubled because you are going to know more about your firm (and what to do next) than anyone else. Trust me on this one.
Time for some homework. Literally, this is going to take some time. Be assured that the better you conduct your analysis, the more likely you will be able to pinpoint a PSMM Protocol Pack that will help you mature your firm, element by element.
Why go to such lengths? The answer is simple: the consulting business is very complicated. There are many factors that go into PS maturity, and you need to consider all of them. One kink in the chain can put you behind your competitors. Measure twice, cut once.
,Here are the elements we are going to be plotting. Each section deserves to be plotted on it's own map.
Elements to be plotted | Brief Overview |
Clients | How does your client see you today relative to your competitors? Plot each one. There is only one way to do this: ask your customers to plot you. |
Consultants | Plot each consultant. We aren't plotting according to their skill level, rather, their placement is dependent upon how well they understand the professional services business and how much they currently contribute to revenue growth. |
Sales Personnel | Plot each Business Development Executive (or what ever title you give them). In what level are they actually selling? |
Sales Support | How mature are your practices for educating and empowering your sales force? What type of business does it influence? You may need to plot sales support for each practice (if you have more than one) |
Recruiting Personnel | Plot each Recruiter (or what ever title you give them). How well can they actually represent your business and articulate that to prospective talent? Looking at the Consultants that were plotted above, what kind of talent are they actually hiring? |
Service Offerings | Plot each one. Are they skill specific or do they solve specific business issues? Be cognizant of the service offerings that are a front for staff-augmentation. |
More Definition on the Levels
Getting your head wrapped around the levels is very important. The next step will be plotting a number of different variables in the PS business in assessing your firm's maturity. Once the maturity level is know for each of the variables, you'll be reviewing PSMM Protocol Packs for specific actions on advancing maturity. It goes without saying, that if you don't plot the variables correctly, the PSMM Protocol Packs will do you very little good.
Once you fully understand and appreciate the levels within the maturity model, your view of what needs to be done next will be clear.
Since my forte' is in the Information Technology industry, my definitions of the Indicators are slanted toward that specific industry subtype. It would be great if you would post comments on how these categories and indicators can be augmented to support your specific subtype.
Level 0: Staff Augmentation
Category | Indicators |
Buyer | Vendor Management Office or Procurement Lower Level Manager IT Manager Typically in the IT department Not affected by the business problem |
Consultant | Typically a "gun for hire" looking for a new project Contractor mentality Paid hourly Looking for the most money Doesn't know how, or doesn't contribute to firm growth Knows little about establishing firm credibility within the client Probably wouldn't contribute to proposal development unless paid for his time. |
Consultant Direction / Management | Given by the client |
Consultant Bench | 0 - 2 weeks |
Firm Risk | Biggest Risk: on an economic downturn or when the client is acquired, Contract Resources are the first to be cut from the budget Business as Usual: On an individual by individual level, there is very small risk if any. Typical risk would be 40 hours of billing should the client decide the contractor will not work out |
Contractual Terms | There are no terms associated to deliverable, date, or quality |
Profit Margins | Low, comparatively |
Consultant Leverage | None |
Sales - Budget Targets | Sales requires funding to be budgeted Targeting the Staff Augmentation Spend |
Sales - Account Planning | Non Existent |
Sales - Strategies | Relationship based |
Sales - Positioning | We have good recruiting We have strong testing capabilities to ensure our consultants are of high quality We have good training opportunities |
Type of Purchase | Typically commodity unless the firm specializes in a very specific niche. |
Brand Equity | Limited to and influenced by the relationship of your Sales Executive and the performance of your Contractor |
Delivery Methodology (ies) | Non Existent or very immature |
Service Offerings | Usually very generic and resource specific. (i.e. Project Management Services) These types of service offerings are just fronts or different marketing schemes for staff augmentation |
Delivery Leadership / QA | Non existent, or borrowed time from another resource |
Model Requirements | Excellent Recruiting that can find the "in" or "hook" - which is typically relationship based Relationship Salesmanship |
Value to client | Fulfilling temporary staffing needs Payroll service |
Competitive Differentiations | Good recruiting Good testing Relationship building Strong relationship based sales |
Level 1: The Chasm
Recall from my earlier post that in Level 1 the PS firm is going through significant transformation on it's way to being a "Project Shopper". It's typical that a firm in this stage will perform both Staff Augmentation Services as well as the services of a "Project Shopper" although they aren't nearly as good at it. This is THE most difficult stage to be in because the focus of the firm (sales, recruiting, delivery) is ambiguous. Any time you have an ambiguous focus, it is extremely difficult, if not impossible, to gain traction in either direction.
