Are Email Newsletter Even Viable Anymore?

After having discussed positioning in multiple previous episodes, David puts together in this one episode the seven most common mistakes firms make when positioning themselves.

30 Jan 201934min

David asks Blair about using "after action reviews" following sales calls, and the two key questions that should be asked as a part of that debriefing process.   LINKS Episode #15 - The Best Learning Method Ever Devised: After Action Reviews, from The Soul of Enterprise Podcast with Ron Baker and Ed Kless   TRANSCRIPT DAVID C. BAKER: Blair, today we are going to talk about debriefing after a new business call. Not after just a business call, but a new business call, right? So how did this topic come to your mind? What got you thinking about this? BLAIR ENNS: I'm a fan of Ron Baker and Ed Kless' podcast, The Soul of Enterprise. They had a podcast way back when and they made the comment that they see the after action review as the most powerful ... I'm gonna get this wrong, but is the most powerful knowledge tool ever invented. DAVID: Wow. BLAIR: That's a big statement. But we were using after action reviews in our business. And we still use them. There's various forms of them. Their origin actually came out of the US Military in the Vietnam War as a way of looking at campaigns. It's a way of essentially reviewing what happened without being critical of any individual and keeping the whole thing positive so that you can figure out what you would do next time. In fact, an after action review is really just okay what was the goal of the thing that we did, whatever the thing we did is, what went well, and then what would we do differently next time? And then there's some protocols around who speaks first and who speaks last, and how a rank is supposed to be unimportant. But I'm listening to their podcast, I realize, oh, yeah we do this all the time in our business. And it is really valuable. And I'd never thought of it as maybe the most valuable knowledge tool ever. But it occurred to me that I've never really advocated for after action reviews in sales. But I think it's probably a pretty good idea especially if you or employee who's on the front lines doing sales or doing new business development, if they're new or they've just come out of some training. Or you're stuck and things aren't going your way. BLAIR: But it's probably a good idea to review all of the key opportunities. The ones that you win and the ones that you lose. But even in the early days, I think just a new business meeting like a phone call. A kind of a lengthier phone call. Something lengthier than no we're not interested, thanks, goodbye. Or a face to face meeting I think is probably a really good idea to review. Let's just review what happened, and decide what went well, and decide what we would do differently next time. DAVID: So just a couple of housekeeping things here, if it's a meeting where you and somebody that works with you and you're gonna do the review, how soon do you do this? Is it important to do it right away after the meeting ends? Even before you get back to the office? I've got several housekeeping questions, but that's the first one. BLAIR: Generally speaking, the sooner the better. We were recording this on a Friday at the end of the week, we had two after action reviews this week of bigger things that happened. One was quite big. The sales period that just passed. That's about two months long. So what happened there. And another one's kind of a smaller thing that we're working on that's quite detailed. And sometimes it makes sense for a little bit of time to go by so that you can process what actually happened. BLAIR: But I think in the early days, if this is new for you, then the sooner the better. And then the times when you are allowing a little bit of processing time or gestation time, you know enough to make notes as things occur to you. Because the danger is if you leave it too long, you're going to forget a lot of the valuable points. Or you're going to forget the specifics of what happened or how you felt in certain situations. And those can be really valuable. DAVID: It seems like if it's you and let's say you're training somebody that's newer to your firm, sometimes it might make sense to have that person give their perspective before you give yours so that you get some independence, I would guess too. So that's interesting. And I could see this happening then after a meeting that both of you attended or maybe after a phone call where you're on speakerphone. How do you handle it when you're not on speakerphone? I presume half of the states in the US allow you to record a call without the other person's consent. But I presume you're not necessarily recording the calls. How do you handle that? How do you get feedback from somebody else if they weren't actually on the call? BLAIR: Yeah. Let me just speak to that issue of kind of rank or who goes first that you touched on. Coming out of the US Military, the idea is when they walk into an after action review, everybody basically takes a hat off and puts their insignias face down on the table. So the idea is that rank goes away. And I think a further idea is that you generally encourage the lower rank people to speak first. So the last thing I know when we're doing an after action review, I make sure that I'm not the first one to contribute. I don't want people saying, "Yeah, I agree with what you said." You really want to hear what others have to say. So that's kind of the housekeeping point. BLAIR: And then your question around- DAVID: Recording. BLAIR: Recording. In some ways, we don't actually do this in our training program. We think about it and talk about it quite a bit. The idea of we should have our clients record some of these calls and bring them to class or to interact with their coach to get some feedback on that. And I haven't closed the door on it, but there is something that I find a little bit troubling about recording a phone call when the other party doesn't know it's happening. But I don't think it's necessary to record it. To me, there's really two key review questions that you want to think about in your after action review or debriefing meeting when you're debriefing on a new business interaction. BLAIR: And the first one is what assumptions did I make in the sale? We can break that down into different categories where you would ask that question. And then the second one would simply, where did I feel uncomfortable? DAVID: Ah, so keeping it very simple there, right? BLAIR: Yeah. DAVID: Because that's gonna surface some things for you to talk about. BLAIR: Yeah. DAVID: You mentioned that you use a checklist for this. I find checklists really interesting. Have you read the book A Checklist Manifesto, by the way? BLAIR: No, I've heard of it. Haven't read it though. DAVID: Ah, it's a really interesting ... So pilots use checklists just to make sure they don't do something stupid like GUMPS. Gas, undercarriage, mixture, pump, seat belt. So you don't land without the- BLAIR: Forrest Gumps? DAVID: No, it's spelled differently. BLAIR: I would be thinking GUMPS, Forrest Gumps. That was a pretty good movie. Why was he jogging ... Crash. DAVID: And then you'd land on your belly of the plane because you didn't put the gear down. BLAIR: Yeah. DAVID: So you have a checklist of four things and it's NATB. So let's break that down. Need, authority, time frame, budget. Let's go down one by one. DAVID: So there's two questions. What assumptions did I make during the call and then where did I feel uncomfortable? So under the first question, what assumptions did I make? There's four things. The first one is need. So talk about that. BLAIR: Yeah. And so the first assumption we're making here is this is what I would call a qualifying call. So a qualifying call or a qualifying conversation is when where you are assessing the lead. A lead is a clue to a possible sale. So you've got a lead represented by an individual. You're getting that person on the phone or you're having a face to face conversation. And then you're vetting that lead to determine if the opportunity exists. Some sales people just work through that conversation subjectively. They feel their way through it. But it's really good to have a framework. And the most common framework is as you call it, NATB. Or sometimes referred to as BANT. We don't use either of those acronyms. But they're helpful here. So it's need, authority or decision makers, time frame, and budget. BLAIR: So assuming we're in a qualifying conversation, that's the framework we're using. So the first thing we're doing is we're essentially uncovering need. And the question is what assumptions did you make around need? And the first big mistake around need is the client says we need a new website. And then you just take that. Okay, new website. And you move onto authority or decision makers to talk about who are the decision makers, what's the decision making process. DAVID: So what should they do differently rather than just the website? You're suggesting they dig deeper than just the website when they're uncovering that need? BLAIR: Yeah. So there's an understanding in sales that the first stated need that you get from the client is usually some sort of tactical need or at the very least, it's what I would call self-diagnosed. So I understand my problem, I understand the solution that I need, and here's the solution that I need. But you as the practitioner, you need to understand for yourself. And you need to validate the client's self-diagnosis. And you might not fully validate in the sale. You might have to sell a diagnostic. So you might have to do some further validation in the engagement. But in the sale, you do have some obligation to do some initial assessment. So beyond just taking the client's word for it, yeah, we need a website, there's a school of thought. It's called the Five Why's School of Thought that says you ask five why's. Okay, well, why do you need a new website? DAVID: Yeah. BLAIR: We need a new website because online sales are dropping. Well, why are online sales dropping? And then you kind of continue to peel the onion in this five why's way. One day I woke up and I realized it's one of these things that just repeated a lot. This idea of five why's, I heard it before and I thought it made a lot of sense. And I woke up and I realized, man, if you have to ask five why's, your first question is a pretty shitty one. DAVID: I love that. So the idea is you're getting to the most powerful underlying need. The one that they're gonna be willing to pay you the most money to fix, right? Because if they land on the tactical, that's part of how they're framing this relationship with you is that maybe they want to pay you as a tactician rather than as a strategist. BLAIR: Yeah, I mean, I'll ask my clients, how often have you been hired? Clients said, "We need X," you said, "Okay." You were hired to do X, you started delivering on X, and you realized, "Oh my god, they don't need X, they need Y." And everybody nods knowingly. It happens all the time, doesn't it? And that's because you made assumptions in that qualifying conversation around the topic of need. And essentially you took the client at face value for is this what they really needed? And you didn't either peel the onion or come at it another way. And I don't want to go too deep down that rabbit hole, but you can look at need as expressed tactical need and then you can get to the underlying business need. And the underlying business need is we're no longer relevant. Clients are buying from somebody else. DAVID: That's much deeper, yeah. BLAIR: Right? So that's a deeper need than ... Well, you don't need a new website, you might need to be repositioned. You might need to rethink what business you're in. You might need to launch new product offerings, et cetera. You might need to think of new service lines. Whatever it is. And then there's ... We can talk about needs versus wants. And maybe that's a subject of another webcast because you've got the corporate needs that the person might be expressing. But really, if you want to win the sale, you're gonna have a significant advantage if you can get to what it is that that personal individual human being wants. BLAIR: Again, that's a deeper topic. But the question is what assumptions did it make under the area of need? DAVID: Right. And that's the first one. BLAIR: Yeah. So it's great if you have somebody asking these questions of you. Okay, what assumptions did we make around the area of need? What did the client need? Could that have been misinterpreted? Is it possible that they need something else? Did you explore? Did you ask five why's? Did you get to the individual wants? Et cetera. So that's the first one. DAVID: Okay. The second one is around authority or decision makers. And I'll tell you, this one perplexes me because if I could do this like on the forms of my website for instance, I would say are you a decision maker or you aren't? And the problem I have is that people won't be honest about that because they can't tell me that they're not a decision maker because they want to be a decision maker even though they know they aren't, right? You can't say, "Are you a decision maker? Are you a loser? Check the box." Nobody's filling out my form. This explains it. So how do you get to authority? I'm really interested in how you probe around this to surface the right answer. BLAIR: Yeah. So this is the most common area where people make the most assumptions and they're most likely to be tripped up later on in the sale because they made an assumption about decision makers and decision making process. And the problem as you pointed out is people are not immediately forthcoming about authority that they do not have. So if you were to ask the closed ended question, are you the decision maker on this project? Is it your responsibility to hire a firm like ours? You're almost always going to get, yes. DAVID: Yeah, of course. Right. Why else would I be talking to you? BLAIR: So a great opening question would be, in addition to yourself, who else needs to be involved in this process to hire a firm like ours? Right? So open with that question. And then you want to rely on your kind of hunch and start probing in specific areas. So you might say if you think this person's needs to be involved you would say, "Does your boss, the CEO, does she need to be involved in the decision?" And you might hear, no, no, no, no. DAVID: I just tell them, after I make the decision, I'll disinform them. BLAIR: Yeah. And then so a great follow up question to that would be does anybody need to approve your decision once you've made it? DAVID: That's a nonsense question, right? On the face of it. BLAIR: But it's a fantastic question. Does anybody need to approve your decision once you've made it? Yeah. The CEO needs ... It's a rubber stamp. Okay, the CEO is the decision maker. And you'll find, especially with new salespeople, if you're the coach and you're facilitating this after action review, you're going to find that repeatedly, the big assumptions are made here. And later on, they'll be the expensive ones. DAVID: Okay. So first one is need. Second one is authority or decision making. The third is time frame. This one stumps me a little because I don't even know why it's important. Why do we even ask time frame questions? Why is this even on here? I get the previous one. I don't get this one. BLAIR: There's really two different reasons we ask time frame questions. And I think most people are oblivious to the most powerful reason. And the most powerful reason is time frame is the surrogate for intent. And the obvious reason is we want to know when they want to get this done. So can we start planning resources, et cetera. So when would we need to start, et cetera. So you start thinking about how and when would we tackle the job. But really, the primary importance of your time frame question is you want to discern through your time frame questions. Whether this is on the wish list or the to do list. And my favorite time frame question is just that. Which has nothing to do with time frame. It's all about intent. You're trying to discern whether or not somebody's just kicking ideas around, they're still contemplating, or they've decided no, we're going to do this project and we're going to hire a firm like yours to help us. BLAIR: The usual time frame questions are when do you need to get started? When do you need to have a solution in the marketplace? Looking forward, is there a milestone or an event that you need to hit? Do you need to be in the marketplace or have this change or this project launched by a certain date? Et cetera. And if you don't get the answers you're looking for ... And what you're really looking for is somebody who's anchored their change in behavior to a future date.   BLAIR: This might get a little bit deep here, but a great way to think about selling is change management. So a great model for how people buy is how people change. So you can take any model of change management and you can just study that and become a better salesperson. And when you look at how people change, when they make a decision, I'm going to lose weight, or quit smoking, or divorce my spouse, or propose to my girlfriend. What they do is as soon as they make the decision, they look forward in time and then they anchor their change in behavior to a date. You could quit smoking on November 3rd- DAVID: And ask your girlfriend to marry you the same day. BLAIR: Yeah. But when it comes to quitting smoking, or losing weight, or something, you wait until the clean slate of a new ... You wait for January 1st. That's why people make New Year's resolutions. And that's just a sign of somebody who's formed intent. Because they've basically thought, I'm going to do this. They have looked at the calendar. And they've anchored a change in behavior, or the outcome they're looking for to a specific date. That is a sign of intent. That is a late stage opportunity that you should now begin to prepare for to go into closing mode. DAVID: Using this in my own experience, it's resonating some in a new way. I just hired an expert to help me with something. And I was very transparent with them about the timing and the money, which I guess we're gonna talk about next as the fourth one here. Fourth assumption. But when I'm buying something besides expertise. When I'm buying a car or recently I signed up at the airstream traders website. And there's a question in there how soon are you going to buy, right? If I want somebody to treat this seriously, I'll say this week. If I don't want them to bother me, I'll say I'm just curious. But when it comes to hiring an expert, I am very transparent about this. And I'm assuming that that's the case in the scenario that you're describing that if it's a real opportunity for this firm to be hired as an expert, if they ask the right questions, they're going to get the right answers. There may need to be a little bit of probing, but they want to be careful about that. BLAIR: There's an answer to your time frame question that we make assumptions around all the time. And this is something that would need to be probed in your after action review. If I'm the salesperson and I said, "When do you need to get this done?" And the answer is ASAP, right away, you can't proceed on that basis. You need to ask the why question. Okay, why right away? Well, because it's something I've wanted to do for a while. Okay, well, when's right away? Well, next 30 days. What if we don't get it in the next 30 days? Well, 60's fine. I'd prefer 30. This is getting into this murky area here where I start to get suspicious because I think this might be a chronic contemplator. BLAIR: It's great that you have somebody who has some urgency, but you want to look for the reason why there's some urgency. So was there a triggering event in the past? But really, you want somebody who's looked forward into the date and said, "Okay, we're gonna start on this date or we need to be in the marketplace by this date and here are the more valid reasons why." A great one would be we've got a board meeting or a trade show. Those are rock solid events. DAVID: Drop dead dates. If we miss it we're- BLAIR: Yeah. And then you know there's intent around that. So this idea of ASAP, that's the same as never. So if you get ASAP, you need to unpack that, you need to explore it, you can't just assume that ASAP means there's actually intent. DAVID: You know what I love about this is that you're not focusing here on what you say. You're focusing really on the questions you ask so that you can elicit the right information. And as you're going through this debrief, you may pause and say, "You know what? At that point, this is the question you ask. This is the question you could've asked and it might have sorted this out from a real opportunity and not a real opportunity." So it's more about asking questions. That's such an interesting thing to think about. Right? See, I'm asking a question right now. BLAIR: Yeah. I agree. When I think back to my consulting days and how many times I had the ... I'd get a phone call from a client and then I draw this little grid in my call log and start asking questions. Okay, what was the need? Who are the decision makers? I go through all this and just debrief with them. And then your spidey sense, you're not getting all the information. And you're not emotionally involved. But it's amazing what you can pick up. The assumptions just kind of jump out at you. And then the second area we're gonna talk about after budget of where you feel uncomfortable, that's probably even more important. DAVID: Yeah. Okay, so what assumptions did I make? First one was need, the second was authority around decision making, the third, which we just talked about is time frame> and the fourth, the final one of these four, is budget. Let's talk about that and why everyone get's tripped up here. I get a lot of questions from my clients around this and I never really know what to say because I don't do sales training like you do. So why do we get tripped up on budget? BLAIR: Well, first of all, it's the topic of money. And there's a certain amount of stress around the topic of money, as we've talked about before, or the avoiding talking about money. And then there's the negotiating that happens. And clients kinda negotiate on the other stuff too. They won't give you all of the information but it's really on budget where the negotiating starts. I was taught that the first budget question is are funds allocated? Yes or no? I'm not asking for the budget. Have you allocated funds for this project, yes or no? DAVID: Because theoretically, it's easier for them to answer than what's the budget, right? BLAIR: Yeah. And just like the time frame question is about is this person interested or have they formed intent? And then the budget