Innovation is the lifeblood of any business and, even in Professional Services (PS), it’s at the core of next generation services. But it’s not easy and the right way to build something from scratch is not always obvious. So what are the tips and traps that can be taken from the start-up world?
A story needs authenticity and resonance
How often have I had an idea and gotten lost in the ‘why it’s even worth it’? Plenty of times. As an idea progresses, the core of it can get blurred and the real reason for its existence forgotten. Every story needs an elevator pitch. It’s the high level value proposition that makes people want to hear more. This is the cornerstone of the whole reason for starting an innovation. It means I need to write it, develop it and use it to build a pitch deck.
It should cover: why we started this innovation, why it’s working and why it could be a hundred times bigger.
It needs an authentic yet unique point of view that gives you goose bumps – answering the emotional qualities and deep unmet need. Yes that sounds a bit far fetched for PS, but we all know when we see something good. We feel envious that we didn’t invent it. We see it skyrocket.
The ‘what’ is not as important as the ‘why’. The ‘why’ needs a soul and a real connection to its reason for being. But don’t make it up. Research it, debate it, build it, sleep on it, keep going. Never stop thinking about your purpose from the client perspective. It needs a beating heart for it to matter.
Any VC is looking for authenticity and a direct passionate connection with the problem(s). It’s about being more insightful and more believable. Insights, from the client perspective, however small, matter. Organisations with a purpose bigger than money have a growth rate triple that of their competitors. Wow!
The ‘why’ isn’t just for your clients or business plan, it’s for your people. If we teach our people to run process and procedure (and consider their health and well-being), we have a good PS firm. Now imagine we do do exactly the same things, but in addition, we focus on belief. Without shared belief, an organisation is just a functioning pack of individuals easily overtaken by a group whose members have a bigger believable purpose and care more.
There’s two ways to build your story…
Even Apple can get this wrong.
Type 1: Is it a narrow problem with real value for a specific client type – but is there enough scale to grow? Eg the fitness GPS smart watch sector has been an absolute hit in the market.
Type 2: If it’s a broad problem with a wide customer relevance – but is there enough relevance and value to clients to be able to sell it? Eg the Apple Watch has been less successful than anticipated.
To be successful you really need both – a type 1 mandate with a type 2 vision. While it might be easier to keep things small and in your control, the real path to success is where:
- The innovation solution has a specific problem relevance.
- It creates a gateway to clients using further services that are relevant and easily cross-sold from.
No VC will ever invest in a cool piece of technology or gadget. They invest in the founder(s) authenticity, product market fit and the potential to disrupt a market or create an entirely new category. They invest in why the innovation will be successful and the story of where it is heading.
This is where innovations in PS create a platform for a different conversation with clients, a conversation that goes to the heart of digital disruption, solving the hidden problems and uncovering untapped value creation – while also pulling in the more traditional services alongside the innovation, in a bespoke wrapper.
Nail your problem statement
How often do I go straight to a solution, before properly considering the problems? All the time. I really need to work on this and be disciplined. I’ve also come to realise that problem statements need regular revisiting to ensure they are still current.
Considering design thinking for innovations, here’s a good problem statement structure to follow:
1. State the problems and symptoms, structure the problems by identifying the potential causes that contribute.
2. Who owns the problems day to day, who are the key stakeholders and how are they all affected.
3. Generate solutions and consider what would success look like. Include the cost and time frame for creating them and how you wow clients with benchmark evidence that you are meeting or exceeding their expectations.
4. Test and evaluate. Rinse and repeat. The most valuable perspective is the one you don’t have. Forester calls this your customer obsession.
Life’s a pitch
Everybody has a someone internal to influence and seek investment from, the VC equivalent. This is such a hard thing to get right and is about flexing your style and your content. Its really hard to satisfy the data geeks and try not to lose people with a short attention span.
So your pitch deck for this purpose, along with a slightly different version for prospective clients, is really important. To pitch like a start-up, know how the best have done so already: https://piktochart.com/blog/startup-pitch-decks-what-you-can-learn/
Any start-up that hasn’t pitched their proposition 30 or 40 times to the VC community, refining the slides as they go, hasn’t pitched it enough. Your leadership pitch deck (and story value proposition) is not mature until you no longer need to make edits – with those difficult yet poignant questions or perspectives you hadn’t envisaged – after each pitch.
