Tomicide Solutions, Jun 2018

Addressing The Mysterious High-Tech High-Touch Balance In IT Service Firms

By Tom "Bald Dog" Varjan


When you take just a quick look at them, can you tell a bee and a wasp apart? How certain are you that you've got it right?

Many people can't see the difference. The little critters look just so fiendishly similar.

Well, on the surface at least.

But their stings are drastically different.

One big difference that the bee's sting is acidic and you need something alkaline to reduce the pain. Baking soda dissolved in water is a first-class weapon for treating bee stings.

In contrast, the wasp's sting is alkaline, so you need something acidic, like lemon juice or vinegar, to treat it.

So, the difference between the two types of stings is pretty clear-cut.

Not so much in business development as to what tasks can be automated and what should be kept manual.

Has it ever happened to you? Most probably, yes.

Many years ago, I read an interesting study about the profitability (revenue per employee) of different industries.

It turned out that professional service firms, including IT consultancies, are behind manufacturing companies and junk food joints.

Yes, the comparison is really hard because they all have different business models, but it's still strange that a profession that on the surface has higher gross margins eventually ends up losing it to other industries.

We know from Michael Gerber that systems make is possible for ordinary people to produce extraordinary results.

We also know that junk food joints need different levels of automation from IT consulting firms, if IT firms invested a tad more energy to redress their automation-humanisation balance, they could generate significantly higher revenue per employee.

But the main problem is that most firms don't even measure revenue per employee. Why? I don't know but they don't.

They love using impressive sounding KPIs, like total gross revenue, headcount and the number of offices.

Traditionally, IT consultancies are filled with highly schooled technical people with various tech degrees and most of them passionately look down on marketing and selling and the people who practise this douchebaggy black magic.

After all, they've learnt from their - predominantly Marxist - professors that profits are dirty and technical people have all the right to despise those moral toe rags that are involved in revenue generation.

Most IT consultancies don't even have sales and marketing functions. They have a function called "business development", whatever that may mean to them.

Business development includes...

Of course, today, with the proliferation of the Internet, business development is a lot easier than it used to be, but still involves quite a bit of traditional sales and marketing.

And this is where the skinny piglet jumps into the marmalade…

And the question is which parts of business development should be high-tech and which should be high-touch.

Many IT consultancies try to make the front end of the sales cycle high-touch (when buyers are not yet ready to talk to sellers) but want to make the tail end of the process high-tech (when buyers crave guidance).

And why? Because no one wants to be the condemned salesperson. Everyone knows that salespeople are resented and no one wants to be regarded as a traitor to the precious tech profession.

But since every business, including IT service firms, needs revenue, and sales is more or less the only function to make sales, someone has to do it.

As Paypal founder, Peter Thiel's is fond of saying, "Look around. If you don't see any salespeople, you're the salesperson."

Whoever the salesperson is, someone has to sell.

And today, we take a look at seven concepts to transition from a tech culture that sells to a sales culture that happens to sell technology as business improvement.

No, no one wants to buy your tech services.

Your clients buy your services because they lead to business improvements. Improved conditions to fulfil your company's mission and achieve its vision.

Consistency Must Trump Automation

During the initial stage when you do the work manually, use check lists just as pilots, doctors and other professionals do to make sure every phase gets done.

Oh, and read Atul Gawande's The Checklist Manifesto: How to Get Things Right. The book can open some new doors about how to use checklists.

Break down your work into various actions and plan when you do those actions. And once the actions are done, you can check them on your checklist.

The Two Extremes

IT service firms often fall into one of two extreme traps.

One of them is the no automation trap.

These firms are so desperate to stay in high-touch mode that they completely ignore the fact that during the initial 57-73% of the buying cycle, buyers are not ready for real-time (phone, Skype) interaction with sellers and don't care about your firms' high-touch intentions.

The other extreme is the mindless full automation trap, which is more prevalent in the tech world. Those firms want to automate the living daylights out of their operations, so they can keep their staff to the bare minimum. These are the firms where you see 2-3 partners and everyone else is on short-term contracts... often from faraway third-world countries.

The fact that most buyers don't take such firms seriously doesn't even come up for firm leaders because they are so obsessed with automation.

They concoct some automated client acquisition systems and hope they get fully booked without ever talking to buyers.

Yes, they get fully booked... all the wat to the bankruptcy court.

How About Some Crucial Metrics For A Start?

When it comes to selling, we have to go deeper into buying, so we have to start with the basic defining number range of 57-73%.

These numbers represent how far buyers are in the buying cycle when they are first ready and willing to talk to sellers.

Before that, they digest sellers' collaterals and content pieces but are unwilling to engage in-person communication with salespeople.

The other number is that in B2B sales over $10,000 you can expect to have minimum 5.4 buyers (don't ask me about the .4. It's the Corporate Executive Board's data). They are some boardroom dwellers and their advisors from specific areas.

