Why Creative Firms Don't (Really) Scale
And How Yours Can
August 2013 |
Michael Gerber, author of The E-Myth, made his name on the idea that you should build and run your small business like you are going to franchise it, even if that’s not a goal. This means mapping out functions and processes, including proprietary strategic processes, to the point that anyone could come along, buy a franchise of your business and replicate your product and your success just from your operations manual and a little bit of training.
Most creative people resist this idea and many outright scoff at it. Abhorrence of routine is after all one of the costs of creativity. Consider this, however. If you argue that the magic of your firm cannot be franchised then you effectively argue that your business cannot be scaled.
During Crispin Porter + Bogusky’s heyday as the hottest ad shop on the planet, Chuck Porter famously posed the question, how big before you get bad? My glib answer is two offices, generally. That’s not necessarily true, or even fair, but the point is that without standardized IP in the form of codifying how you do what you do, scaling across multiple locations is a crapshoot. The likelihood that you will recreate what exists in location A over in location B is pretty low. You almost certainly won’t scale it to location C.
The fact that most firms do not have a meaningful, defined, demonstrable strategy model is the single biggest reason why creative firms do not really scale. Without one, there’s really nothing to scale.
How Did I Get Here? Twelve Years of Evolution
When I started my business development consultancy 12 years ago I was primarily focused on bringing a rigorous sales process to my clients’ firms. It wasn’t long though before I saw that the root of most business development challenges was in the “me-too” nature of the product on offer – a global glut of undifferentiated design firms and advertising agencies meant that the buyers had all the power in the buy-sell relationship. From that point onward, before I attempted to improve sales process I began with a focus on positioning, which when done properly allows firms to claw some of that power back.
I soon realized I was looking at positioning backwards. I was coming at it from the perspective of the firm (What was the firm focused on? What claim of expertise was it making?) and not from that of the marketplace or the client. That made sense, I realized, because I could only hope to impact those things at the firm level and trust they would translate to perception changes in the minds of the firm’s prospects. A claim of narrow focus doesn’t automatically translate to a change in abilities or perception however, so I needed to add another area of exploration and development to my offering. I called this area product – the skills, capabilities, processes and other assets of the firm that allow it to prove its claim of expertise.
Today, I see three variables to positioning that represent three steps: Positioning is strategy, articulated then proven. Strategy is essentially focus – the answer to the question what business are you in? Articulated speaks to the consistent, differentiated claim that you make to the market. Proven speaks to the product you’ve amassed that allows you to back up your claim.
Lessons Learned on Impact
If I look at where I’ve had the greatest impact on my clients’ businesses over the most recent years, it hasn’t been on strategy or the articulation of that strategy. It hasn’t been on sales process or CRM implementation, either. Similarly, my assistance in hiring business development personnel, the fourth P in my Four Ps model of positioning, product, process and personnel, has been so poor that I’ve abandoned it. The biggest impact I’ve had has been in the area of product – guiding my clients to not so much change what they do, but to change and codify how they do it through the development of strategy models that are proprietary to the firm. (I don't mean models for the firm’s own business strategy, I mean models for how it diagnoses and prescribes its clients’ challenges and solutions. This diagnosis and prescription constitutes the strategy component of a firm’s offering that precedes any creative development.)
If you had said to me a decade ago that I would spend this much time helping firms develop and codify strategy models I would have reminded you that I'm a sales consultant. It’s not that times have changed; it’s just that it’s taken me years to understand the importance of such models when it comes to building and proving expertise and longer again to formalize my own meta model to help firms develop theirs. There have been a lot of failed attempts at sales training along the way.
Efficiency Optimization or Radical Transformation?
I'm fortunate and grateful to have had many of my clients write recommendations for me on LinkedIn. Looking through them the other day I realized they fall into two categories. The first I would call polite endorsements. These tend to be from clients whose benefits were largely limited to some process improvement. “We paid Blair some money, he optimized X and we’re happy to recommend him to others.”
The second category I would call testimonies of radical transformation. These more effusive recommendations are almost all from firms that have codified a strategy model for how they do what they do and use that valuable new intellectual property in conjunction with a solid sales process to change what they’re hired to do and what they’re able to charge. The fact that business development is a lot easier (and cheaper – most of these firms have also virtually eliminated their cost of sale) is an almost unavoidable consequence of building a better firm.
The learning for me was not what a great consultant I’ve been over the years (there are fewer radical transformations than I would like and many clients I wouldn't dream of asking for a recommendation); the realization was that while sales process and sales training can be important elements of optimizing a firm’s business development performance, they alone do not radically transform a business. I have never seen a business transformed through sales process alone.