question takes somebody who has formed intent. Because if they're just interested, they almost certainly have not allocated funds. It's not universal, but it almost certainly have not allocated funds. But if somebody has intent, I've decided I'm going to do this, they anchored their change in behavior to an event in the future, the very next thing they do is they start applying resources to their situation. And that's usually in the form of people and budgets. BLAIR: So if somebody says, "Yeah, we need to do it by this event and I have allocated funds," this is a late stage opportunity that's eminently closable. Now it's closable if there's intent but funds haven't been allocated. And where some salespeople mess up is if you ask the question are funds allocated and the client responds with, "No, we don't know what to spend on this. You're the expert. We're hoping you could tell us." I wish I had a dollar for everybody who told me they were frustrated by that. Oh, they're trying to negotiate with me, oh. They shouldn't view it that way. It's a great opportunity. All it really means is yeah they've progressed this far. They formed intent, but they haven't taken the very next step, which is to allocate funds. And they're asking for your help in allocating funds. Why would you be frustrated by that? They're frustrated by it because you want the client to tell you what the budget is. DAVID: So that's not a problem? BLAIR: No, it's not a problem at all. I would actually prefer to be in a situation where there is intent and funds are not allocated. But when funds are allocated, the assumption is that they're not enough funds. You want to sell a solution that costs more. When funds are allocated, that's a sign that these people are ready to go. This is eminently closable. DAVID: Yeah. If funds are allocated, there is a budget, even if they won't tell you what it is. Is that a safe assumption? BLAIR: Yeah, okay. So let's say I'm playing the salesperson. Are funds allocated? Yeah. Yeah. We have allocated funds. Okay, great. Do you mind telling me how much? I'd rather not share that with you. As somebody who loves to role play stuff, I would just love being cheeky. Okay, I'm sorry. We're having a conversation. But you hiring us to potentially help you achieve whatever the benefits are that you uncovered and need. You've allocated funds for this. We're gonna need to work together closely on this if we are in fact the firm that you decide to work with on this. But you won't tell me how much you're going to spend. DAVID: And that's where there's a long pause, right? And you're gonna see who says something first. BLAIR: At some point, we're going to have to trust each other. And we're going to have to have a conversation about money, like adults, right? DAVID: Right. BLAIR: So my suggestion is we just begin now. Is there any reason why you feel like ... Well, I want to hear what your price is. Okay. Well, I can come in with a price, a range of prices, et cetera. And then you could say that's too high. Here's my guarantee. When it comes to giving you prices, I'll give you a range of options. And some of them will be within your budget. And some of them may exceed your budget. But to give me a reference point, please tell me what you've allocated in the way of funds for this. The idea that somebody's allocated funds and won't tell, it's either you're not gonna win this business because they're just kind of going along and you're the third bid, they're trying to protect an advantage for somebody else, or more likely you're just dealing with a junior level decision maker who needs to be schooled on how real business conversations should be had. There should be no animosity or anything. But I'm fond of kind of just stripping away all the pretense and exposing the ridiculousness of the point that yeah we have a budget, but I'm not gonna tell you what it is. That's just absurd. DAVID: Yeah. And you're good at that. You're much better at that than I would be because I wouldn't view it as a game. I would view it as sort of wasting my time. I like how you phrase this. DAVID: Okay. So those are the four assumptions that you need to think about. Let's talk about where you felt uncomfortable. So this is the second big question when you're doing an after action review, to use military phrase. Where did I feel uncomfortable? So talk to me about that. And why are you looking for the ... It's not where did the client feel uncomfortable. It's where you, the salesperson, felt uncomfortable, right? BLAIR: Yeah. If you only had a few minutes to do a debrief on a call, I would actually start with this, where did you feel uncomfortable? DAVID: Yeah. BLAIR: Usually you're uncomfortable because something isn't being said. DAVID: Something isn't being said. Like you're not saying it or- BLAIR: Something isn't being said. Yeah. Oh, okay. There's an elephant in the room and we're not talking about it. DAVID: Yeah. Which we've done a podcast about, right? The say what you think. BLAIR: Say what you're thinking, yeah. DAVID: Yeah, exactly. BLAIR: So the similar principle is to lean into discomfort and light up the dark places. So if you're feeling uncomfortable, you want to train ... This takes a little bit of practice. But you want to train yourself to go to where you're uncomfortable. You start to suspect that the client maybe isn't going to be able to afford you. So you would say, "Hey, before we get too far ..." You might even say, "I'm not sure how to say this. But I'm a little bit concerned that we typically work with companies who spend between X and Y and I'm just a little concerned about whether or not you guys would be in that bandwidth." So that would be a way to kind of bring up price if you're worried about price. Or you might get a sense that this person is really looking for a vendor type provider where it's really about responsiveness and turn around time and you really feel your business is built around the depth of your expertise and maybe customer service. It's there. It's good enough. But it's not your selling point. And this person might value that more. You might just bring that up. BLAIR: One of our key principles is you should view yourself as in a race with the client to object. If there's an objection in the room, like the other metaphor is the elephant in the room. But it's a potential objection. It's a reason why you might not do business together. You want to be the person to put that on the table because the dynamics of objections are such that when one person brings it up, it's incumbant on the other person to address it. And it really doesn't matter which person or which party in the sale. Many salespeople were conditioned to just avoid these things that we see as potential objections. Hope they don't come up. And then when they do come up, the client says, "Oh, we should talk about price. Or we should talk about the fact that you've never done this before." Usually late in the sale, you've allocated all these resources, you've got it to the sunk cost bias is kicking in, you're trying to situate everything that you can to save it. DAVID: And you're on your heels. You're responding defensive. Yeah. BLAIR: Yeah. Now you're on the defensive. So why not just early on as soon as you sense it ... A great example would be okay, I'm really enthusiastic about this based on what you've said about the project so far. It's a little bit different for us. I can see how our experience translates to this. But I want to be completely above board. You need to know, we've never done this type of work before. DAVID: Oh, yeah. BLAIR: And then I just stop and say nothing, right? Just listen to the pause. We've never done this type of work before. And wait for the client to feel that space. DAVID: Even that second and a half right there when you waited, I felt uncomfortable. BLAIR: Right? So the client might say, "Oh, well, that's gonna be a deal killer on our end." Well if it is, you want to find out early, right? You don't want to find out when you're standing there with your 50 page PowerPoint presentation and you get to the last page and oh, yeah, one more question. Thanks for flying out here. We have one more question. Have you ever done this before? No, but excuse, excuse, excuse. It's gonna be okay. DAVID: Yeah. You've wasted all this time. Spent an all nighter. BLAIR: Yeah. And you build all kinds of credibility by leaning into that objection early. You can preface it by saying, "Really excited about it. We've got work that translates. But you need to know we've never done this before." Then pause. Don't say, "But it's gonna be okay." Let the client voice his or her concerns or say, "Well, it looks like you've done this other stuff. I think it translates. I'm okay with it." So you build credibility. You remove this thing that might kill the deal later on. So this idea of where did you feel uncomfortable. Did you address that discomfort or was it still there after the meeting? Right? And what you want to condition yourself and your people to do is when they start to feel uncomfortable about something, lean into this discomfort. Even if it's the way the client is treating it. They're really treating you like a vendor, you want to lean into that sucker. And we could role play that a little bit. DAVID: So this points out the fact that it's not just about what you're saying. But it's your listening skills. Your ability to read between the lines to recognize certain tones of voice and so on. And as you were describing all of this, I as thinking about how this isn't just useful for new business settings, but for account service too. You might even want to include them, right? In some of the conversation ... Some of the debriefing conversations because these account people are having these sorts of conversations all the time. More frequently with somebody that does come aboard as a client. BLAIR: Yeah. That's a really great point. And it makes me think about that in our training program, with every new term that starts and one just started this week, as we're preparing for the term, we're trying to find more and better ways to disseminate the thinking to others in the firm. Because for many years as a consultant, I would advise the salespeople to act a certain way. And then the account people are acting in an entirely different way. DAVID: Right. Yeah. Working against everything that you've built up from a positioning standpoint, right. BLAIR: Yeah. And all of these skills that work in new business development or in sales, they're all applicable in many of the aspects of account service. And some account people are more about server responder types. And the more senior people are really about leading the accounts. And those people in particular, those who are in charged with kind of taking the account into the new direction to the benefit of both the client and the firm, all of these principles would apply to them as well. DAVID: Yeah. Well this has been really, really good. So just finishing up kind of an overview of this again, there's two key review questions you go through. The first is what assumptions did I make? Four that you talk about there. The need, the authority/decision maker element, time frame, and budget. And then the second one is where did I feel uncomfortable? You identify those points and then talk about why you felt uncomfortable and what you might have done to address that issue sooner. This is really interesting, Blair. Thank you very much. BLAIR: Yeah, my pleasure, David. I enjoyed it.

16 Jan 201930min

Blair asks David to make some predictions about the new year, and then they discuss some ways that businesses can prepare for and react to (God forbid) an economic downturn.   TRANSCRIPT BLAIR ENNS: David, predict the future. Coming year, the year ahead ... It doesn't matter when people are listening to this or when we've recorded it, but in the year ahead is it going to be a year of abundance or is it batten the hatches, we've got trouble? DAVID C. BAKER: I think it'll probably be right in the middle. I think it'll be- BLAIR: Oh, come on. Make a guess. DAVID: Oh, no but that is a real prediction. BLAIR: Don't you love driving through these small towns and rural parts of whatever country and you see these fortune tellers that read the cards or whatever? And they're all in these shitty little offices. I'm just wondering, how does that work? DAVID: How come they're not in palaces? BLAIR: Yeah. Right. Or the 49th floor of some high rise condominium. DAVID: You talk with your clients, a lot of them every week, and I do as well, it'd be interesting to see what you're feeling right now. What they're feeling right now. My sense is that there's quite a bit of uncertainty, like the stock market wasn't great through last year, and unemployment is still low, and there's some political uncertainty. The world feels a little bit fragile. But really that's kind of in our heads. DAVID: The actual business results have been pretty good for almost everybody in the marketing field. There are a few isolated examples of firms that have struggled a lot. Often because they lost one big client or something like that. But it's generally, firms have been doing really well, and there's thinking okay, is this next year, is this year, 2019, going to be as good as last year? DAVID: I don't think it will be better. I don't think it will be a whole lot worse. I think we'll be lucky to have a similar year. But what do you think? BLAIR: For context, we're recording this on December 21st, 2018. So Happy Solstice by the way. So we're going into 2019 wondering how things are going to shake out. And the stock market, see I don't pay much attention to the stock market but I just noticed that all the gains for the year have been wiped out in the last few weeks. So the market is down. There is discussion within the broader financial markets about whether, or not we're headed for another 2008-ish crisis. There is the global political unrest and uncertainty. BLAIR: But in the face of all that, if you ask me to make a prediction of the year ahead ... this has nothing to do with reality, I realize as I was thinking about it. And only to do with whatever is going on inside of me. But I always believe my future is bigger than my past, to steal a phrase from Dan Sullivan, from Strategic Coach. So I'm an eternal optimist. BLAIR: Now it doesn't mean I think that the market conditions are going to improve next year. I actually don't spend a whole lot of time thinking about this. That's why I'm going to interview you on it. Because you've spent some time thinking about it. And this can't be right, but it's a great way to go through life. I actually think it really doesn't matter what the markets do. BLAIR: If I'm running a well run business, I will be able to survive anything. So, that's the way I think about. And then how I think about a bad year, looking back on it, might be entirely different. But I go into it with this, you might call it naiveté, around what's going to happen. But you should hope for the best and prepare for the worst. Is that the saying? DAVID: Yeah. That's a really interesting perspective. And by the way, you are so messed up in the head. BLAIR: I know. I acknowledge that. DAVID: You think I wouldn't be surprised anymore by the stuff you say. BLAIR: What surprised you? DAVID: Well, you said something really powerful, that I don't want to pass up. I want to make sure that people don't miss it. And that's that from a personal performance, or a firm performance standpoint, next year will be better than last year. And that's separate than what the marketplace might bring us. I think that's really, really smart thinking. DAVID: I want to clarify having, in that broader context, that yeah, I absolutely believe that too. Every one of my clients is going to be running their business better in 2019 than they were in 2018. But what will the marketplace bring them? And I think that's just brilliant the way you just separated those two things. BLAIR: So I've spent a lot of time contemplating the question of, is there such thing as free will? Do we human beings have free will? Then one day I realized, you know what, it's kind of a stupid question. Because the answer is it doesn't matter. You should live your life like you have free will and you have total control. And I feel the same way about business. BLAIR: You should operate your business like you have complete control over what happens. Because I think in those moments when we feel helpless and out of control; and if we have a tendency to blame the market, really most of us we're running businesses that can survive a downturn in the market. If we're making correct and courageous decisions and preparing ourselves appropriately, it really doesn't matter what happens in the market. BLAIR: Now there are some exceptions to that. Maybe we'll get into that. Because some vertically specialized firms in particular are more susceptible to an economic downturn. Is that right? DAVID: Right. For sure. I think of this as ... so you, the people listening to this, are the captain of the ship. You're standing on the deck, and you can't control the winds that are going to come your way, but how far out should you look so that you can take corrective action if you see an iceberg coming. That's kind of your job as the captain. You can't just rail at the winds, assuming that you're going to change them. But you can get your crew ready. You can think about the decisions you need to make, as far in advance as possible. Think about the culture of the crew and all of those things. DAVID: So it's a unique balance that nobody else at the firm has to think like you do with a finger firmly on the immediate pulse, but also looking far ahead, and making those smart decisions that way. BLAIR: Okay. Let's begin by talking about those things that our listeners can do to prepare before a downturn even hits. So if you suspect, or if you're worried about the economic conditions in front of you, wherever you are in time, what are some of the things that you should do to prepare yourself? DAVID: Well, one of the things that you might do is think about, rather than building a much more expansive, slash expensive, amount of money going to people, you could give somebody a one time bonus, instead of building that amount into their usual salary. Because it's very difficult to take money away from somebody, so that would be one thing that you could do. I don't mean a Christmas bonus. I just mean, instead of an annual bonus, maybe you'd give them just a one time bonus, rather than raising their compensation. That'd be one thing to think about. DAVID: Obviously if you've been doing the opposite for a long time that's going to raise a few eyebrows, but it also might just be prudent thinking, and say, "Hey listen. You've kind of maxed out within the salary range that we set for your role. But you've been a fantastic employee. I don't want to build a whole lot of fixed, higher money going to salaries, but I do think you deserve something. So here it is." I think that might be the first thing you probably think about. BLAIR: I think that's a great way to phrase it. Because as you were describing it I was thinking, well how do you communicate this? So you communicate it by saying, "I want to acknowledge your good work." I guess this is my question. Would you acknowledge nervousness about the market? Because of the market et cetera, I don't want to build in higher, fixed salaries. Or would you always come back to, you've kind of maxed out in the salary band. Is it appropriate to communicate to your people, I'm doing this move because I'm concerned about the larger economic conditions? DAVID: Not unless not mentioning it would strike them as odd. So if they are feeling the same thing, because of what they're seeing in the news, and what you're talking about. And if you don't acknowledge that potential for something right around the corner then I think you're going to look kind of stupid. But if saying that feels more like an excuse to them, then I wouldn't say it. So just sort of acknowledge what is widely viewed in the marketplace. I think that's how I would view it. BLAIR: So preparation point number one is to consider bonusing people rather than building salary raises into fixed compensation. What else should people do to prepare? DAVID: I'm really just working down the income statement thinking about where most of the money goes. Right? And most of the money goes to people. Where does it go next? Well it used, and this is kind of changing a little bit, because of how expensive benefits are for people. But where it goes next is facilities. DAVID: So this is not the time to sign a 15 year lease. Right? It might be as long as you have some outs. And those outs are the ability to sublease to somebody else, or the ability to give them six or twelve months notice at any point in the lease, and walk away from it at that point. Or maybe if you're providing a personal guarantee for the entire term of the lease, that personal guarantee is capped at some certain amount. DAVID: So when you think about how you might need to adjust the size of your firm, other than people, facility is the next thing to think about. So just really careful about some of those long term decisions that you're making. BLAIR: Okay. That makes total sense. What else? DAVID: This is one I want to talk about together. And it's just this notion that lead generation, if done well, is this massive fly wheel. Where I grew up we had to supply our own electricity, and there's this diesel generator. I remember how slow that thing would start. You'd have to crank it over by hand and it would go ... little faster, faster. And then once you turned it off it would take forever to slow up. You could lose a hand if you put your hand in there too quickly. That to me is what lead generation is like. It takes so long to spin up. DAVID: So if you don't have your own lead generation plan well in place, before some sort of downturn hits, then you are screwed, my friend. Because it just takes so long. People are always asking me, after we fix positioning and lead generation at a firm, and you're doing the same kind of work as I am, well what results should I expect? How long should this take? And the answer isn't the same for everybody. But frequently it sounds something like this. "Well, if you do everything right, you should expect to land the first right fit client in about six months. And then about every three months you're going to land another one." And they look back at you thinking, that is not what I expected to here. DAVID: So you've got this downturn that hits and then you decide to get your act together. Sorry friends, it's too late. You know. What do you think about how long this kind of stuff takes to spin up? BLAIR: Well, and both of these issues, positioning, and lead gen in particular, they also affect how you see the new business position. So if you