The best way to define a firm in the "Chasm" is by having the indicators of both Level 0 and Level 1.5.
Level 1.5: Project Shopping
Category | Indicators |
Buyer | IT Manager or IT Director Still in the IT department Still not affected by the business problem |
Consultant | In the early stages: * Recruiting is still hiring the staff-augmentation consultant (see above) In the later stages: * The Delivery Leadership understands more about the business and can/does generate more client revenue |
Consultant Direction / Management | Typically from PS Delivery Leadership as the engagement should be under a Statement of Work. |
Consultant Bench | In the early stages: * the firm still operates like a Staff Augmentation firm giving 0 - 2 weeks of bench time In the later stages: * the sales pipeline is larger and more predictable. Bench time is critical to the success business model. Firms understand that experience working as a team and experience with the methodologies is critical to ongoing success. |
Firm Risk | The risk at this level is more substantial. Proposals and Contracts become very specific and unless managed well, one project going south can tank a firm. |
Contractual Terms | Proposal/SOW/Contract terms are now directly tied to deliverables, dates, or quality. |
Profit Margins | Higher than Staff Augmentation but lower than Solutions. Margins vary depending upon leverage models employed (see below) |
Consultant Leverage | In the early stages: * Typically none as the hiring process is still too close to staff augmentation. In the latter stages * Better. Firms begin to understand what type or classification of consultants they need (or do not need) to be successful. |
Sales - Budget Targets | Closed Sales requires funding to be budgeted Targeting the RFP spend |
Sales - Account Planning | In the early stages: * Very little In the latter stages * More sophisticated, but still IT based and still heavily relationship based |
Sales - Strategies | More sophisticated |
Sales - Positioning | We are the best at "XYZ" skill specific projects. |
Type of Purchase | Still relatively commodity based. Global competitors force rates down because there is still relatively little differentiation |
Brand Equity | Getting better. You may be known or becoming known in your marketplace for having good "XYZ" skills |
Delivery Methodology (ies) | In the early stages: * Typically just starts with some number of resources who have similar skill sets. * Methodologies begin to emerge In the latter stages: * Methodologies are improved and tweaked over the course of multiple engagements. * Resource familiarity with the methodology improves. |
Service Offerings | Service offerings are now more specific, but they are usually targeted to one or a few very specific type of skill sets rather than solving business problems (e.g. Java Development, Portal Development, etc). The Service Offerings at this level are still more tactical than strategic. |
Delivery Leadership / QA | In the early stages: * Non existent, or borrowed time from another resource In the later stages: * Practice and/or Delivery leadership emerges |
Model Requirements | Resources with a specific skill set(s) More sophisticated sales personnel who can adequately project the firm's capabilities. More sophisticated recruiters who can find the right profile consultants In the later stages, * Dedicated Delivery Leadership / QA * Organization Design * Methodologies * Experienced consultants |
Value to client | More valuable to the client than Staff Augmentation firms. Capable of fulfilling the same duties as their own internal IT department |
Competitive Differentiations | Taking on more Risk |
Level 2.0: Solutions Providers
Category | Indicators |
Buyer | Line of Business Executive Directly affected by the business problem |
Consultant | More sophisticated consultant. Often, firms in this category hire directly out of college and train/mold the consultant. Investments are made into making each resource a model consultant. |
Consultant Direction / Management | Always from PS Delivery Leadership as the engagement will be under a Statement of Work. |
Consultant Bench | Absolutely yes. |
Firm Risk | The risk at this level the most substantial. Proposals and Contracts are very specific and usually include penalty clauses. |
Contractual Terms | Proposal/SOW/Contract terms are directly tied to deliverables, dates, or quality. |
Profit Margins | The highest margins as Solution Providers are sophisticated at optimizing the leverage model (see below) |
Consultant Leverage | Very sophisticated. Usually utilizing one high cost resource to many low cost resources. |
Sales - Budget Targets | Strategic Budget. Often, due to the firm's ability to create demand, business is closed when no budget has been allocated. Capable of creating budget. |
Sales - Account Planning | Very sophisticated and is aligned to the Line of Business |
Sales - Strategies | Very sophisticated and includes tools like Benefit Ladders and Influence Maps. |
Sales - Positioning | We can help you solve your business problems. |
Type of Purchase | Strategic |
Brand Equity | Best. When you are known as business problem solvers, your value is much more strategic, and thus, your brand is more relevant. |
Delivery Methodology (ies) | Very sophisticated and has been proven over many projects. |
Service Offerings | The service offerings at this level are Line of Business specific. |
Delivery Leadership / QA | Very sophisticated and often comes out of industry |
Model Requirements | Industry expertise |
Value to client | Strategic |
Competitive Differentiations | Industry expertise |
Monday, September 15, 2008
The PSMM is a community project. It's Free.