The Global Conundrum
Almost every global creative firm on the planet grapples with the same problem: a global distribution of offices has not made them a globally integrated firm. They are merely collections of regional firms, doing different things for different clients in different ways but sharing the same letterhead. There are few similarities to the product or process between location A and location B. There might be back-end synergies in accounting, IT, procurement and HR but very few globally distributed firms have achieved meaningful front-end synergies in things that matter to clients: consistency in product and experience, and as a result, a truly integrated global team. These firms covet but cannot land a real global account because they cannot convincingly make the case for the McDonald’s experience of a similar product and experience at every location.
Single-office firms not interested in scaling geographically but still interested in growing have the same challenge, because sustainable scalability in any form is largely reliant on codified expertise. If you have not codified how you do what you do then you don't really have a growth strategy.
The CEO of every hot shop of the day has shared Chuck Porter’s concern about growth ultimately contributing to failure. If the success of your firm is rooted in the magic of your people then every new hire and every departure represents a very real risk to the sustainability of the firm’s success. (So does time, as it’s been known to age people.) Creative hot shops never last because they never formalize let alone institutionalize their IP.
How Are You Doing? Take This Test
For those of you thinking you're doing all right on the codified expertise front, here is a brief, four-question test.
1. Do you reference your firm’s culture as a selling point to prospective new clients?
2. Is your methodology written out in an internal document?
3. Can your methodology be partially inferred from looking at your case studies?
4. Are new hires trained on the methodology before they are let loose on clients?
If you answered yes to number one or no to any of numbers two, three or four then you haven’t codified your expertise, regardless of that trademarked schematic on your website and in your pitch deck. If you passed, congratulations – my estimation is less than one percent of creative firms on the planet have properly codified their expertise in a meaningful, proprietary strategy model.
Culture: The Great Fallback
I always cringe when a principal or manager says “Our greatest assets go down the elevator at the end of the day.” It’s a nice thing to say to those assets but it’s also an admission that when you take the current people away there’s not much left. Great people are indeed assets, but without codified expertise great people become a mandatory requirement for sustaining even moderate success and the nebulous notion of “culture” is the only means left to try to attract and retain them.
The very best people however are interested in a culture of winning. They want a culture of “we are going to be better at what we do than anyone else and if you can't be that good then you can’t stay.” The best way to build a culture of winning is to codify your approach, continuously work to improve it and enforce standards on delivering it. Without all of this you’re left trying to build culture through beanbag chairs and beer Fridays. I'm not saying these things aren’t valued by employees, I'm only saying they shouldn't be the basis of your growth strategy.
R&D? No Thanks, We’re Creative.
A positive trend is that more and more firms have personnel dedicated to client strategy. Almost universally however, these positions are improperly mandated.
It should be the job of the firm’s strategy director, whatever the actual title, not to develop marketing strategy for clients but to develop strategy models for the firm, document those models and train staff on them. This is an R&D position – one that is largely unbillable. In fact, it’s probably the only real R&D a creative firm will ever do, and most won’t even do this.
Creative firms don't do R&D of any kind, including strategy models, for the same reasons they struggle with positioning: the strength of a creative personality is the ability to bring new perspective to problems. They are therefore drawn to the new and the different and they resist routine in all its forms. A creative person contemplating a standardized way of working brings the same irrational panic as a claustrophobic contemplating an elevator ride. Even if the people above are serious about it, it’s difficult to herd the creative cats below into the strategy model pen.
One of the smartest, most successful agency principal-entrepreneurs I know said to me years ago, “Blair, figure out what the problem is, solve it, automate it.” It was simple advice that might have easily been lost in a long dinner conversation on many topics, but in the moment she gave it to me I saw its value. She had made millions on it.
In your business, automating client strategy means codifying, documenting and training. Very few creative firms do this today. Very few firms will ever do this. But if you do this, your business will be radically transformed, your business development problems will be easily addressed or even start to disappear, and, your firm will be one of the few that is truly scalable.
Model Thinking is a brilliant, free online course from the University of Michigan on using models in life and business, delivered through coursera.org. The next course starts Oct. 7th.
Closing With Case Studies is a mastermind program I'm doing that works to translate the firm's IP into closing tools. It starts Sept. 16th. (It's not free.)
I recently discovered Flevy, which sells models and model-based business documents. Some of these might represent a good starting point for the development of your own models. If you do try them out please let me know your thoughts.
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