don't have the flywheel, the lead generation flywheel moving already, by creating content, building a reputation, et cetera, putting stuff out there that positions you and drives inbound inquiries. If that's not happening and then you hit an economic downturn ... and let's say you've got the new business seat is empty, and you decide oh we need new business, we have to fill it. You're going to look at the new business seat as you want to feel it with somebody who does lead generation the old fashioned way. The outreach, the cold outreach way. BLAIR: And when times are good and your lead generation flywheel, to continue the metaphor, is turning with little effort, then most small to midsize independent firms, probably don't need a business development person who is its salesperson. They need somebody who is actually good at navigating a sale to a close. BLAIR: Just very quickly, if you need your new business person to generate leads for you, rather than navigate the leads that marketing is generating for you, than you want somebody who has got a very high competitive drive. Who's rejection proof. Who goes, goes, goes. Who talks people into things. When leads are coming from marketing then you tend to think of a salesperson as somebody who is a little bit more patient and consultative, who's good at navigating. Is a little bit more discerning, so they have a lower competitive drive. And they're good at navigating opportunities through to a close. And in a lot of firms that can be the principal or another senior person. BLAIR: If your lead generation flywheel is turning you don't need that kind of old school typical new business person, who's out there smiling and dialing. DAVID: Right. BLAIR: But as soon as the downturn hurts and you realize that you haven't done the hard work on the lead generation flywheel issue, then you're going to panic, and you're going to go looking for a salesperson, lead generator, who's going to smile and dial and try to talk people into things. DAVID: I always picture those people driving a Taurus for some reason. BLAIR: Why? DAVID: I don't know. They drive 300 mile max trip and it's usually a dark colored Taurus, and they're wearing a polyester suit. Maybe I'm a little prejudiced about those sales people. BLAIR: Yeah. Maybe you are. DAVID: Yeah. Maybe. BLAIR: Okay. So we're talking about preparing for a downturn. You've talked about trying to keep your fixed comp lower by maybe bonusing people, rather than raises. You've talked about being careful about signing long term leases. You've talked about do your positioning and lead generation planning and work in advance, so that the flywheel is still spinning even in a down economic period. What else? Anything else on the preparation list? DAVID: Last thing maybe would be just to pay down as much as possible, the debt that you've already incurred from either ignoring operational issues that you should have solved in other ways, or maybe from the last downturn, or whatever. Get that off the books. Because when you are looking at reducing your monthly outlay there are some things that you simply can't touch. One of those is the debt. So if you have debt, still on the books, in a downturn, you have to cut the people side even deeper than you would have wanted to. You can't cut the facility. You can't cut the debt. So you have to cut the people side deeper. DAVID: So you really want to focus there, and in particular you want to focus on any debt that's personally guaranteed. Which for any smaller firm listening, almost all of it is. Even the credit cards. That would be like a term loan from a bank or a line of credit. Sometimes in the bigger firms, it's not. If there's a distinction there and some of the debt is personally guaranteed, and some isn't, then focus on the part that's personally guaranteed. So that if there's a really big disaster and we have to walk away from the firm you won't be as harmed personally outside of the corporation, that is the business. BLAIR: Yeah. This in a previous episode we talked about the idea of steady pressure and a pulse of something hitting. So the steady pressure in this case might be debt. You're carrying an unnecessarily high debt load, and then the pulse is rapid economic downturn. You've talked before about how ... I don't know if you abhor debt, but you can correct me if that's wrong. I think you've got a great line about how debt covers up some other issues. Right? It hides things. Is that right? DAVID: Right. Right. Debt is okay in some cases. I personally hate it for anything except for appreciating assets. But where I particularly hate it is where it's just covering up sins that need to be solved in other ways. Whatever the reason for the debt that's on the books, get rid of it as much as you can before a downturn. Then of course if the downturn does hit you could borrow again. I don't think you should. You could borrow again. But mainly it's about giving yourself the flexibility of not cutting more people than you would have otherwise done. BLAIR: Yeah. If you're carrying a lot of debt in good economic downturns, the likelihood of you surviving an economic downturn is not good.   BLAIR: So let's move from how to prepare to how to react. So let's say, God forbid, the market keeps dropping. Other things happen. And we get something close to what happened in 2008, and a big part of the economy kind of takes a big hit. Or freezes outright for a little while. I think you're a big proponent of having a plan. Right? Essentially having a plan, in writing, that you enact at the appropriate time. Is that fair? DAVID: Yeah. Because it's very emotional when it hits. So whether it affected the world around you, and you weren't being singled out, or whether it was just you losing a big client. Whenever that happens it tends to freeze you. It's emotional. You don't know exactly what to do and the best way to prepare for that, I found, is for you as a management team to get together before it happens, and put two plans together. One is the adjustment plan. One is the survival plan. And you put it in a folder. I mean, maybe it's not really a physical folder, where somebody could find it. Maybe it's just in a folder on your computer, or whatever. You just pull that plan out. It will still need to be modified a little bit. But it's a fantastic starting place. DAVID: The adjustment plan would say, "Okay. We probably need to get rid of this one administrative person. We're going to need to slim down and have two fewer account people. Whatever." Then the survival plan is much deeper than that. "We are going to sublease half of our facility. We are going to stop our cooperation with this other firm that we've been doing. We are going to put off this particular purchase. We are going to draw down our line of credit, up to this amount but not a penny beyond that. I am going to cut my salary." Whatever all of those things are. You just pull out the appropriate plan. The adjustment plan or the survival plan, and then you put it into place. DAVID: If you haven't done that then you're typically going to lose two or three weeks worth of very valuable time in reacting the way you probably should. BLAIR: Okay. So I'm imagining, it's a little bit of war planning or just scenario planning. You have these two folders. Here's what's going to happen when things go bad. But I also imagine that that subjective measure of when things go bad, changes as things are going bad. So you probably should have some objective measure that says, when this happens or when revenue or AGI per FTE, or when this client leaves. Or a client of a certain size leaves, or whatever. Is that what you're saying? And if so what would those objective measures be? DAVID: That isn't what I was saying but I really like adding that. Because otherwise, you just don't know when ... so if we were part of the military planning in the U.S., we might say, "Okay if North Korea launches this missile, this is what we're going to do." That would be very easy to measure. But if we say, "Okay how do we measure our relations with that country getting worse, and so on." DAVID: So one of the things that I've seen some firms do is that when they add generous benefits ... so they say, "Okay we're going to pay for everybody's parking now." That makes sense. A lot of firms say that. But what they don't do is they say, "We're going to pay for everybody's parking now, because now our fee billings per full time equivalent employee are above X. And by the way, if they drop below X again, then we will no longer be able to do that." So they layer the generosity, and they tie those individual layers to specific performance metrics. DAVID: The ones that they would particularly pay attention to would typically be the fee billings per full time equivalent employee. Or it could be net profit. That net profit frequently would need to be indexed so that if the principal pays themselves less money to help get through a downturn, we recognize that. And say, "The net profit lower would be a whole lot lower if I hadn't lowered my compensation." So, that's what I mean by indexing that. DAVID: But I like that. So we're going to go to this folder if we lose this client. Any client that represents more than 25% of our billings. Or we're just going to go to this folder if we have two quarters in a row with less than five percent net profit. Or something like that. That's how I would think about it. BLAIR: So I think our listeners need to go out and buy one orange folder and one red folder. DAVID: One red folder. Right. BLAIR: Okay. What else should we be thinking about in terms of our reaction plan? DAVID: You know when you work with a firm, and I work with a firm, and we're sitting there looking at their situation for the first time, it's really obvious to both of us that the roots of what they're struggling with came about many years ago, or many months ago. Then you stop and say, "How did that happen? What led to that?" And frequently it's when they began to chase cash instead of chasing profit. DAVID: So they had these people that were working for them. They didn't want to lay them off. So they said, "Okay I know this is not an ideal client but at least it's something for them to do. We're not going to make a lot of money, but we'll make more money than if we didn't take work for them." And that's fine if you want to do it. But what you don't want to do is lie to yourself here and say, "And then when things get better we'll convert them into the good client that we had hoped they would be at the first." That is simply not going to happen. It's very unlikely that that's going to happen. DAVID: What you want to do is not necessarily, you wouldn't be able to drop this edict on yourself and say we're just never going to chase cash. We're really going to chase profit only. That's probably unrealistic. But at least be honest with yourself and say, "We are going to take this client. We're not going to make much money. But at least it's going to cover our overhead. We know that as soon as we are able to we are going to replace them with a client that will deliver profit to us." So just being honest at the very beginning and recognizing when the switch in your head flips, and you chase cash instead of chasing profit. BLAIR: That's a really important point. And you wrote something years ago, and I quoted you again within the last two weeks on the subject. I think the article was titled, it wasn't the title it was the point of it. Most cashflow problems are profitability problems. DAVID: Right. BLAIR: And somebody said to me the other day, "Oh yeah, we're going to do X. It's just an issue of cashflow." And I probed deeper into that to try to determine whether it was a cashflow problem or a profitability problem. But the interesting idea there is some people know it's a profitability problem. We're just not getting validation from the market that what we do is actually worth something. And others are somewhat delusional about it. So they might know it and they might be spinning a story to you. Others might be spinning a story to themselves. BLAIR: So you're saying, be honest with yourself. First of all. About whether or not we're talking about cashflow or profitability. But in this specific situation, I really like how you said it, it's unrealistic to say never take something for the cash. Because there are times when you've got good people sitting there with nothing to do, and along comes a project that isn't profitable, and you think, 'yeah, what's the harm. It will keep them busy. Maybe they'll enjoy it. There's no profit in it for us but allows me to keep those resources around.' So you're saying that perfectly valid. Just be honest with yourself, and maybe your teammates or your leadership team about what you're doing. DAVID: Yeah. Exactly. And when you mask a problem and say it's cashflow, what you're really saying is this is a problem with my clients. If you said profit, that's really a problem with the way you're running the business. So it's easy to deflect some of the decisions you're making around that. DAVID: You know the other thing I would do too, working down this list, is just about, do you really want to continue this business? In the past it never seemed to be an option to just close the business because there was so much stigma attached to that. But I don't see that stigma in the marketplace anymore. I don't see the stigma of failure like I used to. In fact, I see more stigma associated with people who stick it out, and they really shouldn't. Instead the courageous decision is not to stick it out. The courageous decision is to just stop it. Right? DAVID: But you want to make that choice for yourself. Like every professional athlete, they want to chose when they stop. They don't want their contract to not get renewed, or get shuffled down to a minor league team or something. Just deciding, making a good decision, early on, and not just bleeding all of the money that you do have out to fix this thing that in the end never gets fixed. BLAIR: Now you work with about 50 firms a year. How many times a year are you advising your clients to shut their businesses down? DAVID: About, probably two a year. So four percent or so, of those firms. BLAIR: Yeah. Yeah. Okay. What else is on the list of how to react to a downturn? DAVID: Maybe you need to get rid of that partner. Maybe this is the right time to do it. The firm will never be cheaper if you need to pay them out. This is going to be the cheapest you'll ever get it. That would be one way to look at it. BLAIR: So I'm imagining a firm of two partners, and both partners are listening individually, and they're both thinking, 'Yeah.' DAVID: Yeah. BLAIR: I'm going to get rid of that other partner. DAVID: And they're trying not to flinch as they listen to betray what they just thought of. Yeah. BLAIR: Okay you're both in the car together. You're not making eye contact. This is getting really awkward. You better stop for coffee. Or switch to country music. DAVID: Surely it's not that bad. We don't have to go to country music. BLAIR: We can stop right now. We're done. This podcast will not get any better. DAVID: It probably won't. Why do you not get through a tough time, if you do have a partner? You would think that having a partner would make it easier to get through a good time. When in fact sometimes it's just that you're not on the same page. You're not pulling the oars in the same direction. I often think that, oh there's a great opportunity to adjust your partnership. Especially if this highlights how one of you is just not carrying your share of the weight. BLAIR: Insert awkward silence here. We just stirred up a whole hornets nest, didn't we? Anything else on your reaction list before we get to things that we don't dread about a downturn? DAVID: No, that's about it. Those are the big things. But if you get those you've covered almost all of it. BLAIR: Okay. So I'll just recap. So it happens, you've got to have two folders. One is like things are going bad and when things are really bad. You want to have objective measures where possible. You want to know who you're going to layoff because as you've pointed out, that's probably the easiest part of your overhead to deal with, is the personnel. Don't chase cash instead of profit. Unless you're honest with yourself about what it is that you're doing. Think about shutting it down if it's appropriate. If you're thinking of getting rid of your partner, now is a really good time to do it. Probably financially as well. Okay. BLAIR: So you and I have talked about this before, in private conversations. We have each talked about this from a stage, or written about it. But a downturn isn't all bad, is it? Why? Why isn't it bad? DAVID: No, and I'd want to hear what you have to say about this because you have a very strong evolutionary way of thinking about this. Right? BLAIR: Yeah. DAVID: You see animals killed where you live and you realize it's a part of life. Maybe firms dying now and then is a part of life. It just sounds so cruel when we say it, right, but thinning the herd is okay. If maybe you don't survive, maybe you didn't deserve ... did I just say that? Maybe you don't deserve to survive right? BLAIR: Yeah. DAVID: And if you do survive than tomorrow you're going to have fewer competitors. And it's kind of sad for them, but it's kind of a good time, too, right? Oh that just sounds so awful saying it. BLAIR: Well first let's put it in a larger context. Because I think for most of listeners here, let's just acknowledge, we're all very fortunate to be born when we're born and where we're born. And to be running businesses. And if our business fails what's the worst that's going to happen? If we've been successful entrepreneurs to a point, and our businesses fail, then we will regroup and we'll be fine. We will start another business, or we will go work for somebody else, and we will put those skills to bear. BLAIR: A small number of people, for whatever reason, whatever else they're dealing with in their lives, it's not going to be so easy. So let's just acknowledge that there's always some human suffering. But as we talked about in one of the podcasts a couple of episodes ago, the worst case scenario really, for most of us, isn't all that bad compared to most of the population on the planet. BLAIR: So with that greater context, the idea is that a downturn is like a disease running through an animal herd. It kind of kills the sick and the weak. And in some ways it's a horrible ... well it's a ruthless metaphor. It's not horrible. But in the end it makes the herd stronger. There have been times when I've heard you say, you know if you've opened a design firm in the last ten years, and you haven't made money, then you're an idiot. Because the economic times have been so good that all you had to do was- DAVID: Did I really say it like that? BLAIR: Yeah. Maybe on paraphrasing. But you've essentially said, times are so good that it's really hard not to make money. We have to make exceptions for the exceptional situations. Like when you're young, you're just starting out. You're highly leveraged debt wise. Taking all this risk when you're just starting out. I'm a big fan of those people. And other things, you care for a sick loved one, et cetera. There are all kinds of extenuating circumstances. But generally speaking there are some firms that continuing with the ruthlessness streak, that the world's just not going to miss. DAVID: Right. BLAIR: If they go out of business. Because the honest to God truth is they weren't creating value in ways that other firms, that may have been somewhat similar to theirs, were creating real value. So if you're not creating real value in the world, and an economic downturn hits and your firm gets wiped out, you can feel sorry. You can say, "Oh the odds were stacked against me." But statistically the odds are probably that your business isn't going to be missed. DAVID: Yeah. BLAIR: So what does that do to the profession? It makes it stronger. At least in theory it does, doesn't it? DAVID: It does. And even though it does sound callous I concur exactly with what you're saying. So if you are running a firm right now, and you know how well you're positioned, you've got this lead generation flywheel spinning. And you've got good people, and you don't have a lot of debt. What if next year is bad? In the world around you. What if the environment does take a turn for the worse? In some ways you ought to be rubbing your hands together, and saying, "Oh man. This is going to clear my head. I can't wait to make sharper decisions and to think more clearly about this. And to not tolerate some of the poorer performers that I have. And to use my time more wisely. It's okay." DAVID: So as we face some of the uncertainty that's coming up, I hope the people that get nervous are the ones who should get nervous. And they get off their asses and start fixing their lead generation problem, mainly. That's the big one. I know you've got some events coming up. I've got some events coming up. People need to take that sort of stuff seriously. Or if they just know what the answer is, then they just need to get off the couch and start doing things. Those are the people I want to hear this and just really implant this sense of excited, not urgency, but excited about the future. Excited about taking their firm a little bit more seriously. I think is a message we want for people. BLAIR: You wrote to me an economic downturn is like a breath of cold, fresh air, on a cold winter day, in the mountains. What the hell did you mean by that? DAVID: You just can't ignore it. You just climb out of the tent and ... oh my goodness. It opens up your lungs in a way that it doesn't. And you feel alive, like you're never going to feel alive in an apartment in a city somewhere. Right? BLAIR: Yeah. When I read that I thought some of us our wartime CEOs. When there isn't something wrong, when we're not under attack, by say a competitor or a larger economy, then we are not at our best. When you see threat on the horizon that's when, you know it's like that bracing cold air. It's like, all right. I recognize that in myself. I don't know if you see it in yourself. I recognize it in some of my clients. BLAIR: There's nothing like a little bit of threat to reinvigorate you about your business. And that's what I was when I read your line that an economic downturn is a breath of cold, fresh air, on a clod winter day, in the mountains. DAVID: Yeah. And I didn't mean that as a Hallmark card either. I meant it as a terrifying, sort of invigorating statement. BLAIR: Yeah. DAVID: This has been fun. BLAIR: It has been fun. So let's just leave our listeners with this. We hope an economic downturn is not in your immediate future, but if it is we'd like you to think about it, like a breath of cold, fresh air, on a cold winter day, in the mountains. Okay. Thank you David. DAVID: Thank you Blair.