If you sell custom software developers, rest assured there are some accomplished software people in the buyer group.

Since they are diverse people, you have to present your offer in a rather diverse manner.

For instance...

And in the buying process, in most cases, they all have veto power but only the CEO has acceptance power.

So, you have a small army to please at once, and inspired by the 70's Slade song, you have to do a bit more than merely squeezing them.

The next key number before you can start outlining your client acquisition is your MEL (Minimum Engagement Level). This is the lowest fee at which you accept full engagements, although you may well do paid diagnosis/discovery sessions under this rate.

The fee for a paid discovery/diagnosis session is roughly 10% of your average project fee.

Another vital number is the that no one single client should represent more than 25% of your firm's gross revenue. It's just plain risky.

In order to offer good service and offer some flexibility (discretion, goodwill, etc.), you need at least that 25% spread.

You have to make sure that if one of your four clients pulls the trigger on your money-back guarantee, you have the financial safety net to offer the refund plus you're able to meet your financial obligations, including paying your people.

In most cases, the refund is not your people's fault, so you can't penalise them by withholding their money.

They would sue your arse anyway, and that would tank your reputation too.

And now you can start making some funnel calculations.

Let's say you want to increase your sales by $5 million and you know that those engagements will be min. $100,000.

That's 50 engagements. Calculating with a 10% conversion, you need 500 sales conversations per year with prospects. For that, you need some 5,000 sales qualified leads. That's 10 conversations per week.

B2B Sales Funnel

And this takes us back to automation.

Sales in your industry require high level of trust, which you have to build up before you can expect buyers to become clients.

This trust-building also means that you can automate much less of the sales process than in an e-commerce business where very often there is no human interaction between buyers and sellers.

So A Word About Automation

Well, forget about it at the beginning.

Do things manually until you fully understand the interaction between processes. This manual phase also gives you a chance to iron the possible kinks out of the whole process.

And then automate thigs bit by bit, so you can better control the whole process.

It's like writing a complex macro for MS Office or programming. You write it function by function and automate only one function at a time.

When you're 100% with how it works, you automate it and move to the next section.

The other point is that you have to limit the amount of information that you store on buyers and clients. You don't need every little detail.

And the few details you need, you can store in an MS Excel file and a handful of associated files for notes.

Since you're not in the "volume business" but the "margin business", that should be enough for start. After all, you don't have thousands of clients that need your attention.

The problem is that when many IT consultants have enquiries, they optimistically believe those enquiries are guaranteed clients, so they start collecting and compiling all sorts of information on their buyers... not even buyers just suspects at that stage.

Use Rudyard Kipling's Six Serving Men

Kipling's six serving men are who, what, where, when, why and how.

Some of those six serving men can be automated, but some must be kept manual.

Automating the "how" is just unnecessary micromanagement.

  1. Who is assigned to do this work?

  2. What is the work to be done?

  3. When is the work to be done?

  4. Where is the work to be done?

  5. Whydoes the work need to be done?

  6. Howdoes the work get done?

As you can see, #1-4 can be programmed into your calendar to remind you. #5 has everything to do with the company's vision and mission.

And, considering certain guidelines, #6 is up to the doer.

The temptation here is that many IT professionals try to automate what should be left alone as manual work.

But remember, no matter how great your automation is, if your process is flawed, it only gets automatically cocked up and your process becomes the proverbial crazy train going off the rails.

Let's say you want to systematise blog production for your content marketing.

Then you can go back to Kipling's six men and evaluate each of the six men both in in the good and bad dimensions...

  1. Who produces blogs very well? Who does it very poorly?

  2. What is a very good blog for us? What is a very bad blog for us?

  3. When do we need new blog posts the most? When do we need new blog posts the least?

  4. Where can we find good blog examples? Where can we find very bad blog examples?

  5. Why do we need new blog posts done? Why don't we need new blog posts done?

  6. How do we create new blog posts? How do we avoid creating new blog posts?

And now let's define good and bad.

The way I see it, good is what helps the firm to achieve specific goals.

Specifically, good is what helps your firm to land high-quality clients with high-margin and interesting projects at low cost of acquisition.

And bad is what holds your firm back from achieving specific goals.

Business Development On A Continuum

For whatever reason, but your buyers can always stall, strand or even shipwreck your sales process, and unless you've baked continuation into your process for most contingencies, you're toast. And a rather burnt and soggy one for good measure.

Sort of stale toast left over from last week, using some terrifyingly terrible Wonder Bread.

When you put your sales process together, you can take one of two paths.

Your "from first contact to signed contract" continuum can either be based on fewer but larger steps or more but smaller steps.

I know people say a bird in the hand is better than two in the bush.

