Tuesday, June 8, 2010

Strategic Planning Analogy #331: Heal Thyself

I have a large number of friends who have left the big corporate world and set up small consulting businesses. I know it can be difficult for a small start-up to get established. After all, there are a ton of small business consulting firms. The joke is that “small consulting firm” = “unemployed executive between jobs.”

Therefore, I’m curious to see how these friends of mine position their business to succeed. I go to their web pages to see how they present themselves to the world. Quite often (but not always), these web sites are a real mess.

Many of these web sites are bland and generic. From reading the site, I cannot discern their consulting point of view or style. Others are so packed with jargon that I have no idea what they are talking about or what services they provide. Rather than being customer-centric, they tend to be consultant-centric. Worse yet, they do not convince me why anyone should prefer hiring them over the competition.

Other than the page that shows a picture of the actual consultant, you could pretty much swop pages between sites and not be able to tell the difference.

So here’s my question: Why should I write a big check to a consultant who claims they can make my company a huge success (better positioned, bigger, stronger, more professional) if the consultant’s own business looks like a bland, unpositioned, unprofessional mess?

Physician, heal thyself.

Although there are some advantages to being a small firm (more flexibility, less overhead so you can charge less), there are also quite a few disadvantages. The bigger firms have bigger promotional budgets, economies of scale, well-known reputations, and other such benefits.

On top of that, there is typically more personal risk for an executive to recommend to his boss to hire the services of a small firm. As the old saying used to go back in the heyday of mainframe computing, “nobody ever lost their job because they recommended that their company use IBM.” IBM was the “safe” choice, because they were big and well-established leaders in the field. If the deal later turned out to be bad, rarely would you be in deep trouble for recommending the safe choice. However, if you had recommended a small firm and the deal went bad, you could easily lose your job for making such a poor recommendation.

Therefore, if you are a small business and want to succeed, you need to work extra hard at building a winning reputation. Unfortunately, it seems like many of my friends wanted to skip this step when setting up their consulting businesses. Many of these friends were so focused on being able to “do the work” that they did not spend sufficient time creating a compelling reason why they deserve to “get the work”. They had not branded their business.

The principle here is that small businesses are not immune to strategic planning. They need a plan to win as much as the big companies—maybe even more so. And since most small businesses are predominantly in service industries, what you are selling is not an isolated product, but rather a relationship between the service provider and the customer. Therefore, it is essential to take the time to brand your business, the entity you want your customers to form and keep a relationship with.

A business brand should answer the following questions:

1) Why should someone do business with me?
2) Why am I a superior choice over the competition?
3) What is my area of specialty…what do I provide better than the big guys?
4) If you had to describe your benefit in the marketplace in one or two words, what would those words be?
5) Who am I targeting for business? What problem am I trying to solve for that customer? How is my solution superior for that customer? If it is not superior, should I change my business model or change my targeted customer?
6) How do I present myself and sell myself to my customers so that they can quickly understand my brand and why it is the best solution for their problem?

Trying to be all things to all people is hard enough if you are a large firm. If you are a small firm, that is next to impossible. Even if it were possible, your potential customers would not believe such a claim—you would be seen as too small to have that capability to offer so much with any degree of quality.

Therefore, you have to make choices and tradeoffs. You need to focus on being better at doing less. The trick is deciding what and who to focus on (and what not to focus on), and how to create a business model which exploits that niche. This focus becomes the nucleus of your brand.

Some small businesses resist the idea of spending time to brand their company. I will look at two common points of resistance and show the weakness in their argument.

1) I Have Connections (The full silo fallacy)
A lot of times, people who leave the world of big corporations to start a small business think that those connections to the big business world are all they need. They claim that their Rolodex is full and their old contacts and clients love them. Therefore, there is no need to brand and sell their business—all they have to do is get their old contacts to follow them to their new, small business.

There is some truth to that line of reasoning. I had a friend who left a big corporation and took several of that corporation’s key clients with him to his new, small business. That worked quite well…for a short period of time. The problem was that after a couple of years, he had successfully met most of their needs. Suddenly, the business from those old clients stopped. Because he had not spent time branding his business and selling that brand, no new business was coming in. So when the old business stopped, he had no business at all, so he had to shut down his small firm and go back to being an employee in the big business world.