2 Jan 201934min

Blair describes to David how he was able to distill his Win Without Pitching approach into a simple formula: P=db/D Power = desirability / Desire   Links Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics by Henry Hazlitt Economics in One Lesson Wikipedia page Henry Hazlitt Wikipedia page The Win Without Pitching Manifesto by Blair Enns   Transcript DAVID C. BAKER: Blair, We are going to talk about selling in one lesson. BLAIR ENNS: I know why you're laughing. DAVID: I'm laughing because you're constantly pretending that people need to hear all kinds of lessons, but if really is selling is just in one lesson, then doesn't that sort of undermine, anyway, let's just go on. I'm sorry, I'm just trying too hard here. BLAIR: Yeah. DAVID: So selling in one lesson. But what's interesting about this is that you have a formula, and I think we probably need to put this formula in the show notes, right? Because just being able to picture this as a, so tell us the formula and then where this came from because I find it really fascinating. BLAIR: Yeah, it's a formula. It's not really made for the audio medium but what the hell. So selling in one lesson, well let me back up a little bit. So I've been doing the Win Without Pitching thing since about 2002. And since then, people have said to me, you know, like in as few words as possible, explain how you win without pitching. So it took me a long time to get it down to two steps. And so here's how you win without pitching in two steps. BLAIR: Step one, you change the power structure in the buy sell relationship, and you do that through positioning and we could talk more about that, but we'll get into that in a bit. But that's step one. You change the power dynamics or the power structure in the relationship through the positioning of the firm. By vastly reducing the number of direct competitors you have, you change the power dynamics towards you because the client's power, their power in the sale, their power to push you around, dictate price, etc, comes from the availability of substitutes. So by narrowing your focus, building deep expertise, you become this expert firm and you change the power dynamics. So that's step one, change the power dynamics in the relationship primarily through positioning. BLAIR: And then step two is to leverage that new found power that you have to change the way your services are bought and sold. And it takes a really long time to unpack that second step because it encompasses many, many things. So, for a long time I was pretty happy with my Win Without Pitching in two step description. And then about five or six years ago, I read Henry Hazlitt's book Economics in One Lesson. And this is a book that I think it was published in 1947 and sold well over a million copies, and I'd never heard of it. And somebody mentioned it and I picked it up and I thought, well, this is something else. If somebody can really pull off the promise in the title by delivering the entire kind of school of economics, I won't call it a science because I like many others don't believe it's a science, but the entire school of economics in just one lesson that will be impressive. And he did it, like to Hazlitt's credit, he was able to distill the entire field of economics down in one lesson. DAVID: And economics is not a simple field either. So pretty complex. So you took this as a challenge. Two is not enough. BLAIR: I thought, well, he can do it in one lesson, I can do, what does it mean to win without pitching or to sell creativity or to sell expertise of any kind. I'll just broaden out to selling in one lesson. And let me read you Hazlitt's lesson because early in his book he delivers the lesson and then he goes through all of these examples of how poor economic decision making or poor economic policy arises from violation of the lesson. Here's the lesson. "The art of economics consistent looking not merely at the immediate but at the longer effects of any act or policy. It consists in tracing the consequences of that policy, not merely for one group, but for all groups." BLAIR: So, what he says essentially is that any mistake in economic policy arises from the violation of one or two things. The first thing is you didn't consider all groups who would be affected by this. You only considered one group. And the second thing is, you didn't consider the long term, you only considered the short term. It's not the only book you would read in the field of economics, but it's a book that you could read and then you could measure any other economic theory or recommendation against the lesson in that book. I think that's why it's such a powerful accomplishment that Hazlitt pulled off. And I was thinking, well, is there the equivalent in selling? And I don't know if I've arrived at it, but I have a lesson that I can distill into even fewer words than Hazlitt. I can get it down to a formula. DAVID: Yeah, and I'm picturing you in this white lab coat in this big theater at Harvard, and you're writing on the whiteboard and all the students are nodding off. What happened to our regular professor? Where'd this guy come from? BLAIR: What's Matt Damon the janitor doing here? DAVID: Okay, so read the formula, and if we have anybody still listening, you need to picture this, and you might want to go to the show notes as well if you can just to see it. So, read the formula. BLAIR: Our last podcast was so good. DAVID: It was. Oh, how the mighty have fallen. BLAIR: I'm going to read it. I'm going to read it because it's on the back of the coffee cup that I'm holding up. Here's the formula, selling in one lesson. P=db/D. DAVID: So it's capital P. BLAIR: Capital P, equals lowercase db over D, capital D. DAVID: Okay. So let's break this apart. What does the P stand for? BLAIR: P stands for power. It's short form for power equals desirability over a desire. So your power in the sale is a function of having your desirability be greater than your own desire. Makes sense, right? DAVID: Yeah. So somebody needs to want you more than you want them in simple terms. BLAIR: Yeah. Drop the mic, podcast over. DAVID: Right. But now we're going to drag this out for another 20 minutes so people feel like they got their money's worth. BLAIR: Go ahead and get a coffee folks. DAVID: I mean it makes perfect sense. As I think about this too, and I'm also wanting to draw this parallel with something that you mentioned in passing, talking about Hazlitt's theory and thinking about, sort of you didn't use this phrase but unintended consequences. I was just thinking about how many times principals make short term decisions thinking that there will not be unintended consequences. DAVID: So for instance, you need a lot of work at some point and so you make all kinds of compromises not realizing that you're really throwing away the long term viability of this particular client, but the good news is that you get all kinds of opportunities to do this. And what you're talking about is taking the longterm view. But more than that, it's about the whole, maybe not, I guess power structure, is there another word besides power if somebody isn't drawn to that, maybe opportunity or choice or control, something like that? BLAIR: You've kind of put me onto this a few years ago. I think you very subtly pointed out that I use the P word a lot, power. And you've suggested that, well, there are other ways to think about power, distributed control, the ability to lead. But let me unpack the formula a little bit. DAVID: Sure. BLAIR: Your power in the sale is a function of your desirability being greater than your desire. And so power is the power to do certain things, not just when the business, I'll unpack that more fully in a minute. But it's essentially your power to win the business and other things. I talked a little bit before about who has the power. Typically the client has the power and that's a function of the availability of substitutes. But in this formula, we're just thinking about it differently. Your desirability, how badly the client needs or wants you or the engagement with you when it's higher than your own desire for the client, for the engagement with the client. When your desirability is higher than your own desire, then you have the power in the buy sell relationship. So that's in simple terms, he who wants it least has the most power in the relationship. BLAIR: And if you look at most of the problems that agencies find themselves in under the banner of new business development, most of the things that go wrong, most of the costs that get incurred, it's a function of the client didn't want it as bad as you wanted it. DAVID: You've actually talked about this inside of a micro-example way when you talked about using silence in conversations to see how long you can wait before somebody else says something, before the prospect says something. Sort of like a micro-example of how all of this happens. Are you talking about real desire? If you feel like you need to land some business, are you talking about eliminating that or actually pretending that you don't need it? BLAIR: That's a very good question. Yes. DAVID: Okay. You didn't set me up with that. On my own, I came up with that question. Let the audience know for sure. BLAIR: You read that just as I wrote it. DAVID: Yeah. Right. BLAIR: So, you could extrapolate that formula to mean that, okay, therefore, we must seek to maximize our desirability and minimize our desire. Now, if you did that, what would happen? If we sought to minimize our own desire, A, we would lose the motivation to go get the business to begin with, B, we would communicate to the client that we're arrogant, aloof or uninterested. So, I'm not suggesting that we take that formula to the maximum and seek to minimize our desire. We do want to maximize our desirability. And I'll come back and talk about how we do both of those things. Maximize our desirability and not minimize our desire, but just make sure that the expression of our desire, and that's the answer to your question I think is lower than what we discern our desirability to mean. BLAIR: Are we just convoluting things? Let's unpack power then we'll go through desirability and desire. DAVID: All right. BLAIR: So P=db/D. Your power in the sale is a function of your desirability being greater than your desire. And when I talk about P or power, I'm talking about the power not just to win the business, but to win the business with key variables in place. Number one, the right type of business. You and I have worked with so many firms who are pretty good at closing new business and then you look at the business that they want and you think what is this? What is this dog's breakfast stuff? Things that you've done for all kinds of different organizations. When a firm has a positioning challenge and they look at everything they do now and everybody they do it for it, they think, well, I don't know where to begin. And you don't know where to begin, first of all, you shouldn't necessarily look at your current or your past client base. But when you do look at your current client base, all you're seeing is the history of everybody you've ever said yes to. That's all you're seeing, right? BLAIR: So you really need to start being more discerning about the types of organizations you work with. So first of all, it's the power to win the right types of business. And the right type of business might mean at a certain fee level or budget level or even profit level. So that's the second variable of power, not just the right type of business, but at high margin. We all agree that high profit margins are better than low profit margins, right? DAVID: Yeah. Unless you're in the southern hemisphere and then it's flipped. But yes. BLAIR: Shout out to all our Australian friends. So the power to win the right type of business at high margin. The third variable is at low cost of sale. Now, just like you and I and everybody listening will agree that higher profit margin is better than low, we all agree that lower cost is better than high cost. But it's not just for the obvious reasons that we want to keep our costs low. The reason you want the power to win the business at low cost of sale is the cost of sale that you incur to close the business is an indication of how much power you actually have in the sale. Therefore, how likely you are to win. So, if you're going through the sale and even in the early days of the sale, the client is forcing you to incur all of these costs like travel to see them or do some sort of research or other things, that's an indication that you're not likely to win the business because you're not seen as meaningfully different. BLAIR: So, we want to be in the power to win the right types of business at high margin, at low cost of sale, and the last variable under the subject of power is well positioned to have the greatest impact. And what I mean by positioned to have the greatest impact is with you positioned as the expert practitioner in the sale and you have enough power that the client is letting you lead. I think everybody would agree that for you to do your best work for your clients, you need the client to allow you to lead the engagement. One of the phrases that I probably say most often over the last few years is this, the sale is the sample. If you are not allowed to lead in the sale, then you are not likely to be allowed to lead in the engagement. BLAIR: That's one of the reasons why I like measuring how much power you have in the sale is so vitally important because if you're not able to amass some of that power and I sound like a dictator, but if you're not able to get some sort of indication from the client that they see you as the meaningful expert and they're allowing you some sense of control, they're allowing you a leadership position in the relationship, then you're not likely to win the business. And if you do win the business, you will not be positioned to have your greatest impact because for you to do the best work, you need to be able to lead. If you're not leading in the sale, they're not going to let you switch hats. You can't be a good soldier in the sale responding to RFPs, saying yes, leaning on service and enthusiasm. That's what I consider to be a good soldier. Somebody who follows orders well. And then once you win the business, take your soldier hat off and put on your general hat and then start to take control of the relationship. BLAIR: The dynamics of the relationship are established in the sale. So, you need the power to win the right types of business at high margin and high margin is important because profit margin just goes down over time. So it's important to have high margin at the beginning. Low cost of sale, low cost of sale is important because it's an indicator of how likely you are to win the business, and with you positioned to have the greatest impact. By that I mean with you in the expert practitioner seat rather than the vendor seat, where the client is saying, okay, you're hired, what do we do now, let's do it your way. Rather than you're hired, here's how this is going to work, Mr vendor. DAVID: Yeah. In a minute, I want to ask you to talk me through how we kind of keep our expression of D low and still be true to ourselves and not abuse the prospect/client and so on. But, I just have to kind of interrupt a little bit and just talk about how close this revolves around my entire life's work because it just resonates so well with what I want to do for this field. What I try to do is to help people make better business decisions. You do the same thing in a slightly different area and we overlap some. DAVID: But what motivates me to do that and to pour my life into this is this deeply held belief I have that financial panic is the, I guess that's the right way to say it, financial panic is the father of just crippling compromises that you make. So if you have these things in the back of your mind as the principal, you're going to make so many bad decisions. You're going to let somebody go that just is an ass on staff. You are going to price things too low because you're afraid of not keeping somebody busy. DAVID: So, running your business well equates to not having to close every piece of business so that you can act like an expert and not a vendor and not be so desperate so that you're just seeping with this panic all the time. And I know it sounds weird to get kind of emotional about this, but this is, this is what I do for a living for this very specific reason. I just believe so much that if you run your business well, then you can maximize this formula which I didn't know the formula until you started talking about it, but it just resonates so well. DAVID: If you have a certain amount of cash on hand, if you have a lead generation plan that's running, that's spun up and it's built on a very strong positioning which you alluded to a minute ago. If you don't have some huge client that you're beholden to, all of those things set you up so that you can make more considered careful, thoughtful, expert like decisions. This is just a fantastic topic to me. BLAIR: Nicely summarized. I think if you or I could wave our magic wands and just kind of impose a wonderful new state on our clients' businesses, it would be that description of power that I talked about, the power to win the right types of business at high margin, net low cost of sale, well positioned, to have the greatest impact. And then, earlier you were referencing Hazlitt's idea of the long term versus the short term and you're just talking about how so often we just get caught making these short term decisions and don't appreciate the long term consequences. BLAIR: I was going to say, when you were talking about that, I was thinking, well, I think most people understand largely with the long term implications are, but I think they're somewhat in denial. I think they kind of lie to themselves about it, and it's probably because of that financial panic. Like there's a saying, there's long term pain or short term pain, like which one do you want? And if you can live with the short term pain, the long term pain goes away. If you can't live with short term pain, you're never going to make the correct decisions in the long run.   DAVID: Week after week, I work with a new firm and I say to myself, without any sense of arrogance or smirking or anything, I just say sometimes, just to myself sometimes to them, you could have higher expectations for your business life. You have settled into something here and you could see it differently. You could have a different vision for how things could be and as an outsider, I come in and you come in and we see things that, because we aren't quite used to things the way they experienced them every day, and I'm sure our businesses are probably the same. People could step in and see what we put up with as well and say, you know, your business doesn't have to be that way. It could be different, and here we are thinking these thoughts towards the end of a boundary, a chronological boundary, and it's very motivating just to think about this. DAVID: But getting back to what you're talking about, can you talk a little bit about how to keep our expression of this D low? There are some really key concepts here. BLAIR: Yeah, can I just explain what you mean by desirability and desire a little bit more first? DAVID: Sure. BLAIR: These aren't the right words. This formula is like a bit of a work in progress. I don't think it's nearly as kind of succinct and self contained as Hazlitt's work. So maybe it's just a starting point and I'll throw it out in a few years and come back to something better. But when I talk about desirability or desire, I'm trying to find a word that sums up not only the needs of the organization, so when I talk about the client's desire for you or your desirability, it's not just the needs of the organization, it's the wants of the individual. It's not just economic needs or economic forms of value, it's personal or emotional forms of value. BLAIR: So, I was trying to find a word that encompasses all of those things, needs and wants, economic and emotional forms of value. And desire or desirability are the best words that I could come up with and they're not exactly the right words. They'll do though, I think. So, I'm really talking about does the client need/want you? Does the individual really want to work with you and does the organization have needs that really couldn't be met to the level that you can meet them by competitors? DAVID: We've all seen the sappy sort of high school movies, right? Where some guy's interested in some girl and the fact that she seems uninterested in him makes it even more difficult for him. It's sort of a little bit of this at play here. BLAIR: Yeah. DAVID: But talk about the Jedi mindset, investing in the sale. I want you to dive into how you can get to the point, there's not much control you have over how much they desire you outside of your positioning. But from your standpoint, how can you control your outlook on this possible sale? BLAIR: Yeah. So how can you control your expression of desire? The irony, it's ironic to me because when I was taught to do new business years ago, I was effectively taught to maximize, to show a high level of desire. DAVID: Yeah. And I've heard you talk about this and it just makes me laugh, talk about going to a physician who's just so excited to work on you. BLAIR: I really want your heart business. DAVID: Yeah. How that would turn you off. BLAIR: I'm really passionate about your heart. DAVID: It would just turn you off. You'd rather have not an inhuman, but more of a measured, thoughtful somebody who is very glad to serve you, but not somebody that's desperate to work on you. BLAIR: Yeah. So, it's an unfortunate condition of human beings that we are repulsed