Believe it or not folks, I've received 2 emails now asking me to shut down my project and my blog.
Apparently there are companies that exist just to assess the maturity of Professional Service firms. Guess what? You guessed it, they charge a fee.
The PSMM is a free, community-driven, project designed by the professional services community, and for the professional services community. Here's why: every, and I mean every, professional services firm is uniquely different. Only you know the best actions (protocols) to take to improve the maturity of your firm. I would suggest to you that you are wasting money by having someone else (who doesn't know your business, doesn't know your capabilities, and doesn't know your clients) assess and make recommendations for your professional services business.
The idea behind the PSMM is to be a community driven project with many different types of firms submitting many different protocols. These protocols would then be available for your review, and you can decide which protocols make sense for your business.
To your maturity - Mitch Loder
Sunday, September 14, 2008
Understanding the Maturity Model Framework
Okay, so lets start diving into something meaningful.
As I began to create the PSMM, I first asked myself, "how would I accurately assess a Professional Services (PS) firm if I was going to buy it with my own money?". The reason I asked this question should be obvious: spending your own money makes you want to do it correctly.
I've participated in "due diligence" investigations when PS acquisitions were being considered, and trust me, I've seen the negative ramifications of not utilizing a framework. In fact, it is very common to hear about PS acquisitions that didn't work. Of course, there are many reasons for failed acquisitions, but the assessment of the acquisition target should absolutely be completed to ensure business model fit.
It became evident that a simple, yet powerful framework would be needed to assist in an assessment of a PS firm.
The next question I asked myself was "If we had a framework for an objective assessment, how could we use it to create a framework for maturity?"
Thus, the final goal during the creation of the PSMM was to provide meaningful and objective framework that would allow the professional services community at large to contribute best practices and new protocols for PS maturation. It then can become feasible to think that PS subtypes (Accounting, Law, IT Consulting, etc) could contribute their own protocols and best practices, but yet still be extendable and valuable beyond their subtype.
The framework presented in the PSMM doesn't or shouldn't replace any other business planning tool that your firm is using. (Although I've never seen any other tool actually provide any meaningful information in PS industry. Enough with the SWOT analysis already! How many years have gone by without making any significant strides towards Maturity??).
Below, in all of it's simple brilliance is the PSMM framework. It has 3 levels and a dangerous chasm.
We'll talk about the levels in a moment, but first, lets talk about context for axis definition.
PSMM Axis Definition
The PSMM framework is a simple framework, and we've learned that axis definition around the framework can accommodate multiple context view
Axis Context View #1
Starting with the most basic context: economics - clients will pay more from something that they value. Therefore, we can define the vertical axis as the fees you can bill for the services you are providing your client and the horizontal axis is the "strategic value" your client is receives from your services. It goes without saying that if your value is low, chances are your fees is going to be pretty low. Now that we are in the global economy, if your value is low, your services are at a commodity level.