The problem is that the bird in the hand might be a scrawny little sparrow and the two in the bush can be two chickens, ducks, turkeys or even ostriches.

And while you may starve to death on the sparrow (although I can tell you sparrows make rather nice stew), you can have a slap-up mean even on one half of one chicken.

In my experience, to sell premium IT services, you're better off with more but smaller steps.

This is why.

When you have fewer but bigger steps, you can assume that buyers engage you at a higher price. That can happen, but your conversion rate will be very low.

Let's say your MEL (Minimum Engagement Level) is $50,000 and you try to sell this service to a buyer who's never bought anything from you. It's not easy. Well, it's rather hard.

Granted, if you're a specialist with pretty high level of notoriety, it's a tad easier, but still...

So, you can offer a one-day discovery programme for $5,000.

Basically, during this session, you seek the answer to three questions.

  1. Where does your buyer want to be three years from now?

  2. Where is your buyer now? What's going well? What's going not so well?

  3. Why isn't he there yet? What's got in her way?

So, you can sell this initial standardised discovery session with three options and at three price points ($1X, $2.2X and $5X).

The idea is that this discovery is a standalone service and is valuable to your clients even if they don't buy anything else from you.

And of course, it must be valuable to clients as well.

And after the discovery session and handing over your summary of findings, which includes a paid proposal for implementation, clients can decide whether or not to retain you for facilitating the implementation of your recommendations.

Bloodshed And Cuckoo Clocks

In Graham Greene's 1949 novel's film version, The Third Man, Harry Lime (played by Orson Welles) said...

"In Italy, for 30 years under the Borgias, they had warfare, terror, murder, bloodshed - and produced Michelangelo, da Vinci and the Renaissance. In Switzerland they had brotherly love, 500 years of democracy and peace, and what did they produce - the cuckoo clock."

Most IT service firms try to play the Swiss brotherly love game and ignore the Italian bloodshed because they're shit scared of the possible negative consequences.

And as long as they remain technology businesses, the consequences are predominantly negative.

But once they become sales and marketing businesses that sell the business benefits and values of information technology, they can expect some sweet positive consequences.

This preposterous approach would make it possible that IT service firms have a consistent, predictable and reliable supply of qualified sales leads and some of the leads regularly always turn into clients.

But if this strategy gave IT consultancies a rather keen edge and they could even out the dreaded feast and famine cycle, why don't more firms do it?

Well, no matter how effective it is, it goes against the fundamental grains of the industry.

Most technical people at technology companies are 100% convinced that they are the most valuable people at their companies because they understand the intricacies of programming or other aspects of technology.

But unless the business development folks bring in the money, the techies don't get paid.

The other issue is accountability.

Business development is a high-accountability profession. It's hard to hide behind fabricated excuses, as it is so common in technology.

The problem is that while the temptation of steady revenue is sweet, but the resentment for sales and marketing is bitter enough to overshadow the sweetness.

No matter what they do on a daily basis at a tactical level, unless they have solid marketing or rather, business development strategies, their tactical machinations become as useless as a neck massage en route to the guillotine.

Those firms are forever condemned to winning some minor battles (projects) but losing the war (getting recognised as a premium firm).

All right. you've developed your strategy, and now you're ready to go to hunt for your next clients.

But hang on a moment. Are you sure, your clients want to be hunted?

I know the sales industry has fed us the idea that real salespeople are the hunters and the farmers and gardeners will end up with what the hunters have rejected.

But there is another side of the same coin.

What about the preponderance of hunters who buyers have rejected and banished from their contact lists once and for all?

My observation is that the only people who like this sales hunting nonsense are the sales trainers who teach cold-calling, RFP bidding and other nonsense because it's easy to sell to people who naturally like doing these activities suitable mainly for aggressive type A personalities.

They are willing to dial for dollars, sit through dozens of bidder's meetings and knock on doors all day, even if they get hung up on, rejected and have many of those doors slammed into their faces, rearranging their conks.

My observation is that you can't hunt your clients because they run and hide from you faster than Bill Clinton's falling trousers in the Oval Office.

No, in the premium range you can't convert buyers into clients in one fell swoop, so you'd better stick to systematic business development.

And knowing how complex the whole process is, you'd better know what to standardise (automate) and what to humanise (customise)?

To Hire Or Not To Hire, This Is The Question

Some IT service firm leaders decide not to get involved in business development.

But instead of properly delegating it to business development specialists, they abdicate and micromanage it.

They hire low-skilled people for peanuts thinking that they can dictate to those people every step they need to take to land new clients.

Some others say it takes a long time to train new people, so they decide to do client acquisition themselves. They believe their firms and services are so complex that no one else can explain their services properly and bring in new business.

But if you do that, who does their work? Who runs the firm?

No one. It's just sailing on autopilot going wherever it's going.