by neediness. And again, I was taught to do new business by demonstrating how passionate we were about the client's brand, how badly we wanted it. I can remember a situation, a new business pitch from one of the world's largest ad agencies where we just leaned into that. It was embarrassing. It was embarrassing the stuff that we did. And so what I'm saying is, you really need to minimize that and you would channel in these moments. You wouldn't channel kind of this service worker who's leaning on passion and enthusiasm because as we've said before, you're not in the service business, you're in the expertise business. So you would channel somebody more professional in your life, like your cardiologist, like your lawyer, like your accountant, and just ask yourself like what expression of desire would they communicate to you? BLAIR: So I think you want to be clinical, you want to be professional. It's perfectly appropriate to be enthusiastic about the fit as you uncover the situation, what it is the client's need. It's perfectly appropriate to say, oh man, as you learn more about the situation. These opportunities, these are right in our sweet spot. My people could get really excited about this. It's appropriate to communicate that. And again, we're not minimizing our expression of desire. We want to be really tuned into how much the client, do they see us as meaningfully different. Do they see us as the expert. And if they treat us like a vendor, where they're demonstrating kind of low desire for us or our desirability in their eyes is low, the worst thing that we could do is try to compensate that by proving to them how badly we want this. BLAIR: So, the short answer to your question of how do you minimize your expression of desire is you do not overinvest in the sale. So, let's count the ways that a creative firm can over-invest in the sale. DAVID: Free work. BLAIR: Free work, free strategy, get on a plane and go, and I'm not saying you shouldn't travel for new business meetings, but willingly getting on a plane too early, too eager to go get a face to face meeting to sit in front of the client, only to be stood up half of the time. And probably the biggest one is you go into the closing meeting and you go into presentation mode. So where you should be having a conversation, you go into convince mode. As soon as you start trying to convince the client that they should hire you, you're giving all the power away to the client. BLAIR: If you think about the professionals that you want to hire in your life, what you really want to do is you don't want a presentation, you want to sit down and you want to have a conversation, a peer to peer conversation where you're both openly assessing whether or not it makes sense to do business together and you're both being completely transparent and honest about what you see as the pluses of doing business together and what you see as the minuses, the cons or the concerns that you have. And if any party has a concern, you would want that party to put the concern on the table, and the other party to address it. And if it's a significant concern that can't really be addressed, you would want somebody to say, yeah, you know, that's an issue, that might be a deal killer. BLAIR: When you hire a professional in your life, that's how you would like to go about it. That's not how we do it in the creative business though, is it? DAVID: It's not. And I wonder why. We need to be engaged, we need to be thoughtful. We need to be glad for the opportunity to help somebody. But why do we overinvest so much in this field compared to other areas of the professional services fields? BLAIR: There are a lot of answers to that question. And one of the parts of the answers is, well, we've done it this way for a long time and we've conditioned clients this is how it works. So that's kind of just a comment on the state of things today. How did we get here? It's a function of a few things. At the heart of it is we're not good conversationalists. We in the creative professions are not good conversationalists. BLAIR: Now, if you think about most of the communication a creative firm has with a client right from the beginning when they're thinking of doing business together into the early days of the engagement, here's how it works. There's very few conversations. So first the client on their own and speaking amongst themselves, they decide we needed to hire a firm so we're going to put together a brief. So there's some internal communications and then they lob this RFP out to multiple firms. BLAIR: So, we're sitting here at our creative firm, hey, we get an RFP. We're allowed to ask a couple of questions maybe. But then we sit down, we talked amongst ourselves about coming up with a response to this communication. We submit our communication to them again. So it's one way communication from them to us. Then the client gets our RFP submission and they make a decision on whether or not they're going to invite us to the next step and then they send us a communication that says, congratulations, you're invited to the next step. It's a face to face presentation, here are the rules. And then we talk amongst ourselves and we prepare our presentation. BLAIR: We go in, the client's sitting there with their arms crossed. They don't say much and we present to them and then they say, okay, this is great, we'll get back to you. And then they make a decision and they communicate their decision to us and the decision might be, congratulations, you're hired. Now here's the real brief, and then we might get together and have a bit of a conversation and a fuller brief, and then we go away and we do the work and then we show up and we present again. It's just a series of one way presentations back and forth, back and forth, back and forth. We as creative professionals, and I've talked about this before, we are addicted to the presentation. BLAIR: There is something about the creative mindset or the makeup of the creative professional where one of their strengths is thinking on their feet. So, if you're a creative person, your real gift is the ability to see around corners. That's what creativity is. It's not the ability to draw or the ability to write. It's the ability to see. And for reasons I don't fully understand, directly tied to this ability to see around corners, is the ability to think on your feet. So if your strength is standing at the front of the room, giving a presentation and dealing with objections as they're thrown at you, if that's one of your strengths, if you love being in that moment, then you will create conditions where you are allowed to be in that moment. BLAIR: So, I believe that's a big reason why we're horrible conversationalists because we love to present. There's something about being creative that makes us skilled at presenting and dealing with objections. So we create this series of communications where it's one way at a time presentation, presentation, presentation. What I'm advocating is we get rid of all of that, and I talked about this in my first book, The Win Without Pitching Manifesto. It's the second proclamation. We will replace presentations with conversations. BLAIR: And when you can learn to do that, now you can get to a place where you're no longer over-investing in the sale. You're showing up and facilitating a conversation. And because you're not over-invested in the sale, because you haven't stayed up all night doing a 50 or 100 page PowerPoint deck, because you haven't incurred all of these costs and begun to solve the client's problem is proof of your ability to solve the problem, then you don't have this high level of need. You're not over-invested in the sale. You're not over-invested emotionally or in time and hard costs. That's when when you can bring yourself to not over-invest emotionally in time or in hard costs of travel, etc, outside research, that's when you can demonstrate a low level of neediness. That's when it's easy to minimize your expression of desire and show up and just be professional and clinical and facilitate a real proper two-way conversation. DAVID: Yeah, as opposed to a series of telegrams. We're about out of time here, but I was just thinking about how, this is something I would love to explore with you sometime. I don't remember ever talking with you about this, but it's how we are addicted to solving problems as well. So, every time we see any problem that we can solve, we dive in even before we set the terms of the relationship. It's very much like a friend that you have. I'm not thinking of a specific one or even like my friendship with people. Instead of just listening to them, I'm always looking for places to solve, like provide my advice or to start solving the problem. BLAIR: To be their personal consultant. DAVID: Yeah, exactly. And rather than just listening, we're so addicted to solving problems, making money solving problems, it's almost an afterthought. BLAIR: Well, it's one of the reasons why new business meetings go so wrong because you bring people from your team to a meeting kind of early in the buying cycle where the client's still thinking about things, you're getting to know each other a little bit. You think, okay, I'm going to bring my creative director, I'm going to bring my account planner and maybe even my media person if you're still in the media business. I'm going to bring these people in the meeting for whatever reasons. These people are trained to solve problems in their specific domain, right? You bring them to a meeting with somebody who has a problem, what are they going to do? They're going to start to solve the problem even though you haven't been paid yet. So, either quit bringing these people to new business meetings or give them some sort of training so they know where the line is, the line that they cannot cross of beginning to solve the client's problem as proof of your ability to solve the problem. DAVID: Right. Yeah. Oh, there's just so many deep nuggets in here. Maybe a lot more of our training should be around how to have useful conversations, how to listen. I was at a meeting this last week. It was a two day session with 10 agency principals. And as an experiment, what I said to them was, okay, you're not allowed for the next hour or so. I didn't give it a time, that's what I was thinking. You're not allowed to give anybody any advice. All you're allowed to do is ask questions. It changed the entire nature. All of a sudden, it wasn't as defensive. We listened to each other so much more carefully. This is just such a fascinating topic. DAVID: So if we want to leave people with a little bit of homework, they can think about to what degree their positioning gives them any power in the relationship. That's the foundation that you talked about. And then maybe do some analysis of new business situations that didn't go well and think about where was the power imbalance and did you see early signs of it and how did you react to that? What would you leave with people as they begin thinking a little bit more about this? BLAIR: Yeah, I would think of the new business opportunities that you lost or maybe even the ones that you won and then the engagement didn't go well because you feel like something you did in the sale. And just run the whole sale or pitch process however you think about it through this filter of P=db/D. Did you have the power to win the right type of business at high margin, at low cost of sale with you positioned to have the greatest impact? Was your expression of your desire for the client and the engagement lower than your desirability? If you were suffering from low desirability, is it a function of your positioning? Is it a function of where the lead came from? You chased it down and dragged it in rather than they came to you. So, just take the formula and run it against your recent new business failures. That's such a harsh word, but the ones that didn't go well, and just see if you can find the root of the problem. DAVID: Yeah, and have more conversations instead of starting to solve client problems before they've engaged you to do it. Ask great questions. BLAIR: Yeah. DAVID: Great. Thank you Blair, this was really interesting. Appreciate it. BLAIR: Thanks David.

19 Des 201834min

After touching on the topic of risk in many other episodes of this podcast, David and Blair finally take a full episode to discuss at length the role of risk in entrepreneurship.   LINKS "Confessions of a Recovering Consultant" by Blair Enns Hyman P. Minsky Archive Twitter exchange with Jonathan Stark on risk Strategic Coach program with Dan Sullivan "A Mission With No Exit" by Blair Enns Peter Drucker   TRANSCRIPT BLAIR ENNS: David, what's the riskiest thing you've ever done? DAVID BAKER: I've always wanted to have a really long pregnant pause right after you start something, because you're always telling me I can regain the power with silence. The biggest risk I've taken was probably telling my wife about the risks I was going to take. BLAIR: Yeah, right. Wow. Hands up, everybody. DAVID: She's only told me there was one thing I could not do and it's so illogical. She says I cannot jump out of an airplane. She doesn't terrify flying, or race, or whatever, but I can't jump out, which seems so illogical. So, as soon as I get some, you know what, I'm going to jump out of an airplane. BLAIR: You've got some high risk hobbies. I'm not sure that you indulge in all of them, but tell us a little bit about your high risk hobbies. List them off, because it's a little bit incredible. Here's the consultant, somebody who types for a living. DAVID: Oh, that is dismissive, types for a living. BLAIR: Well, I refer to myself that way too. DAVID: Yeah. BLAIR: Like I'm a typist, right? I have friends who have calluses, like they're real men. You and I, we type and talk on the phone. DAVID: Okay. So, I taught motorcycle racing. I fly airplanes and helicopters. I travel to very dangerous parts of the country. BLAIR: Yeah. DAVID: I love the shooting sports, not shooting at each other. I'm not so much into those, and I don't hunt, but I like shooting sports. And I do a podcast with you, that's pretty up there too. What are yours? BLAIR: Yeah, right. Okay. I knew I was going to open with this question. For those of you listening, if anybody is listening, this is the risk episode, where we're going to talk about various types of risk, but to answer your question. When I knew I was going to pose this question to you, I started thinking oh, what's the most riskiest thing I've ever done? Other than some things that were driven by kind of alcohol and youth that were just outright stupid when I put my life or the lives of others in danger, other than that, I can't ... The riskiest things I've done in business have been investing in the business. By that I mean spending money, seeing something as an investment but knowing in the short-term, the expense is potentially debilitating to the business. DAVID: Right. BLAIR: But then trusting that it's going to pay off in revenue down the road. DAVID: Oh. The biggest risk you took that I can remember was when you totally changed your business model to a training model from a consulting model. That was a huge risk, to me at least it felt, maybe it didn't feel that way to you as much as it did to me. I was looking, from the outside, in marvel really. I was thinking, "Wow, that is a big risk." BLAIR: You were thinking, "Wow, that is a stupid move." I remember you telling me like a year later, "You know you could still go back to being a consultant," and I couldn't because I wrote that 3,000 word blog post called "Confessions of a Recovering Consultant." DAVID: Right. BLAIR: The reason I did it is I put it out there so that I would not ... That was my version of burning the ships so that I would not go back. DAVID: Right. BLAIR: And here we are. DAVID: But you do take some pretty significant physical risks. They may not seem like it to you because of where you live, but you hike in pretty crazy places and you poke bears, maybe not literally but close to it. BLAIR: I once said to my son, who was 15 at the time, I said, "You know, you're one of the few people in the world who has put your hand into a grizzly bear's mouth," and he responded promptly by saying, "I'm one of the few people in the world who has stuck a thermometer up a grizzly bear's butt." DAVID: Except he didn't use that word, but yes we gathered. BLAIR: He did. DAVID: He did? BLAIR: Okay. Enough about us. So, I sent you a text saying, "Hey, we should do a whole show on risk," because probably like one in three or four episodes, we keep coming back to the subject of risk, like how much risk that the principals of creative firms take. So, where do you want to start here? Do you want to start with your Minsky quote? DAVID: You know, I never used to pay any attention to economists, until you kept quoting different economists to me. So, as I was thinking about risk last night, watching a very boring TV show, I found this quote that just struck me. It's by Hyman Minsky, and it says this. He said, "Stability is destabilizing." And then there was an article on the Wall Street Journal talking about that concept and he also said, "That's because, in other words, stability is destabilizing because long periods of calm induce behavior and innovation that make the next downturn more violent" I was thinking about times in history where all the nobles were safe in the castles and the rest of the people are dismissed, and all of a sudden, they revolt against everybody. You think about all of these cycles that have happened over time, and the apparent stability that just slowly, slowly was like boiling a frog in water, people don't even notice, and all of a sudden it just breaks out. Or you think about some of the terrible diseases that have wiped out millions of people, or you think about some of the financial crises that almost all of us now are not too young to remember, like the Housing Crisis and so on, and yet we think that somehow this isn't going to happen. Then other times, we think it's going to happen. The more I thought about risk, the more confused I got really because I think of myself as quite a risk taker, but I also wonder if I really am. BLAIR: Isn't that interesting? Why do you doubt that? DAVID: Well, because I have one of those personalities that thinks really carefully about the implications of something, and then I just do it. So, I have what's called the DC conflict in a personality, so I tend to overthink things a lot and I'm a bit of a control freak. BLAIR: Yeah. DAVID: Then I think well, after I thought through this this much, it doesn't feel like that much of a risk. That's why it doesn't feel like I'm as much a risk taker I think as maybe other people who've seen my behavior might think that I am, because it's just no, I'm going to do this. But also, you and I have had really interesting conversations usually after a Manhattan or whatever we happen to be drinking. BLAIR: It's a Negroni this year. Let's just be clear, this is the year of the Negroni. DAVID: The year of the Negroni, that's right, yeah. But I have run my business and my life in a way that I'm going to try to make principle decisions and that means that I'm not going to stop short of those because of fear. So, I am willing to picture myself homeless, that is, without a business, without any significant level of asset, and I will still be making decisions based on principle. DAVID: That just seems like such a logical position for me to have, and so in that sense, it doesn't feel all that risky to me because what's the worst that can happen? Oh, homelessness, oh, I'm okay with that. That's why risk is a confusing concept to me. BLAIR: I think that some listening to this might think, oh that's a bit of an exaggeration, but like somebody who knows you and has had many conversations with you, in which you have brought up that scenario, you have very vividly painted this scenario of you being homeless, you usually had a dog. DAVID: Right. BLAIR: You've lived in this future state where you've imagined it quite a bit, and so you've tried it on and thought, "Yeah, I'm okay with that, as long as I can live with myself and the decisions that I've made." DAVID: Right. I believe that I am a few stupid mistakes, let's say I'm struggling with some emotional or mental issue and I make a bad decision, and then it's compounded by another one out of 10, so two decisions. BLAIR: Yeah. DAVID: Do you think you are a couple of decisions away from a very altered lifestyle? BLAIR: Wow, you know, you're probably asking me at exactly, I won't get into the details, but we're considering a big move in the business, financial move. So, I have thought okay, if this goes wrong, I'm really vulnerable. If this goes wrong and something else goes wrong, I might be starting over. But like you, being bankrupt and starting over doesn't worry me. It worries me because it would terrify my wife and my obligation to my marital partner. My kids will be fine. I'm okay with starting over. When you get these compounded variables, it's like okay, I'm going to take a big risk. DAVID: Yeah. BLAIR: And you take a big risk and it doesn't work out. Usually, we're not betting the entire firm or our entire lifestyle on it. But if something else happens at the same time, then possibly we're wiped out. That's how populations go extinct, this combination of a steady pressure and then an incident. I forget, there's a name for it, it will come to me in a second. So, the steady pressure might be economic decline. So, we're in a period of recession and then something goes wrong, so when you get those two variables together, that's when everybody is really vulnerable. BLAIR: I was really interested in this topic because a friend of mine, Jonathan Stark, on Twitter he's