Axis Context View #2
Another way to look at the axis definition is based upon your brand recognition (current or potential) and the level of talent you are able to recruit. I know what you are thinking, "money buys the talent". However, there are a number of studies that have demonstrated the correlation between brand and talent. Even though you have an argument, I would argue that not only will that line of thinking provide you with lower margins, the talent your are buying is a poor investment for your firm. We'll talk more about investments and talent in subsequent posts. You may also be thinking that "Everyone already knows my company". I would refer back to the post that discusses Truth and Anguish.
Axis Context View #3
Here is a context view that PS firms "who get it" should understand. On the vertical axis is "Client Trust" on the horizontal axis is "Ability to Influence". Those of us who have been successful in the consulting industry continue to work towards achieving high levels of both. The reason for which is measured in our ability to continue to recognize significant revenue streams from our clients.
Axis Context View #4
I tend to really like this view of the axis context because the term "partner" is such an overused word in our industry. I find it particularly amusing when low-value firms use this term openly to self-classify their value to clients.
Now, we can now use the PSMM framework for properly classifying a PS firm's value to clients. Looking at the framework then, we can classify A PS firm then can either be a "Commodity", "Tweener", or "Partner" based upon the value they provide to their client. We'll further define these classifications in future posts.
PSMM Maturity Levels
You see the curve, so lets define the levels.
Let me start off by saying that the classification of "Level 0" is not about a firms ability to make money. Rather, it's simply about maturity. It isn't meant to be an insult in any way. There are plenty of staff-augmentation companies that make good money. However, Level 0 is the easiest type of PS firm to create and run. You can make reasonable money, but if you are a publicly traded company, not only will Wall Street classify you as Level 0, they will also classify you as a "Commodity".
Believe it or not, I've heard executives from billion dollar plus PS firms (who will remain nameless) define their business model as "cheeks in seats", meaning, their whole goal is to provide as many resources as possible to fill the staff augmentation demands of their clients. The point to take out of this is that this is a "billion dollar" firm who makes a ton of money at the lowest level of maturity.
Level of Maturity | Brief Definition |
Level 0: "Staff Augmentation" | The lowest level of maturity. Firms in this category typically just provide resources to fill demand of their clients. The only strength of these firms is their ability to recruit Contract Personnel to perform the work as prescribed and managed by their clients. They typically act as a recruiting and payroll service for their clients. We would classify the talent in this category as "Contract Personnel" as opposed to "Consultants". The Staff Augmentation firm has relatively low legal or monetary risk in this category. |
Level 1: "The Chasm" | Though the name could make you think otherwise, the Chasm is an actual level of maturity. While any forward movement on the maturity curve is difficult, it is most difficult (and the most expensive) to move between Level 0 and Level 1.5. This level is fraught with peril and should be taken very seriously. The protocol packs are going to be very important for you to survive this level. It is typical for firms in the Chasm to be performing their typical staff augmentation services, but their attention is given to figure out how to go "Project Shopping". |
Level 1.5: "Project Shopping" | As a firm emerges from the Chasm, the next evolution in the maturity framework is to go "project shopping". Project Shopping can be defined as looking for business (RFP or other) that is a natural fit for the capability that is emerging. Typically what we see in the initial stages of "Project Shopping" is firms continuing their staff augmentation business while shopping (looking) for RFP business that is a natural fit for their capability. The primary benefit for firms in this category is now they has some number of resources who are skilled at something. Methodologies are non existent or just emerging In the early stages. Later in the stage, the methodologies are more complete as they are updated or tweaked over the course of engagements. The primary value of firms in this stage is "now they resources with some specific capability". These firms are beginning to take on serious legal risk. |
Level 2.0: "Solutions Partner" | This is the "Partner Level" so sought after by so many firms. I keep repeating this, but it's important. The majority of firms will misrepresent themselves and call themselves "Solutions Partners" or "Partners". If you are a client, you really, really need to understand this. The fact remains that few firms mature to this level. The best way to define this level is "having the capability to help clients achieve their business goals time after time". Methodologies are very mature proven and fine tuned over many engagements. We will typically see the highest levels of talent working for firms at this level of the maturity model. We will also see these firms as the most confident in their ability to take on work as the risk at this level is the highest possible. |
Wednesday, July 16, 2008
A few tails of Truth and Anquish
Story 1 - The inspiration of the PSMM
I had spent 7 years humping it as a consultant. Earning money for my firm and helping them improve their reputation based upon all of the hard work I had completed for my clients. I was not only doing my job, but I was influencing my clients to buy more consultants from my firm. Truth be told, I was doing what a good consultant should do. Finally, I had gotten my chance to make a difference. I had been promoted into a leadership position. For 2 straight years, I worked my tail to the bone to close more business. And I did. I closed (relative to the size of the branch) significant business. It was not only new business, it was higher value business. We were selling services at billing rates my branch had never even imagined were possible in this market. I had become a difference maker and I knew it. My name was starting to be thrown around in new circles both in my local market as well as nationally.