Yes, finding and enticing talented people to your firm is hard.

Let's face it, the calibre of people that you're searching for are not searching for new opportunities. They are already happily working at great firms with great clients on great projects.

In order to dislodge them from their current situations, you have to offer them something significantly better than what they have now.

Using Dr. Mihaly Csikszentmihalyi's definition, these talented people operate in flow. That is...

"Being completely involved in an activity for its own sake. The ego falls away. Time flies. Every action, movement, and thought follows inevitably from the previous one, like playing jazz. Your whole being is involved, and you're using your skills to the utmost."

The other side of the recruitment coin is that firm leaders hire some superstar salespeople from totally irrelevant industries and, usually without any training on the nature of the firm and its services, send them out to "drum up" business.

Yes, on their websites, they claim to be premier or premium IT professionals, but behind closed doors, they are busy "drumming up" business.

But when a company has to resort to "drumming up" clients, well, it's not exactly a premium provider. It's just one of the many IT vendors.

And that's the point where, instead of attracting talented people, the firm starts repelling its best talents.

Salespeople turn around at pretty high rates and firm leaders have no idea about what's going on.

Well, IT is pretty complex.

It's complex on the subject matter because IT changes so fast and so significantly.

Plus, on the top of the IT expertise, good IT consultants also have to have significant boardroom-grade business savvy.

And this is where IT generalists are in deep trouble. They can't learn their target markets lingo simply because they have so many of them.

And just because one KPI is vital at a meat processing plant, it may well be irrelevant at a dental clinic or a non-profit.

Larger firms spend significant time on their new people to make sure they can represent them in the best possible light.

IBM, Intel or Xerox spend well over a full year to train new salespeople. They know no one can just show up and start selling next morning.

And after having your salespeople properly trained, you have to offer them all the day-to-day support they need to perform. Without that ongoing support, the whole training is a waste of time and money.

And there is one more important point. Ask your salespeople to document the sales process and work with them on documenting their processes and scripts.

This documentation becomes the heart and soul of the training material for future salespeople.

In Wold War II, the Japanese army drove its fighter pilots into more and more combat missions until all the aces had died.

In contrast, the US military sent fighter pilots to some missions and then held the best ones back to train the new pilots.

That's probably the reason why the US has the best air force in the world. There is a strong emphasis on training the new pilots.

But there is one caveat.

With systems, many firm leaders think that salespeople are expendable because any new person can learn the system and get trained pretty quickly.

Not really.

The majority of the sales process can't be put into a system. What is that? The character and personality of the salesperson. No one can systematise that.

So once you have ironed out your firm's personality, hire new people based on that personality. If you run a premium firm, you can't hire over-aggressive hucksters.

If your firm basic personality is quiet and humble, then stay away from hiring braggadocio loudmouths.

Conclusion

The reality is that almost anything in this world can be automated. But should it? I'm not sure.

Alibaba has just developed a AI system to do copywriting. Mind you, it's not the kind of copy that you could use to sell caviar in a concentration camp. It's just a pile of stitched-together words. May sentences don't even make sense.

So, I reckon, it's good enough to write mass-produced web content, but it's not for the kind of copy that is expected to generate revenue.

Would you send your children to kindergartens and schools where, instead of humans, they are looked after by robots?

Experts say that one of the root causes of all problems in the world is low emotional intelligence. Basically, people have come to not giving tow shits about each other and selfishly pursue their goals even at others' expense.

I have a bad feeling that over-automation can make the situation only worse.

Selling IT consulting services has lots of delicate moving parts, and many of them are unsuitable for automation.

I know this is strange to hear this from an engineer who comes from the exciting wold of industrial automation, but that's just reality.

Also consider that, due to the nature of your business, your salespeople can't act like salespeople who sell things. We can call them salespeople among ourselves, but to the outside world, they'd better become consultants.

Buyers want to meet experts not salespeople. They know most salespeople are skilled in one thing: How to convince buyers to hand over as much money as possible as soon as possible.

Buyers know they can't ask meaningful questions because most salespeople have neither technical skills nor business savvy to answer boardroom-calibre questions.

But this whole selling business must start with good lead flow.

With good lead flow, your business development becomes a consistent predictable and reliable company competency as opposed to a function haphazardly provided by people who can quit at any time.

Without good lead flow, business development is just as haphazard individual effort which is as far from consistent, predictable and reliable as Rome, Italy from any of the 15 Romes in the US.

Yes, automation is a great thing, but just as everything else in the world, it too must be done with moderation.

In the meantime, don't sell harder. Market smarter and your business will be better off for it.

Attribution: "This article was written by Tom "Bald Dog" Varjan who helps privately held information technology companies to develop high leverage client acquisition systems and business development teams in order to sell their products and services to premium clients at premium fees and prices. Visit Tom's website at http://www.varjan.com.