a developer and teaches developers about value-based pricing, and he was tweeting about an episode of one of his podcasts recently, and I haven't listened to it yet. But he was ... just the subject of risk, I forget what his question was, but I tweeted that ... and I was really thinking through this as I was forming the tweet that's, "I've come to the conclusion that the state of entrepreneurship is that you are all in all the time. You're always making ... You always have a bet on the line." BLAIR: His reply was, "Yeah, but you're not always betting the business. It's a series of small bets." I tweeted back, "Yeah, I agree with that," but I don't fully agree with that. I want to come back to that Hyman Minsky quote in a minute, but I think there's something about the state of entrepreneurship where you are always walking some sort of line and when I read Minsky's quote, let's just reread it again. BLAIR: So, "Stability is destabilizing, that's because long periods of calm induce behavior and innovation that make the next downturn more violent." I read that quote, I think of our listeners, our clients, and the ones who are like they get comfortable. They build a comfortable business. They're not constantly reassessing their business model. Then along comes change and they're just caught flatfooted. It's like your friend who says, "Yeah, my wife left me and I ..." DAVID: It was a surprise. BLAIR: We didn't even have any trouble. We never argued, and you think you idiot. A married person needs to be just slightly paranoid about the state of their marriage, the way an entrepreneur needs to be slightly paranoid about the state of the market. Something could come along, the karate instructor or whoever it is. DAVID: I just love how you just lay your whole life out in front of thousands of people. BLAIR: Well, I've learned my wife doesn't listen to this podcast, so I'm okay. DAVID: Oh, that's given you a lot of freedom, yeah. BLAIR: When you read the Minsky quote, were you thinking about yourself or were you thinking about those clients that you've had who it's like good stable business, and they're playing golf or they're so comfortable, they don't change anything, and all of a sudden, the condition are slowly, slowly changing like the boiling frog. BLAIR: And then bang, they wake up one day and everything is different and they kind of blame the market or they don't understand what's happened to them. What's happened to them is they got comfortable. They weren't sufficiently paranoid to the point that they weren't constantly reinventing things, constantly taking risk. That's what I see in that quote. What do you see? DAVID: I see the same thing, and your description of these entrepreneurs, these principals that are listening is exactly right. They wake up in the morning and if they're not worried, they're worried. They're worried about nothing to worry about. They're always paranoid about something, even if they have to make up something that they're paranoid about. They envision that maybe an employee is plotting with a client to take the business, or they read something that isn't even there in a comment that a client made about oh, their client is going to leave. Or they read something in the news about how this entire industry is changing. So, yeah, that's exactly right, but I feel conflicted because on the one hand, I look at firms who just toil under the radar, they're not firms that anybody is trying to emulate. They're not winning all kinds of awards. They're not the cool places that all the young folks want to go work at. They just do good solid work. They've got solid financial fundamentals as well. They've got decent principles about how to manage people, and year after year, they make money. Then you have the other ones who are innovating at the frontline and creating new service offerings and saying, "Hey, you know what? Nobody is going to be developing websites in three years. So, in one year, I'm going to stop doing that and reinvent myself." What's the better model, because I just don't see too many firms who have much of a balance between those two things. It seems like it's one or the other, and I want ... Maybe this is my personality coming through here, but I want a little bit more balance and I hate the fact that they're constantly paranoid, but I love the fact that they're constantly paranoid. Does that make sense even? BLAIR: So, you're saying at one end of the spectrum, there's an unhealthy paranoia. DAVID: Right. BLAIR: Right, just because you're paranoid doesn't mean they're not out to get you. DAVID: Right. BLAIR: At the other end of the spectrum, there's this complacency. DAVID: Right. BLAIR: And you're saying you would like to see more firms in the middle that have where the principal has a healthy level of paranoia. Is that what you're saying? DAVID: Yes, I am. I wish there was some way to figure out where principals were on that spectrum. Here's an example, this may not be the answer, but it illustrates what I'm thinking of. Maybe you need to be making your employees a little bit nervous most of the time, but not flat terrifying them, right? BLAIR: I agree with that completely. I really identify with that. DAVID: Okay. BLAIR: Yeah. DAVID: Or another would be you need to run a culture where people really want to stay and work for you, but some of them should still leave for the right reason. We don't want to read too much into people, or read the wrong things into people leaving. We want them to leave for the right reasons, and so on. I'm just inventing these on the fly. I don't know exactly what the answers are here. Then there's also this whole notion of an efficient marketplace. Here's an example of that. An efficient marketplace says that there are very few unexplored arbitrage opportunities in that a market will usually fill in those low spots on the road or knock off those high spots on the road within a couple of days. Okay, but entrepreneurs principals or folks listening, our clients, your clients, they're always seeing like oh my God, there's an unmet need that I can fill, but they don't think about those opportunities very objectively. The same sort of objectivity they bring to solving problems for their clients, they don't bring that same level of objectivity to solving problems for themselves in terms of evaluating the soundness of an opportunity. This is why, as we were thinking about this topic, I'm thinking you know, you're always saying that the sample of the work you do for the client is the sale. You say it differently, but that's the idea. BLAIR: The sale is the sample. DAVID: Sale is the sample, yeah. And here, the fact that we are bouncing all over the place, this is the risk thing and we're taking a huge risk even talking about all this stuff without really knowing. We're flailing around here. We're just kind of getting inside each other's heads a little bit.   BLAIR: Okay, we're talking about risk. This is the risk episode. Do you remember, David, a couple of years ago I asked you to translate something into Latin for me? Do you remember what the phrase was that I said this is my personal motto? DAVID: No, I don't. I don't remember that. BLAIR: So, looking up on the wall, I'm still seeing your handwriting of the various ways to translate this into Latin. But it's unpredictable, but dependable. To me, just looking at this it's still tacked to my wall, I'm thinking when you were mentioning how your employees should maybe be a little bit nervous about what you're going to do next. DAVID: Yeah. BLAIR: I was thinking about I really enjoy in relationship with my wife, who's not only my life partner, but my business partner, I enjoy the role of disruptor. I enjoy the role of being the person who shows up and says, "Okay, we're going to take a whole bunch of risk," and then she and the other calm people around me kind of have this little meltdown and I enjoy seeing them go into meltdown mode. BLAIR: So, it's really important for me as my personal identity, and I really wonder the people listening out there, all the entrepreneurs, I wonder if you identify with this as well, to be seen as unpredictable, but not unstable. I would like to be known as somebody not just in business, but in life who is seen as you never know what Blair is going to do next, but I know I can always depend on him. DAVID: Yes, buttressed with the fact that you have scared them before. BLAIR: Yes, and they have survived. DAVID: And they've survived, and they've also seen, they followed your lead, and you led them through the Red Sea and nobody, or not too many people drowned. BLAIR: I didn't lose many. DAVID: You didn't lose many, right. So, the idea is that okay I've had crazy ideas in the past, some of them have not worked out, but enough of them have that we should at least have a really good discussion about this. In the end, I'm going to listen to everybody says, but I'm going to make a decision on my own kind of. Maybe not on my own, that's a little bit ... That doesn't sound good, but it's not going to be democratized. BLAIR: Yeah, yeah, with the input of others. DAVID: Right. BLAIR: So, I wonder if that shouldn't be the motto of all entrepreneurs and not just me. While we're skipping across risk related topics here, another thing I really wanted to talk about is this idea of no exit. A few years ago, I had a revelation about my own business from a couple of different sources. One was the Strategic Coach program and Dan Sullivan, and another entrepreneur who had said something publicly. I'd had this revelation and this epiphany that I was never going to sell my business and I was never going to retire. So I wrote a lengthy blog post about it called "No Exit", and I've since done a bunch of exercises around this when I'm speaking to a room full of agency principals. The first time I did this was at Revenue 2.0, that's an event you and I did together twice about alternative business models, and I do this talk that I have called The Five Constraints, but the first constraint is this idea of no exit. So, if you're listening to this, if you're the owner of a business of any kind of, whether it's a creative marketing business or some other kind, I want you to try on this constraint. The constraint is that you can never sell your business and you can never retire, and then I'll just stop there while you think about that for a second. Then I'll ask you if that's the constraint you had to live by, what are the changes that you would make in your business right now? Make a list of the changes that need to be made in your business, and then what are the changes that need to be made in your life. So, I give people a couple of minutes to make some notes, and then I ask the audience, "All right, what did you write down?" People say, "Well, I've got to change my role. I've got to quit sacrificing today for tomorrow. It's important that I show up to do a job that I love, so I've got to change my role. I've got to delegate. I've got to take more vacation." DAVID: Right. BLAIR: So many people say, "I need to start working out." I'm not exactly sure how that's connected, but it's a really interesting constraint. The real source of it, I was inspired by a couple of different people, but the real source of it is I noticed this pattern in my clients' businesses. When the principal gets to a certain age, and the age is just a few years shy of where I am. I'm 52 at this recording, so I start to see it around 55, late 50s, so definitely in the early 60s, when somebody gets to that age, when they can tell me when they're going to retire, I know it's over. It's over because as soon as they have one eye on the exit, they quit taking risk. Have you see this too? DAVID: I have, but I'd never seen it expressed quite like that. Immediately I say, "Oh, that's something I could study." BLAIR: Yeah. DAVID: Because as soon as they have a date three years, now what does their decision making look like when they know that it's only going to be three years or five years or two years or whatever it is? BLAIR: I'll tell you this anecdotally, if somebody says they've got an eye on a retirement date that's within five years, they will not make a difficult decision around positioning. DAVID: I was just going to ask, positioning would seem to be the likely one. BLAIR: Yeah. DAVID: What are some of the other topics they would avoid decisions around? BLAIR: They won't make difficult staffing decisions. I might not be right about this, but I'll say it anyway because it never stopped me before. DAVID: Wait, is this the same Blair? Who took your mic? BLAIR: They kind of cede control of the culture. That's not necessarily a bad thing, but if you think about like a vibrant firm, at the helm of the firm is a truly inspired leader whose primary job is to keep an eye on the horizon and say, "We're going this way," and to make decisions about things that are going to happen in the future, spotting things in the market, spotting trends in technology, et cetera, et cetera. So, that vision is at least five years out, and as soon as that vision gets to a five years, four years, three years, they're not really thinking about the health of the firm long-term. That has a significant impact on the culture of the firm. The energy is different. As I'm talking about this, I'm hoping that you can imagine firms or just recall firms that you've walked into where you realize, oh yeah, this is not a vibrant young place, and it's not so much to do with the chronological age of the people, although that is a factor. But the energy of a place where the principal is thinking about retirement is completely different. As soon as the principal starts thinking about retirement, they lose, I don't know if it's moral authority, but they become less of a guiding force. So, where does the guiding force come from? Maybe it doesn't come from anywhere. Maybe there's a power battle. DAVID: Nature fills a vacuum, right? So, if they're not leading, then somebody is going to step up. I think I can illustrate what happens along this same line. What I have seen is that you will be more tolerant of talented assholes as employees. You do that, not just because you don't want to rock the boat, but because this talented asshole is somebody that has taken something away from you and you don't want to step back in. You don't want to find somebody else to do this for you. That is making a huge ethical compromise honestly. BLAIR: Yeah. That's part of the problem I have with it. I do see some of these compromises as ethical compromises. You avoid the big fights. You're absolutely quick taking risk in the marketplace, and that's another element of risk. My favorite Peter Drucker quote, there are so many great Peter Drucker quotes, is, "In business, all profit comes from risk," and I like to add, in life, all profit comes from risk. So, you imagine that okay, if that's the nature of profit and risk in business, so you imagine that your client decides that they're going to go out into the marketplace and take some risk in the market as a way of earning profit. So, first of all, your client decides I'm going to take some risk, and then they hire you and in part, what they're hiring you to do is to make some of that risk go away. In every price that you charge, put forward to your client or charge your client, there's some sort of risk level built into the price. There's just risk all around. When somebody in the middle of the equation that is the principal of the firm quits taking risk, then everything kind of doesn't grind to a halt, but everything kind of slows down, gets less interesting, less value is created. DAVID: And clients start to run things more as well. You don't push back. BLAIR: Yeah. There's another tough decision that you're not going to make. You're not going to push back on this client. You're thinking ah, three more years. DAVID: Yeah. BLAIR: Three more years. DAVID: Don't want to upset the applecart. BLAIR: I've some friends who are cops and once they get 20 years of service in, they always say three bad days. If I have three bad days in a row, I can just quit and I've got pension. I feel like that's what happens to agency principals when they have one eye on the exit. I just want to clarify here, I'm not saying you can never retire. I am saying you obviously want to build a business. You want to create your wealth, so at any moment you can stop, you can shut it down. But the idea that an entrepreneur is going to, in five years from now, I'm going to keep sacrificing and then in five years or whatever the time period is, I'm going to like shut it all down or go do something else and start my new life. I think if that's what's driving you, if that's kind of your vision, maybe you've just inherited it from the previous generation where we were taught, for whatever, that that's how things are done. We just need to unlearn this old practice of retirement. We should just get away from this practice of retirement, or you've just built your business in a way that it's just ongoing sacrifice, sacrifice, sacrifice. So, what I'm advocating is your business should serve you, right? Structure your business in a way that it serves you, in a way that you love showing up to work, and you're energized by work, and you're making good money, and you're getting all of your needs met, and you get to this place where your business is so good at serving you that the idea of retirement becomes ridiculous. DAVID: Right. Now, if you catch this early enough, let's say ... And I get this, because I get calls from people who want me to help sell their business, and if it's early enough in the process, I can probe and say, "Oh, you know what? This isn't the problem. The problem is that you're just not as interested in it anymore, but we're catching this quick enough. You could reinvent yourself and you wouldn't want to sell your business." Sometimes that's quite possible, right? But if you're past that tipping point, there's very little that can happen. I'm hoping that as people listen to this, they're inspired to be honest with themselves about this, and to live with some of the discomfort and the paranoia and to let that make them feel alive and to embrace the risk taking, and also to picture themselves homeless or whatever that looks like for them. Maybe it's just not enough money for a latte tomorrow or whatever. But picture themselves and embrace that fear and then make better decisions that follow some deeply held principles that you have and not be dragged along by the marketplace. My goodness, that's what I hope people hear here. BLAIR: Yeah, and again, back to this point I was trying to make earlier is at some point, things change, your partner, like health problems, whatever, everything changes, and you do want to be in a position where you can shut your business down or sell it if there's a willing buyer. I'm not saying you can never sell your business and you can never retire, because there are times for lots of people when it's going to make sense to do one or the other. What I'm saying is you should operate your business with this idea that you're going to die with your boots on, so that you never quit taking risk, you never quit facing the difficult business decisions. I want to close by, I'll give you the last word here, but I want to close my part here by recalling a tweet that I saw last week on the subject. I'm not sure who it was from. I think it was a financial advisor. He was saying the pattern in life when it comes to retirement is you've got a job, and at some point, you get to a certain age you realize, at this rate, I'm not going to have enough money to retire in the style that I want to retire. That situation, that realization forces you into entrepreneurship. So, you begin to take risk and you start a business, and then what this guy says is the inevitable is you make the money that will allow you to retire, but you're having so much fun now that you completely ... You discard the idea of retirement and this guy is saying this is a pattern that he sees over and over again. That really resonated with me. I think there are certain jobs that you absolutely have to retire from. There are certain businesses that it might make sense to retire from. But when you're already an entrepreneur, you're already taking risk, we're not coal miners. You're not wearing out your body. I think you structure your business today so that it remains fascinating to you and the requirement of that is that you keep taking risk. When you do that, and you don't have one eye on the horizon, you're going to focus on living a long healthy life. You're going to focus on shaping your role in your business so that it serves you, and the idea of ever retiring is going to be absurd. So, that's my last word on this. What do you want to finish on? DAVID: I can't top that. We'll leave it at that. I think that's a very apt way to end this thing, and it's been fun to talk about this risk. There's just such a brotherhood out there, of risk takers and almost like a secret handshake, you meet somebody that you hardly know but they're an entrepreneur and you immediately know that there's something you share with them. It's this risk taking thing. All of a sudden, you understand their world, even when you don't even know it yet. It's just an amazing thing. BLAIR: That is so profound. Like I got goosebumpy when you were talking about it, because I'm remembering there was no room I would rather be in than a room full of entrepreneurs. DAVID: Yeah. BLAIR: A room full of people taking risk, and then you drop the person in who's like got his eye on the retirement and it's like, yeah, you're in the wrong room, dude. DAVID: Yeah. This has been great. BLAIR: Yeah. DAVID: This has been a fantastic discussion. Thank you, Blair. BLAIR: Thanks, David. Talk to you next time.