I personally built new capabilities and attracted some of the top talent to come to work for us. Times were great, and at that point, I was absolutely at the highest point in my career. I had personally developed a very high level of ethusiasm for the firm I worked for and for the services we provided (read into this developing a high level of arrogance). It would soon come crushing down in the anquish of truth.
I began to realize the truth on a plane flight. I happend to be sitting next to a nationally known figure in the consulting world. I was very eager to talk with him - and learn as much as I possibly could. I introduced myself, and told him that I was a big fan. We talked for awhile and I was really enjoying and learning from our conversation. Finally, he asked what I did. Truth be told, I couldn't wait to tell him what I did and who I worked for. Finally that time had come. So I did - with utter enthusiasm and arrogance. After I told him who I worked for, he responded "oh yeah, I know you guys - you're that staff augmentation firm". My first thought was, this guy is crazy - doesn't he know what we really do? As I tried to expain to him that we were more than that, I found he became less and less interested in talking to me. My anquish began creeping in at that moment.
About a year later, the largest services deal I had ever sold at that time came crashing down around me. Everything about our delivery on the project was extremely poor. My client ended up kicking us out. Talk about personal anquish. I later came to realize that not only was our delivery poor, as I evaluated the entire situation, I discovered the firm I worked for really was a staffing firm misrepresenting and selling itself as something else.
I had done my client no favor. The anquish now was very real. The next thing I'll tell you I've never told anyone until now except for my wife. When I had my intelligence level tested, I tested out in the top 1% of our country. I'm not telling you this to make myself appear to be smart. I'm telling you this because consulting companies are full of smart people just like me. But, just like me at that time, just because you are smart doesn't necessarily mean you understand the professional services business.
Don't feel bad for me. Quite the contrary. This was my turning point. I had finally realized that the gentleman on the plan was correct. We were a staffing company. This is when I decided that I really needed to understand the professional services business. If I were going to really service my clients better, I needed to really understand how our business works. I needed to understand the differences between staff-augmentation firms and firms who are more highly regarded by clients. This personal anquish of defeat was the birth of the PSMM.
As the anquish really settled in, I recognized this specific situation represented an opportunity. If I were able to really learn and understand the professional services business better than anybody else, not only would I service my clients better, I would be invaluable to numerous professional services firms.
Story #2 - The PSMM gets validated - and more personal anquish
For the next several years, I kept up with my passion to study the professional services business. I developed early models of the PSMM and would test them against new situations I was running into. I continued to flesh it out. Around Version 2, I would have the chance to present it against a real business situation.
The firm that I was working had a serious issue. As they were continuing to acquire new firms with enhanced and new capabilities, Wall Street began to weigh in. Wall Street was noticing that the firm wasn't increasing organic revenue as a result of the acquisitons. In response, they tried all of the mind numbing strategies we've all heard of to improve their organic growth from the acquisitions. You guessed it - their strategies didn't work.
Here was my chance to make a difference. I worked during all of my free time to create a presentation on the PSMM and the strategies based upon the PSMM to solve their organic growth issues. I have to say, this was an awesome presentation.
You guessed it, here comes the point of more anquish. After I presented it, I realized that it had fallen on deaf (or dumb) ears. The model and the strategies went unnoticed because either a) they were too arrogant to think that someone could teach them something new about the business or b) they didn't understand the business to begin with. Of course, I'll never know the real reasons- but I suspect it was really a combination of both.
This situation only inspired me more. It inspired me to write the book, which became the blog. I've realized there are so many people in the professional services industry who could benefit by understanding the maturity model.
