New competition is entering your market to win and they’re bringing tools from the future.
If you’re a professional services firm and you’ve been in business in your geographical markets for a decade, two decades or even a century, you are now likely noticing that competitive entrants are appearing everywhere. We are seeing spikes in competitor presence in every region and market sector we serve. The question is, what can you do about it? How do you temper your firm from encroaching competition?
Let me give you an example. We are in a pretty hot market here in Raleigh, NC. Lots of growth in every vertical and in every respect. Growth is magnetic, pulling in new office locations from big national players in Accounting, Legal, Architecture, Engineering, Construction, IT services, you name it. In fact, one of the larger national contractors, Hitt, a DC-based building contractor, just moved into our very office complex this past year.
Hitt Contracting is a $2 billion firm and has almost 1,500 employees that has grown to 12 offices peppered all over the US. Same growth is happening with Skanska, Turner and Kiewit. And if you’re thinking, yea, but they are just doing the massive projects, not our bag—well, think again. The foothold growth strategy for these larger firms is not limited to just massive projects—it’s regional growth in whatever form necessary or however they can incrementally increase local market share. Then they do what they do best, build. It’s not uncommon for larger, national firms to come into a new market (yours?) and essentially buy the business, thus driving you out of the running and ultimately driving your margins down over the long-term.
If you’re a local mainstay with strong grass-roots relationships that you’ve developed over the years, we’re here to warn you—you are not as insulated from forces of encroaching competition as you may believe. Certainly not if the encroachers have invested in powerful client experience-led methods (CX) to compete, which they likely have.
You may be asking, what do you mean, client experience-led methods? What does CX mean exactly? We’ll get to that in just a second. First, let’s lay out a relevant, real-life scenario that we are beginning to see a lot more often.
Let’s assume that your design/build firm has better than average relationships with a facilities director at the big state university 30 minutes south of you. He has a direct line to the purchasing/ procurement official. Not only do you know this person well, your spouses are also close. You learn that you are bidding against the usual local firms and two big firms, one out of Dallas and another out of San Francisco. You then learn that the San Francisco firm is going in bidding in partnership with your nearest local-ish competitor 30-minutes north of you. Then you hear that the San Francisco firm had the idea to come in with their CX tools and set up a client empathy charrette (a big design thinking brainstorm) with a range of stakeholders to collect ideas and field questions in a session they called, “Designing the modern student event experience.” And your close friend, the facilities director was there with his procurement colleague, learning how stakeholders felt about the design and the student experiences the design impacts. The broader student community in attendance fell in love with them because the firm gave them a voice and listened carefully to their ideas—all of them. That was a difference-maker.
You just lost that bid to a San Francisco firm who brought what seemed like psychological warfare to the battle. This was yours to win. You had all the relationships firmly in place. What happened?
In a nutshell, as all decisions are gradually marching toward parity, it’s making the choice more difficult for those on selection committees. As everything (price, methods, reputation, awards) is steadily marching toward parity, savvy firms are recognizing that differentiation is the key. And differentiating on the basis of the experiences they offer across the board, is quickly becoming the basis of this differentiation.
Get used to it. Experience-based differentiation is rapidly becoming the new normal.
In fact, we predict the rate of those who practice experience-based methodologies or what we normally call “Managed CX” (Client Experience) to win more ideal business is going to skyrocket. Why? Because it works. It works on every level of your business.
Look at it this way, if your firm has inconsistent or even adequate employee and client experiences, or if you’ve built a great firm on the tenets of ‘customer service’, prepare for a rough road ahead. Customer service, as you know it, is not the same as client or employee experience, and it will be no match for those firms who have learned the benefits of becoming more experience led. (Note: customer service is typically a reactive response to an articulated client need. It’s about 10% of the client’s experience and it fits inside the overall client experience. The client experience is a proactive and managed program allowing the firm to use client journey mapping and advanced empathy practices to know more about the gaps between client expectation and experience at every interaction a firm has with its clients. It’s the new best differentiator.)
This experience-led movement is also a double-edged sword. For firms who’ve relied on the promise of strong customer service for decades, who are now seeing their bid/win ratios decline are not only getting hit on the business development end, they’re also getting hit on the talent end. Let me explain.
If you wanted to expand into new geographical markets, and begin to take market share from the incumbent market leaders and build a name in that new market, what else would you do? That’s right zero-in on local talent. And where would you get that local talent? Correct, you steal it from the incumbents. How are nationally expanding firms stealing talent? They are using experience-led methods called Employee Experience programs (EX).
EX programs are becoming the new normal for larger firms that set out to learn more about how well their cultures can foster the talent necessary to grow a great firm. These programs map the employee experience from recruitment to onboarding all the way through to their future and keys in on fixing open head count and employee attrition challenges.
So, what happens when a handful of your best PMs or a key member of your A-team leaves the firm and joins up with a larger, hungrier national firm? Statistically, the average firm experiences 18% employee attrition which costs the firm $100k/per employee, whether they take clients or intellectual property with them or not.
EX programs are the firm’s closest thing to a insurance policy ensuring this doesn’t happen—and when it does, departing employees are far less likely to lure clients away with them.
The bottom line:
There is little firms can do to discourage larger firms from entering or encroaching on their ‘territory.’ But the smartest firms among us are those who embrace the new normal and realize the next long string of battles for work, talent and market share will be done on in what economists are now calling the “Experience Economy.”
Know this—experience-based methods (or CX) impact your brand, marketing, sales/business development, bid/win ratio, firm culture, employee experience/loyalty/attrition, client churn, client loyalty, revenue, margin and profitability. If your firm is embracing CX/EX programmatically, you will be far more likely to hold your ground.
Anecdotally, here is a clue that proves this all is really happening right now. In late 2019, we were called on by a large global AEC firm to help them study the competitiveness of four geographies (Raleigh, Austin, Minneapolis, Scottsdale). The key question this global AEC firm wanted us to help them learn was, how far along in CX/EX are the top 10 AEC firms in each of the four markets they were planning to enter?
It’s happening. What are you doing to prepare?