5 Des 201831min

Blair gets David to admit that he was kind of wrong about open book management being just a fad when he originally wrote about it almost two decades ago, and David offers ways that it can actually benefit both employees and clients when used appropriately.   Links Financial Management of a Marketing Firm by David C. Baker   TRANSCRIPT BLAIR ENNS: David, today we're going to talk about open book management. How does that sound to you? DAVID C. BAKER: Sounds like you think you're in charge. Why don't you say, "Can we talk about that?" BLAIR: Well, let me assert control. David, would it be okay with you if we talked about open book management? DAVID: Great idea. I like that idea. Let's do that. BLAIR: Okay, fantastic. I just happen to have an article here that you wrote. I've actually just pulled it out of your book, Financial Management of a Marketing Firm. We don't talk about that. We should do some podcasts on that book, because that's a book that every principal of a creative firm should have on their desk or their bookshelf. And the reason I had it out is, I was just on a call with the owner of a small creative firm who wants to raise his level of business acumen, and we don't have the training program that he's looking for. Ours is too specific to business development. So I said, "You need to buy this book." And then, as I was leafing through the book, I saw you had the stuff on open book management. We'd already agreed that we were going to talk about open book management. But I want to read something from this that's in the book. BLAIR: It says, "OBM, open book management, is clearly a fad. That doesn't make it wrong, just suspect!" Exclamation mark. "Open space layouts are also a fad, and time will tell how they catch on. Though there's already strong anecdotal evidence, if that's possible, that people jumped on the bandwagon and only later asked where it was headed." DAVID: So you want me to pull stuff out of here to embarrass you, as well? Or not? BLAIR: "In my opinion, open book management is a fad that will not catch on with the masses." When did you write this? DAVID: Last month. No, the first time I took a stab at writing about open book management was in 2000, so you gotta give me a little bit of slack. I was kind of wrong about that. I'm still going to be right about open plan offices, but it's going to take another decade for the world to figure out that I'm right about that. BLAIR: Really? DAVID: Yeah. BLAIR: Yeah, you think we're going to go back or away from open plan offices? DAVID: You know, one of the key components was that the principal or leader or whatever should be out with all the rest of the folks, and that blew up in everybody's faces, so we've already walked away from one of the key tenets of it, and we've also walked away from other things like, now we have places for people to go off and work if they want to, and we're not making everybody sit in what looks like a call center and be all disturbed by everybody's nonsense. So, yeah, I do think it's going to be another ten years, but we'll figure that out, too. BLAIR: Okay. DAVID: But I was wrong on this one, for sure. BLAIR: Well, let's just pick up from there. What did you think was going to happen, and what's the state of the nation right now when it comes to open book management? DAVID: Well, people are more open to it for sure, and one of the things that occurred to me as I was looking back over my first foray into this is that I wrote it at a particular time in history, so this is right during a difficult economic environment, and that's typically when principals move towards more open book environment. BLAIR: Yeah, "look, I'm not making any money." DAVID: Yeah, right, so quit your whining. It's like, I'm not making any money, why do you keep asking me for more money? That's very common, like people go to open book management when things aren't going all that well, and then they're not quite as enthused about it when things are going great. But, we've matured in so many ways around that, and it think that the current approach to open book management is really good. I'm very much in favor of it, to a certain degree. DAVID: I asked a bunch of principals not too long ago, just a couple months ago, about their perspective on open book management, and you and I talked about this poll. It's really, what did you find interesting about that poll? Tell people about the results of it first. BLAIR: Yeah, so the Twitter poll that you did. You said, "As the principal of a marketing firm, my perspective on open book management is: A, everything is fair game; B, all is open but salaries; C, we share the big picture; D, financials are not shared. And the number one response, 38% people said, everything is fair game. DAVID: Yeah. BLAIR: And then 24% was the next, B, all is open but salaries. So 62% of the people you polled are in favor of open book management at one level or another. DAVID: Right, that surprised me. It surprised you, as well, I think, right? BLAIR: Yeah. I mean, I was shocked at 38% said everything is fair game, because the distinction really is pointed out in the next response, which is all is open but salaries. So people are saying, yeah, what the principal earns, what the highest earners earn, what the lowest, everything, shared, or who gets bonuses on what, commissions, etc. DAVID: Right. And I came across something just last week that I found even more interesting than that, and it kind of pegged those results into a better, more I guess, an anchored context. And this was something that Katherine Vasile had done on CNN.com, and she discovered that the big difference in how we approach open book management is a generational one. So, 30% of workers between 18 and 36 have shared what they make with a colleague. So a third of younger workers tell their colleagues what they make. Compare that with older people, like you, not me, but older people, only 8% of those people share what they make. And then flip that around to what do they share about what they make to family members, and 60% of millennials will tell a family member, whereas only 48% of older folks. So there's something about, maybe it's transparency. I'm not sure I completely understand that, but that's the difference. It seems like it's a little bit generational. DAVID: And since these younger folks are running firms, they're taking their personal perspective to how they want to run the firm. I think it's great. I think it's fantastic. BLAIR: I probably should have done this at the beginning, is the one interviewing you. We should probably define open book management. Do you want to back up and do that? DAVID: Sure. So, it's being more transparent about what is happening in the business, and if we back this train up 20 years, it was pretty common to find agencies who didn't even show employees ... they didn't know what the hourly rate was, really wild, bizarre, and they never got to see the proposals that clients were accepting, which I also found incredibly bizarre. And then, so , what the hourly rate is might be the first step. Next would be seeing proposals, what clients are paying for what they're getting. A deeper step might be, what are the top-line numbers. What are our top-line financials. Not the net, not all of our expenses, but what, like, we're a $4 million firm or something like that. DAVID: Next step down would be looking at more detail in the income statement. So, you subtract all the expenses, what's the net. And then the deepest you could go would probably be sharing what everybody else is making individually. I would stop short of that for a couple of reasons, but that's the progression for open book management. So it's not like you're either open book management or you aren't, it's more a matter of degree, probably. BLAIR: So is it all financial when we're talking about open book, or are we talking about The Books, the accounting books? DAVID: Generally it is, yes. There are some other things that people aren't nervous at all about sharing, like the purpose of the firm, the future of the firm, what the principal's timeline is, what we're thinking about in terms of maybe opening another office, maybe changing our perspective about certain service offerings. I don't see anybody ever thinking about pulling back from that. Universally, people are open about that. So yeah, it really does come down tot he financial side. And when you think about the classic term, open book management, that's always around financial stuff. BLAIR: So, it seems, looking at this article from 17 years ago now ... Wow, I can't believe we've been doing this this long ... to where you are now, you just said you think this is great, the openness, the trend towards openness, so clearly it's not a fad. It's stuck around. It seems to be gaining some traction. You're pointing out that it seems to be a cultural thing, as the younger people live in a more open and transparent society where everything is out there on social media, etc., there's less inclination to hide things. So, your assessment is this is a good thing and we should all be embracing it. Is that correct? DAVID: It is. Up to the salary side. Maybe that'll change too. I don't have a history of predicting this very reliably, so I'm hesitant to do it again. Maybe that'll change, but I do think that we tend to judge people too quickly based on how much money they make. So we tend to assign a human value that's tied to what they make, and I think that's a massive mistake. Because it really is more about, it's really a positioning question, like how easily replaceable is somebody's labor, and it has nothing to do with how valuable they are as a person, and we can't separate those two things in our minds. So I don't think sharing salaries is good. I think sharing the whole bucket of salaries, like this is what everybody makes together, and that should be less than 45% of AGI, that's fine. But I do think it's really good if we stop at that particular point. DAVID: I wish that our transparency just extended to actually with our clients, as well. I would welcome a little bit more transparency about the financials of agencies, so that clients could actually see them too. BLAIR: Well, that's interesting. DAVID: And clients are demanding it, right? You've seen some requests for that. Some of that is just intrusive, asking a lot of those stupid questions. But I think clients do have a right to know whether your agency is financially viable. They don't have a right to know what your people make and all those other intrusive questions. They're asking because they can, as you're famous for saying, but that doesn't mean it's right. Bu I am in favor of more transparency around financials. BLAIR: So, let's come back to clients for a minute. I just want to go back to the idea of sharing salaries, what people on the team make. When I think back to some of the stories around professional sports ... as a Canadian, I'm going to use NHL hockey as an example. And for many years, quite famously, the salaries of players were kept artificially low by the fact that it was either a written agreement or it was some sort of "gentleman's understanding," in quotes, that players wouldn't share with each other what each other was making. And Gordie Howe was this player who was kind of famously responsible for ... He was privately told he was the highest-paid player in the league, and there's a culture in the league of players not talking to each other about what each other was making. And the NHL ownership was famous for being successful on that level. And then at some point, somebody pointed out to Gordie Howe, made this comment in the room, "No, I'm the highest-paid player in the league," and some junior guy said, "No, no, he makes more than you, he makes more than you, he makes ..." BLAIR: And that was the beginning of kind of a slow move towards like full disclosure, and as everybody became aware of what everybody else made, then the salaries just started to go up and up and up. So that's what happens in professional sports, and I can imagine that in the average firm, if, especially as you get larger firms, and I've worked in some large firms where it's a very kind of competitive culture, like not to an unhealthy degree, but when you get into a firm of hundreds of people, you look at some of your colleagues, and you see them as direct competitors for the job that's the next level up. And I cam think of a couple places where I worked where that was rife. And again, not necessarily a bad thing, if you're a competitive person, but just the salaries, I can imagine, in a firm like that, large firm, multiple competing for the next promotion, everybody's measuring themselves against each other. That would have to drive salaries way up, would it not? DAVID: It would, right. And that's why I think it's healthy to publish a salary range, and maybe not publish it on your website, but talk about it when you're hiring somebody, so that somebody knows that you are going to move around within this salary range, and that won't change unless you take on additional responsibility, or the firm grows, in which case, that range for that particular role might rise a little bit, otherwise you're going to end up overpaying people. DAVID: One of the things I've noticed is that the people that tend to get overpaid or paid too much are the ones that have been with you for a long time, or the ones who know what other people are making. So you give a bump in pay to somebody, the only other person who knows about that, besides the person, is the CFO. And so, as all of these little raises are going out, the CFO or the bookkeeper, the accountant, full charge bookkeeper, whoever that happens to be at your firm, knows about this, and you feel duty bound to sort of send them some bumps along the way. Those are the two people that tend to get overpaid. DAVID: But there's a dynamic that's changing out there. LinkedIn did a fascinating study, and this certainly applies to agencies as well. People don't make more money by just staying at one place longer. They make more money by changing jobs, right? And so they pick up that bump in pay at the intersection, when they cross the boundary and go to work for another firm. And so you don't have quite that pressure of paying people a lot, because they stay for a long time. DAVID: The other things that's interesting to me, and there's a pretty strong argument that the unequal pay between male and female has come about largely because of the secrecy around what people make. And so, if I think of one particular factor that might tip this in favor of more transparency, it might be this notion, not notion, it's true, it's real, that females are not getting paid as well as males are for the same work. So that might be enough to tip the balance towards more transparency, so that we can erase some of that wrong in the marketplace.   BLAIR: Are you aware of any information studies that have done, either of yourself or anybody else, that shows the benefits, either financial or in any other form, of moving to open book management? DAVID: Yes, there is an organization, the organization that basically founded the whole ESOP movement, which stands for Employee Stock Ownership Plan. I think it was 40, 35-40 years ago, and this is an organization that is self-interested. In other words, they have a strong incentive to say that open book management really benefits the companies that practice it. And even with that bias, they could not come up with any demonstrable proof beyond about 1-2% gain. So in other words, open book management is not something you do primarily to boost your firm's performance. And that mirrors what I've found in the marketplace. It has virtually an unmeasurable effect on the firm's performance. That is not why you do it. You don't do it to help people self-manage or to say, "Let's align everybody's activities with some goal that will benefit them individually and the group." It just simply doesn't work. That's not why you do it. There are good reasons to do it, but that's not one of them. BLAIR: You mentioned in this article from 2000 that there's a really bad reason to move to open book management. You just touched on it, and you said the bad reason is this idea that open book management will lead to a self-managing culture. DAVID: Right. So it's usually instituted by principals who don't particularly enjoy management, and therefore they're maybe not that great at it, and so they're searching for ways to have employees self-manage the environment. You see this in environments where they have this owner's manual, that's kind of what I say, it's really more of an employee manual, but I think of it as an owner's manual, that's 300 pages long, and no matter what the circumstance, all they have to do is just point to this page, and that's what will fix the situation, or you see them with this very convoluted compensation structure for especially the sales people but also other people as well, so that they don't have to make decisions. DAVID: Principals cannot insulate themselves from making decisions. They are responsible for the profit that the firm turns over. Setting those priorities, having the right people in place. As you talk a lot about thinking about future value, that's their job. And no open book management plan or anything else is going to relieve them of that responsibility. That's why it's really dangerous to put open book management in place if you're doing it for the wrong reasons. It's just simply going to disappoint you. BLAIR: Does the size of the company make a difference on whether or not you should consider open book management or the level to which you should exercise it? DAVID: Well, if you have a three person firm and you're publishing the aggregate salary number, then it's going to be a little bit easier to figure out what somebody else makes, but I don't necessarily see any difference there. You know, here's something interesting. I have a client, about a 40 person firm, and twice a year is they do this employee retreat. Instead of running all the employees through the same sort of disclosure about say the future marketing plan, and about our facility, and about our financial performance, and our clients, and maybe a survey we did. You know, instead of running everybody through that, they set up stations instead. They set up six stations. One of them was financial performance. One was our marketing play. One was our survey with clients, those kinds of things. And they let their employees decide what they wanted to learn about. DAVID: And what they found consistently over the years is that very, very few people actually went to the financial station. Not that many people were interested in it. The ones who were interested were very interested, but it wasn't that interesting to most people. And that also mirrors what I've found. If you're going to talk about financial stuff, then make sure people are interested in it, and I feel like it should always be married with financial literacy. So like, explaining to folks, "what does this really mean?" Because some of your people have run businesses and are very astute, other haven't. They run their own personal finances, but it's different. So, coupling any information with financial literacy training would be useful as well, but I think we overestimate how interested people are in this stuff beyond the top level open book management. BLAIR: Yeah, I wonder, and you probably know the answer to this, how many people in the typical creative firm are actually able to read an income statement or a balance sheet. DAVID: Not many people. Not many principals can, honestly. And when you talk with CFOs and controllers and so on, and they're frustrated because they cannot get their principals to understand the basics of a financial statement. And every principal is very different about how they want to process this information. They want to see I ton one page, they want charts, they don't want the detail. They usually want to see a stack of detail, but they don't want to have to dive into it. They just want to know that somebody has done all the detail work, but they don't really want to look at it themselves. And I think that mirrors what most employees are interested in, as well. They almost want access to it, but as long as they have access to it, they're probably not going to dig all that deeply into it. BLAIR: Yeah, interesting. Anything else you want to add on this before I circle back to the doorway you opened earlier, and that's the idea of more financial transparency with clients. But, anything on the employee front? DAVID: I think I see this changing still over time. I think more and more of this transparency will surface, and I think that's a good thing, as millennials and so on and folks who are more driven by transparency and openness as they take over more and more firms, I think this is going to be a movement that continues contrary to my prediction 17 years ago. BLAIR: And you think that principals should embrace it? DAVID: I do, absolutely, think it's great. BLAIR: Yeah, okay. So again, back to the idea of aversion of open book management or at least financial transparency with clients, there are some kind of well known examples out there in either the design profession or the advertising profession of large clients running arduous, elaborate pitch processes where part of the process is they demand to see profit level and they want to see employee salaries. And I've always been quite vocal on the fact that that is none of their business. But I do identify with what you said, the idea of, you know, a client does have a right, I think, and I think that's what you said, to know that you are financially stable. What's the level of transparency that's appropriate to clients or prospective new clients? DAVID: I agree with you on that front, that that level of disclosure that they're asking for is not only stupid but it's also dangerous, but it does seem to me like we could develop a policy that explains to prospects, and maybe even to employees who seem to be interested in the financial viability of the firms they're beginning to work for, and there's more and more I guess concern on their part about whether the firm is worth taking a flyer on. But, we could develop this policy that talks about what our perspective on business, like the solidness of business. Like, how do we view the role of profit? And how do clients fit into that? And what are our principles about maintaining debt levels below X amount? And where we let our net profitability float between X and X, and how much of our income we reinvest in innovation, which is, as you pointed out several times, is the enemy of profit. How do we make choices there to throw profit away and invest it in innovation? DAVID: So like having a sort of a ten part manifesto around our perspective for money, and make that very visible on our website. I think that would be a very healthy thing to do. I've never seen anybody do that, but I would be very in favor of it. BLAIR: That's an interesting idea. I mean, to publish that, you would have had to have thought through these idea first, right? And how many firms have? DAVID: Right. And that's the biggest advantage, right? BLAIR: Yeah. DAVID: This forces you to think through it before you publish it. BLAIR: So that would be publicly available to clients and to employees, and to prospective employees, to prospective clients? DAVID: Right, yeah. BLAIR: Gee, that's not a bad idea. Where would you put the cap on the profit? DAVID: Well, it's like I would say, maybe ten to 30%, that's probably what I would say, and also explain that the economy is notorious for sneaking up on us, and when that happens, we want to have enough padding that we can still pay our people fairly and still exist for our clients. And so, we recognize that some years are going to be lean, and those will be offset by the better years, and so we have a commitment to that. And if we fell like we're consistently making more than 30% profit, then we're probably overcharging clients or we're underpaying ourselves, and we have to bring that back into balance. That's the level of disclosure I would be in favor of. BLAIR: That's fantastic. Do you have a name for this document of financial disclosure? What do you call this manifesto? DAVID: I don't know. I haven't written it yet, but maybe that's something we should do together. Wouldn't that be interesting? BLAIR: That'd be very cool. Alright, this has been fascinating, David. Thank you so much for this. DAVID: Thank you, Blair. It was a fun discussion.