Tuesday, July 15, 2008
Are you ready to tell the truth, the whole truth, and nothing but the truth?
For you to get value from this blog series, you have to be prepared to honestly assess your business, and be truthful in that assessment. Yes, I'm intending to have an emphasis on the truthfullness. :-)
If you aren't prepared to be completely honest (in otherwords, you can't release yourself from your own arrogance) I would suggest you check out someonelse's blog. Sure, there may be a nugget of knowledge you can glean here and there. Just know, the real knowledge, the real value, comes from embracing the PSMM.
em·brace
1. to take or clasp in the arms; press to the bosom; hug.
2.to take or receive gladly or eagerly; accept willingly: to embrace an idea.
3.to avail oneself of: to embrace an opportunity.
4.to adopt (a profession, a religion, etc.): to embrace Buddhism.
5.to take in with the eye or the mind.
This blog series is going to require you to be truthful. Truthful about your company. Truthful about your consultants. Truthful about the services your firm provides. Truthful about your office staff. Truthful about your sales staff. Truthful about your partners. Truthful about the manner in which your client spends with you. Most importantly, you're going to get at the truth for how your Customers perceive you.
Truth hurts. It really really does. In a future post, I will describe to you that you that if you really do want to mature, you're going to have to ask your customers for their perspective of you. That's when it will really hurt. Why is it going to hurt so bad? Well, the answer gets back to the arrogance that embodies our industry. Chances are the feedback you'll receive from your client is very different your own personal arrogant perspective of your company.
Hold on, there is light at the end of the tunnel.
The real Truth, however, will set you free. Once you know the truth of how your firm is positioned on the PSMM, you will be in a much better position to accelerate your maturity (think innovation, think competitive strategies, think growth). This process will only work if you come at it from a purely objective point of view. Challenge yourself at every question. Play devil's advocate with your answers. Being truthful is tough, especially in the professional services industry. But, I will tell you, the truth can be, and should be, addicting. As an added benefit, not only will your firm improve by being truthful, you'll obtain a higher level of personal satisfaction as well. And by the way, your customers will love you for it.
Monday, July 14, 2008
Why a maturity model?
In my 19 year career, I've worked for several professional services firms and have provided strategic consulting to countless others. I've worked with large, medium, and small firms. I've worked for good ones, and bad ones. I've worked for firms my clients loved, and (very shortly) worked for firms my clients hated.
Over my career, I've made it one of my passions to study the business models of each organization. Identifying what makes them unique, valuable, and trusted. I can tell you that every firm I've been around is very very different.
Eventhough all of these firms have different business models, the most interesting aspect of my studies has shown one unique trait each of these firms share. It is how they all perceive themselves and their business. Consider this, consulting, by its very nature, is arrogant. I mean, our clients hire our consultants because we supposedly know more than they do. So, why shouldn't this innate fact create an arrogance in our industry that no one knows more about the professional services industry than we do? Don't get me wrong, every firm is doing something right... I mean, you couldn't make money if you didn't have a model that works (to some degree). The question becomes then, can we actually mature as an organization? Can we make ourselves more valuable? Can we grow? Can we keep customer satisfaction?
There are a few good books out there that discuss professional services. We've all read "Managing the Professional Service Firm" by David Maister. It's a necessary read for anyone in our industry. But, this book is about the basics. It misses the tactical moves a company needs to understand. It doesn't help us understand how to improve and become more valuable.
The issue with our industry that strikes me the wrong way, which becomes more prevalent as the entire economy revolves around customer-centricity, is how many firms actually have the audacity to believe internally and tell their clients they are a "solutions" firm. We'll talk a whole lot more about this topic in future posts. The truth is, achieving "Solutions" status is one of the pinnacle levels on the maturity curve, but it is also one of the most elusive and expensive levels to achieve. Remember what you say you are and how your customers perceive you can be, and probably is, entirely different.
So, back to the question, "Why a maturity model". That's easy to answer, to mature as a professional services firm, one must answer the question, "What level am I on today"?. The second question a firm should ask is "What can I do today to be better at my current level" and finally, we should ask "What do I need to do (and how much is it going to cost) to climb to the next level on the maturity curve?"
So, now you have basis for my blog "The Professional Services Maturity Model"