I call this the “full silo fallacy.” It would be like a farmer saying, “I have a large silo full of grain, so I can stop farming.” The problem is that eventually, either the farmer will use up all the grain in the silo or the grain in the silo will go bad. Either way, if the farmer stops farming, eventually he will run out of resources and go broke. Just as a farmer needs to keep farming to replenish the silo, a small business needs to brand itself and sell that brand in order to keep replenishing its sales.

A silo full of great connections from the big business world will not provide business forever. Here are some of the factors that can deplete that silo faster than you think. First, some of those friends who seemed to love you when you worked for that big company in reality may have only spent time with you as a way to get closer to that large company. Once you leave that big company, you become less valuable to them and they de-friend you. I saw this very thing happen to another friend of mine. A lot of his so-called friends were less likely to return his phone calls after he left the big firm. They only liked him for his connection to the big firm. Many did not follow him to his small firm.

Second, just as we saw before, it can be personally risky for an executive to recommend a small firm. Even if these contacts love you and want you to have the business, they may not feel they can take the personal risk. And even if they want to take the risk, they may not be able to convince their bosses to take the risk (even if they did not mind working with you when you were at the large company). And if you have not developed a strong brand to counteract this risk, you are even less likely to get this business.

Third, contacts don’t sit still. Many of them retire, switch industries, leave your area, or in other ways are no longer in a position to help you. If you have not developed any branding to transcend that personal friendship, you business with that company can evaporate when the contact leaves.

Fourth, many large businesses make their employees sign contracts preventing them from taking away clients when they leave. So even if the contacts want to move with you, you may be prevented from taking them by contract. And even if there is not a contract, the old company is going to fight back to keep those clients. They have a lot of resources at their disposal to keep a client from switching.

Finally, as we saw earlier, some relationships have natural endings. Your type of services may no longer be needed because: a) you finished the project; or b) the customer has evolved to the point where your type of services are no longer needed. Perhaps they became large enough to hire someone to do that work in-house. Perhaps they changed their strategic focus so that work is no longer necessary. In any case, the work can end, even if you were on very good terms with your contact.

Therefore, don’t put your hopes on a full silo. It may not be as full as you think and it may get depleted faster than you think. It is better to brand yourself, so that you are better able to replenish the silo.

2) I Just Have to get my Name out There (The push marketing fallacy)
In the old days, small business branding was little more than putting your name in the Yellow Pages of the phone book. The idea was that if I just get my name out there in the one place where people look for small businesses, I will be found.

Unfortunately, the internet has destroyed that old world. Customers get their information from a wide multitude of sources, including customer rating sites and company hate blogs. The power of the customer is making the old push marketing approach of “just getting your name out there” obsolete. It is now the world of pull marketing where you need to brand yourself so the customer will want to pull you into their world.

If you do not proactively create a positive brand for yourself in cyberspace, the people using the internet will create their own brand for you in the way they talk about you—and you might not like what they say. This is one reason why I was so disappointed with many of the web sites my friends had put up for their small businesses. They were not trying to control the conversation around how they were becoming branded.

Just because you are a small company does not mean you can skip the tasks of strategic planning and branding for your company. In many ways, you need it more than the big guys, because your size makes you more vulnerable. And if you want to be a strategic planning consultant, it is even more important that you prove that you have done strategic planning for your own firm. If you cannot plan for yourself, why should I believe you can plan for me?

I was inspired to write this blog based on a suggestion from one of my readers. If you have some topics you would like me to cover, let me know.


  1. Gerald, this is a nice presentation and covers lots of reasons why more than 65% of small business die very young.
    Having said why they die this reminds me of one of your responses to me on the 5-whys technique. Are you still considering a blog to cover it? If not how about writing a post about its uses in strategy orientation, choice of direction, strategy failure, just to give few examples

  2. Ali;

    Sorry about forgetting the 5 whys. It is a very important technique.