I know, it’s exhausting just writing this, but it’s so true. Practice makes perfect, yet what is ever perfect? I guess it’s more about talking to people and getting feedback – internally and externally.
Here’s a decent innovation pitch deck structure to consider
Intro – product market fit:
- The problem – client focused and covering EQ/IQ aspects.
- The solution – people don’t buy what you do, they buy why you do it.
- Market – size, location, attractiveness and accessibility. Your market validation and opportunity size, growth over the next 10 years and likely future disruptors. Why now?
- Competitors – landscape, go-to-market and your differentiation. Push-backs understood and mitigated. Your competitive moat should be quantified and an honest assessment of how well protected it is.
Clients – attractiveness and accessibility:
- Ideal client – profile with specific understanding of needs and value creation.
- Client acquisition – channels highlighting what’s most successful and where needs improvement. Route to market and adoption model. Milestones to achieve full potential. Marketing that gets to the heart of the buyer journey and buyer personas to establish a solid connection with client feedback and value creation stories.
- Current clients – including your best example in more detail. Understand your ‘network-effect’ where clients attract other clients and adjacent clients.
- Client insight analytics – honest and robust. Vale creation – volume/ value curve. Know/ build knowledge of the COGS (cost of goods sold) and churn/ LTV (lifetime value) metrics.
If you missed it, check out my article on scaling and COGS.
Revenue and commercials – growth and sustainability:
- Revenue model – projections over the next 5 years, KPIs and their track YTD
- Repeat revenue – cross sell and up sell strategies – sticky happy customers return, the rest wont. Know your position with the % of returning customers.
- Commercials -models scoped and tested. Ramp determined for margin, pricing by market segment (top tier versus mid cap). Have creative pricing models, but be consistent in their application and know the margin.
- Demonstrate fertilisation – across sectors and products/ services.
- Pipeline – position, including live, won and lost. Score pipeline on light versus full scope opportunities, ability to access untapped value and the anticipated LTV. Be careful to select targets that you have the expertise to advise (eg market knowledge) and consider adjacent targets to recently converted clients.
Its also important to not over inflate your story or the revenue prize. Some start-ups even slightly downplay the current and forecast numbers in certain forums, in order to remain relatively humble, certainly in the early days. There’s nothing worse than selling an over inflated vision and people shooting holes in your numbers. Once that kind of reputation is established it pretty hard to overcome.
Operations – robustness and scalability:
- Product road map that quickly irons out the core issues – Scope what you deliver described full (where clients need substantial help), medium and light (for the more advanced client where we just need to plug a few gaps), including what is and is not included. Upgrade the tech stack sooner rather than later. If a rebuild is needed, the people that built the first version might not be suitable to build the second version. If there are issues with the tech stack and reluctance to rebuild, there will be lots of problems later on.
- Investment capital position and projected needs – linked to technology and people.
- Marketing – your route to market will determine the need for approach and budget. Be aware that the typical PS ‘people led’ sales route might not be appropriate for your innovation. Engage with marketing experts on how to access your target audience and be sure to not base it purely on paid-for customer acquisition, or you will run out of money pretty quickly and have an unsustainable business model.
- Team and growth plans – a rigorous approach to not settling for second best in recruitment, on-boarding and training them to get quickly become self sufficient and be on successful). Ensuring your team expansion is supported by a x3 relationship to margin.
You can dial up or down any of these sections, but they are really important. You will need trackers behind a lot of what’s listed here, and the sooner you have them set up the better. Information is knowledge and at some point, you will need to connect the dots. Leading indicators in your pipeline win rate, COGS and LTV will need to be dynamically connected to your revenue forecast, but are essentially historical. Your pipeline size, its qualification accuracy and rigor, along with client facing schedule will give you future indicators.
Most start-up founders are kept awake at night by their ability to SCALE their business, but after initial accelerated growth, most fail to SUSTAIN the growth. BCG absolutely nailed this with their summary of forward looking strategies:
- Do we have a sufficient pipeline of “future bets” with high growth potential?
- Does our strategy balance short-term exploitation with long-term exploration?
- Are we developing sufficient capabilities in the technologies that are transforming how businesses work?
- Do we have a culture that promotes cognitive diversity and a competition of ideas?
- Are we willing and able to challenge our incumbent approaches and beliefs?
Your promotion might depend on getting short-term approval to keep developing your innovation, but your long-term position depends on an ability to achieve what you’d planned.
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