21 Nov 201824min

Blair and David analyze and then look beyond the requests for reassurance potential clients make during the late stage of a sale to address their underlying motivations.   LINKS “Transtheoretical Model” (Prochaska & DiClemente, 1983; Prochaska, DiClemente, & Norcross, 1992)   TRANSCRIPT DAVID C. BAKER: Blair, today I want to ask you about something that I've heard you talk about for many years and it's this notion of alternative forms of reassurance. BLAIR ENNS: Yeah. DAVID: We used to do this event together and we did it for like 10 years running. BLAIR: You mean that one where I carried the both of us. DAVID: Yeah. That's the one, right. Yeah. Yeah, that's definitely the one. I remember listening particularly attentively to this one section that you used to talk about because it was a new concept to me, but I was also really fascinated by it and I thought, mainly I thought the title was just perfect and you called it something like the alternative forms of reassurance and as I recall at a certain point in the sales cycle when an agency is in the process of landing a new client, that prospective client still wants a little bit more information and they might ask for something and this was a way as I recall, where you could kind of redirect the question and provide alternative means of reassurance. You remember those days? BLAIR: Yeah, I remember those days fondly and the way you described it, I think of a judo move. We're talking about late in the sale and I guess I'll back up in a minute and explain why reassurance is important late and it's not important at all early, but we're talking about late in the sale when your job as a salesperson is to reassure this nervous late stage client and they ask you for things. I was counseled to look beyond the request, the specific request and look at the motivation for the request and sometimes the request is the negotiation, the request is to cut price. Maybe you're just negotiating, but maybe there's something else going on here or maybe they're asking for a money back guarantee or maybe they're asking for references or maybe they're asking to do things a little bit differently. DAVID: Right. BLAIR: In a lot of those situations, you have to think about what is the client buying from you. Anytime they hire your firm, they're buying a path to their desired future state, and so when you put forward a proposal in front of them with a price attached and they look at that price, you are essentially pricing their desired future state discounted for uncertainty. In every price, there is an uncertainty discount that's built in or there's some math around an uncertainty discount that the client is doing. Looking beyond the motivation for the request late in the buying cycle, again, it might be to cut price, it might be to offer references or it might be to do the engagement differently. It's not universal, but many times they see a lot of risk in the engagement and they're simply trying to mitigate that risk. They're trying to lower that uncertainty. BLAIR: So if the engagement fails because of what's known as performance risk and that is you're the provider, your questionable ability to do the job, if in the end you don't end up doing what you say you're going to or to the quality that you say you're going to and you affect the outcome, but then the client is on the hook for that and if they think there's a great chance that that's going to happen, then if it's really high, they won't hire you at all. But if it's a little bit lower than that, maybe they'll see the risk and decide, "Well, for the level of risk that I'm taking, I want a lower price." So that's just one example, asking for a lower price where the client's really just trying to mitigate their risk, factor in uncertainty or another way of putting it is they're looking to be reassured that everything's okay and those are all different kind of spins on what is essentially the same topic, a nervous late stage client wondering, "Well, what if this goes wrong?" DAVID: So if you handle this well, can you in effect eliminate that discount a bit from a pricing standpoint? If you handle that reassurance correctly, can you close that gap and leave less money on the table? Is that part of it as well? BLAIR: Oh, yeah. I couldn't sit here and say you're going to eliminate all discounts forever and still close the deal. But the vast majority of them, especially with good clients, like a value buyer who doesn't see themselves as spending on an expense, but investing in a solution or an opportunity, a value buyer who maybe starts negotiating or asking for a discount, you can almost always offer an alternative form of reassurance as long as you're able to look past the request and discern the true motivation and see what's going on underneath. If you don't mind, I wouldn't mind backing up and just talking about why reassurance is important late. DAVID: Yeah, sure. BLAIR: I'm fond of saying that selling isn't about talking people into things. My definition of selling is selling is three steps. It's helping the unaware, inspiring the interested and reassuring the intent, and this is a truncated, bastardized and otherwise manipulated version of a change management model that's called "The Transtheoretical Model" developed by Dr. James Prochaska and some of his colleagues, it often goes by TTM, so it's a model of understanding how people go about change and I would just interject here and say that I believe that buying is changing and therefore selling is change management, so that's a model. It's a way of looking at the world is thinking of buying is changing, therefore selling has change management. Okay, if you believe that, then you can go to the world and grab a number of these great change management models and there's a bunch of them out there. In the last 10 years, there's been some really interesting ones. BLAIR: You can take any of those change management models and you can apply it directly to the world of selling. This woman I worked with years ago, her name was Pauline O'Malley. She's a sales trainer in Vancouver. She dropped Prochaska's model in my lap. Now I don't teach so much to that model anymore other than the idea that you should think about the client going through this arch in the sale and they go from unaware of the fact that they have a problem to aware of the fact that they have a problem or opportunity and interested in solving it. When they're interested, they're kind of gathering information and assessing the pros and cons. Then they move to forming the intent to act. So they go from unaware to aware which we'll call interested and then intent, intent on solving their problem. BLAIR: I mentioned there's three steps, help the unaware, inspire the interested and reassure the intent. So let's just put help the unaware aside for a minute because that's really when you call somebody and say, "Hey, we're in the business of X. Can I be of assistance to you?" and they say, "I don't have any need for X." They don't have a problem. So let's put them aside. In your CRM, they would be a lead, maybe, but you wouldn't create an opportunity because there's no fit there on the subject of need. So that leaves the interested and the intent, an early stage buyer and a late stage buyer. So your job as salesperson is to inspire that early stage buyer who is interested, they're aware of the fact that they have a problem or an opportunity. They're gathering information, assessing the pros and cons and thinking about whether or not they should do something about it. BLAIR: When people are at that interested stage, they overweight in their mind the possible benefits of change. So they're quite prone to inspiration. So they're actively looking for an inspiration. They're looking for, if it's somebody buying design, they might be looking at portfolios. If they're buying advertising, they're looking at an advertising reel, they're looking at examples of best work and they're getting all emotional and inspired by it and they're trying to just move themselves to the next level where they form the intent to act. So somebody who's interested overweights the benefits of change and they underweight the costs or potential consequences of things going wrong. There's a line, when they cross the line and go from interested to intent when they decide, "Okay, I'm going to do this. I'm going to hire a firm like yours to help me achieve X." Just a few hours after they crossed that line, things shift. Now they start to underweight the benefits of change and they start to overweight in their minds all of the things that could go wrong. DAVID: Skeptical essentially. BLAIR: Yeah, skeptical, prove it to me. So your job as salesperson flips. It goes from trying to inspire somebody to trying to reassure them. If you want to create buyer's remorse or feed buyer's remorse then inspire. Try to inspire somebody- DAVID: Who's skeptical. BLAIR: Who doesn't want to be inspired. DAVID: Yeah. BLAIR: Yeah, exactly. DAVID: Yeah. BLAIR: When you're on the buying side, it feels like somebody is trying to manipulate you through emotions. DAVID: Oh, yeah. So these three stages, and I'll just say them again for folks where this language is new, help the unaware, inspire the interested and reassure the intent. These occur and this is chronological and you mentioned early on that there is a point for reassurance and then I introduced this whole idea about the way you used to talk about this of alternative forms of reassurance and then you jumped in and said, "We don't want to offer alternative forms of reassurance too early." So now you've explained why we need to wait. What are some signs that they've crossed away from interested into the intent stage so that we don't offer the wrong things at the wrong time? BLAIR: I remember working for a design firm and presenting our portfolio to a prospective client and he kept banging his hand on the desk going, "Oh, yes,. Oh, that's beautiful work. That's fantastic." He kept crossing his legs and re-crossing his legs and I thought, "Wow, this is a little bit like the fake orgasm scene in the movie When Harry Met Sally." He was getting very, well, the technical word is aroused. He was getting very excited by the work that we were showing him. The firm that I was with at the time had world class creative work and the portfolio was beautifully shot and mounted on these boards, old school, wise. Man, as a new business person, I'd walk into a meeting and I have that portfolio and I think, "Wait till they see our work." It was just a great thing to have. So this guy was reacted so viscerally to the work that we were showing. BLAIR: At some point, we progressed through the sale, that conversation, a couple of others. We uncover a specific opportunity. It's a late stage opportunity at some point and we come back to the table and I bring the president of the firm with me and we come back to present the proposal. Now, we've got all of the decision makers around the table and the president says, "Hey," and he had a habit of doing this and I think a lot of people will identify with this, he said, "Hey, before we present the proposal, there's a few new people in the room, they haven't seen our portfolio, so let me just take a few minutes and just walk through some of our portfolio." So he walked through the same portfolio, nothing. There was no emotional response whatsoever and the guy who could barely contain himself the last time he saw this work sat there stone faced and so did all of his colleagues. BLAIR: There was just absolutely nothing and I thought, "What is going on here?" I kind of put it away and it wasn't until I was taught to view things this way that I realized that we're trying to inspire somebody who is nervous. We're trying to say, "Look how great things could be." DAVID: Yeah. They felt like you were wasting their time almost, like you were manipulating them in a way, like trying to generate the same reaction they had. It's like, "I've already seen this. I've already had this reaction, get to my questions," right? That was what was happening, BLAIR: Yeah. Then your question is what are the signs that they've crossed the line? So that's one. DAVID: Right. BLAIR: Another one is the questions that they ask you late in the buying cycle when they're driven by a fear of making mistake, they're these very specific, almost unimportant questions and they're often dismissed by the firm. It's like the discovery session that you talked about, that would be the first step, "How long does that take and who needs to be involved on our end?" "It is half a day or a day and you would need to be involved and Bob over there and maybe a couple of others." That's the wrong answer to that very specific question. DAVID: What's the right answer? BLAIR: The right answer is, and this is just an example of the right answer, it's the precision with which you answer, "Discovery sessions take six hours. We do them in our office. We expect that certain key people will be present. That will be you, Bob over there and these other three people that you've identified in the sale and the outcomes look like this." So the answer to this seemingly innocuous question is an answer that shows we've done this before. We do it all the time. We have a bulletproof way of doing this. DAVID: Yeah. So that's where the reassurance comes from in this case. It's almost like what's going on in the buyer's mind at this point? Are they pretty close to buying and they're just sort of condensing themselves or are they talking to themselves? I mean, are these really important questions to them? BLAIR: I think these are vitally important questions. One of the alternative forms of reassurance is what I call process frame case studies, and we'll talk about that in a minute, but another alternative form of reassurance is offer to breakup the sale into phases. So instead of the client making like $100,000 commitment to you say, "Why don't we take it one step at a time? First step is a diagnostic and it's $15,000." Then with an out clause. So the out clause would be, "At the end of that first step, when we present our findings and recommendations, if you feel like you don't like the direction this is going, you don't like working with us, whatever it is, we can just call it quits right there." So there's a phased engagement that's reassuring to the client. Okay, I don't have the same financial commitment. The out clause, I can get out after the end of that first phase if this isn't going well. Then you could even layer in one of my favorites, which is a money back guarantee. BLAIR: So you could say at that point in the sale, when you're describing the out, you could say, "At that point, if you decide that we're not the right firm, we're not going in the right direction, or you don't like working with us for whatever reason and you don't want to proceed, then we're just going to give you your money back. Because if we failed that badly, then we owe it to you to give you your money back." So that's an example of string together three different alternative forms of reassurance when the client might be asking for a discount or they might just be sitting there nervously, not asking for anything specifically, but you can tell they're nervous and you're looking for ways to kind of assuage those nerves.   DAVID: I was never a fan of the money back guarantee thing. In fact, because we've shared many clients over the years and when you come up and you're not there and I'm just joking with them about how our outlooks are very similar and I used to always say, "He is wrong about a few things, six specifically," I would say. Then of course that always made them curious like, "Well, what are the six?" Rather than just saying, "Yeah, he's wrong about a few things," and I would bring this up about the money back guarantee because I always felt like it would insert this thought in somebody's mind that, "Well, why do you even offer a money back guarantee?" Oh, some people want their money back? It always bothered me. I don't know if you do that anymore. Did you ever have to give somebody's money back? BLAIR: One of the first pieces of business I closed on my consulting practice, somebody, late stage buyer, we're kind of at the end. He's nervous and he's asking for references and I didn't have any references because he was like my third or fourth client and I didn't have any references. So I was kind of stalling and saying, "Yeah, yeah, I'll get you references when it gets to the right point." DAVID: Give me me for years, I'll get back to you. BLAIR: He said, "Forget about references. Give me a guarantee and we're good. We'll do this." I paused and I had already decided that this is going to be a principle of mine in my consulting practice. I paused and said, "Well, everybody gets a money back guarantee. If you're not happy, I'll give you your money back," and he went, "Done." DAVID: You didn't have to give it back though. BLAIR: No, I didn't have to. I'll get to the point when I did once. DAVID: Oh, okay. BLAIR: That discussion proved to me that the guarantee and the references, they're effectively the same thing. If you don't have good references, I had a client recently email and say, "I can't figure out what went wrong. The client said all the right things. It sounded like we were going to be hired. Checked their references and then didn't hire us." I said, "Well you might want to have another look at your references. So instead of handing out those references, you might think about a guarantee." At first I made a point of stating it to everybody and then I would just use it when I felt it was appropriate. Then I had one client where the engagement went poorly. Effectively, I let the client take control. I let him reach over and grab the wheel. It was a positioning engagement that went poorly. BLAIR: Then many months went by and he called, about six months later, and he said, "Hey, yeah, I'm not all that happy with the engagement and the outcome." He said, "We didn't really get anything from it, but I estimate that we're 50% responsible. How do you feel about giving us half of our money back?" I said, with great relief, I said, "That's a small price to pay to get you off of my conscience." DAVID: Because you'd been thinking about it too. BLAIR: I'd been thinking about how poorly I had underperformed. I just regretted, from the moment when he talked me into doing it his way rather than the way that I always did it, I just regretted it and it was on my mind always. I knew I didn't deliver value and I thought it was really big of him to own up to the fact that he had some responsibility in it and if he would've said, "Please give me my money back." I would've given it all back. DAVID: Yeah. BLAIR: We've talked about this before, I just don't care about money. In situations like that, it's not that I don't care about it. There are other things that are far more important to me. So I have given money back. There are probably one or two other times when I've given partial refunds that I can't remember. DAVID: One of the alternative forms of reassurance that you list and talk about is references and I've got my own story to tell on that one. I quit giving references many, many years ago and I explained it on my website. I think I've got four points about why I think they're really not all that useful and this is why I don't do it and so on. Partly folks were just wearing out references. BLAIR: Yeah. DAVID: Asking them for advice when they should have been asking me and my references didn't sign up to give free advice and there's all those reasons. But anyway, about two years ago, I think it was, I got the opportunity to do a really large project and this person, really good person, really great firm, asked for references and I explained that I don't do it and here's why. He just insisted. I decided to violate my own policy and give him references. I said, "How many do you want?" and he said, "Oh, give me eight." Okay, so I gave him eight references. He called every single one and the relationship did not go well and partly it was my fault. I would say 60% of it was my fault and so the majority of it, but it just reinforced to me again, it's like set a policy and then stick with it and follow your instincts a little better. I should have done that. I should have done what you recommend here, when somebody asked me for references, they're not asking for references, they're asking for something else, right? So let's get back on track. What is it they're asking me when they ask me for references? What are they really asking me? BLAIR: They're asking, is everything going to be okay? DAVID: Yeah. BLAIR: With references it's a little bit tricky because they're a completely valid form of reassurance. DAVID: Sure. BLAIR: But timing is everything because I think a nervous late stage prospect, they'll never be closer to hiring you without actually hiring you than they are the moment they hang up the phone from talking to one of your best clients of really good reference. DAVID: Right. BLAIR: Right. So they hang up the phone and then immediately like tick, tick, tick, buyer's remorse seeps back in. So if you're giving out references, maybe you want to give out three references and you'll say, "Okay, how much time do you need to talk to these people? Do you need half a day or do you need the full day?" "Well, I'm going to need the full day." You see how I'm leading by asking an either or question, not how much time, "Oh, a couple of weeks." No. "Do you need half a day or do you need a full day?" "I need a full day." "Okay, I'm going to call you or let's put a call on that calendar for the day after tomorrow, so I'm going to give you 24 hours to check these reference, all day tomorrow to check these references and I'm going to call you the next morning." Even better, call it the end of the day and the last thing you want to do is give references on a Friday and then have the call on a Monday. DAVID: They'd think of all the reasons they might not want to hire you over the weekend. BLAIR: Yeah. So if you're using references, think about momentum is so important so the references mop up that buyer's remorse, but then if the client's allowed to sit there and think for long, then all of the nervousness is going to seep back in. So see if you can't position it so that there's a conversation with you in a short but acceptable timeframe that you've given your perspective client to check your references. DAVID: Yeah. Then of course have the right sort of references. Thinking back to you said earlier. BLAIR: Yeah. DAVID: "Oh, the problem is the references. They don't like you." Yeah, I just want to list because we don't have a lot more time. I want to list some of the alternative forms of reassurance and some of these don't need a whole lot of discussion. There are a couple that are really interesting to me for sure and I think they will be to our listeners. So one of them is references. Another is the guarantee, which you've touched on. The one that interests me the most I think is this idea of case studies and you touched on this because it indicates that you've done this before, which assures the prospect what? What's so beautiful about that? BLAIR: The takeaway is little variability in process equals little variability in outcome. DAVID: Right. BLAIR: Right. So think about a nervous late stage client and then you think of the typical creative firm trying to close a nervous late stage client and case studies are appropriate when they're in the right form for closing. When they're in a more traditional before and after format, they're more a tool of inspiration that you would use early. So we teach our clients how to build process frame case studies that really take, they take your typical before and after case study and they take the proprietary methodology that you claim to have. DAVID: You claim to have. Right, I see some skepticism there. BLAIR: Yeah. We have a whole term that people have to do on building a proprietary methodology, IP development before they're able to do the closing with case studies term. So process frame case studies, you take your IP, you take your typical before and after case study, you cut up your case study and put it back together in a way that tells a story that shows that you A) have a novel point of view and path to solving your client's problems, and B) you use it. DAVID: Right. BLAIR: Because if you think of most creative firm case studies, it's, "All right. Here's the case study. Here's the challenge," and what happens is in presenting the case study, the creative person or the principal of the firm or the salesperson always falls in love with the story. It always happens. The person presenting it falls in love with the story and gives this detail they completely lose track of what's important to the client. DAVID: Yeah. BLAIR: If you're the salesperson in that situation, you're telling a story and the client's thinking, "Okay, I don't care about this story. I don't care about what you did for somebody else. I am interested in your methodology a little bit because what I'm really interested in is how you will solve this type of problem for me." DAVID: Yeah, yeah. BLAIR: Right, so you show one case study. Your journey has to be described by this replicable path and when you show the second case study, that's where the proof is in the pudding. You demonstrate that lo and behold you followed the same path. DAVID: Right. BLAIR: Some of the tools may be different. The outcomes are going to be different. The findings or recommendations are all going to be different and specific to the client but you followed the same path and that path is framed by this intellectual property that falls out of your perspective on how things should be done so all of these things tie together. You show one, two, three case studies, different clients, different situations, different levels of investment, different outcomes for each client, but the same methodology. Nothing reassures old nervous late stage client like a process frame case study because it says we've done this before. We do it all the time. We have a defined way of working. It's a bulletproof way of working. Now, people say that in the sale, but they never prove it and the work that they show almost demonstrates the opposite of what they should be proving in that moment. DAVID: I want to overlay a positioning question here. So you could have a poorly positioned from that would have good references. You could have a poorly positioned firm that offers a money back guarantee. Is there a connection between good positioning and good process frame case studies? BLAIR: Is there a connection between good positioning and a good process frame case studies? There's a starting point. DAVID: Do you need to be a well positioned firm in order to have a powerful process frame case study? BLAIR: Yeah. So if you're a poorly positioned firm, let's just take a full service ad agency and that's just a poorly broadly positioned firm, and then you've got a case study that says, "Here's how we'd go about ad campaigns." Ad campaigns is such a big phrase. It's such a vast territory that could include so many different things. It's just not narrow enough. Plus, there's so many firms in that space. So are you likely to show something novel? You might show something repeatable, that's half of the battle. At least that's something you can build on, right? We'd coach our clients, "Well, start there. Let's just start with a repeatable process and let's build the propriety over time." DAVID: Yeah. BLAIR: Right. So that's another way to look at it. DAVID: We fall into the trap of talking about positioning as if it's all about the clients you serve, but it feels to me like part of positioning is how you serve those clients as well. So there might be a hundred firms that serve the same kind of client, but how you solve problems, which you've put a lot of thought into them, which doesn't vary much, your earlier point about little variability, that's part of the positioning story too. You're not moving away from positioning when you start talking about process. It reinforces your positioning. Not only do you serve the same kinds of clients or the same demographic, it's a horizontal positioning, but you also serve them in the same way, you've done this so much. It sounds like a beautiful part of the story to me. BLAIR: Yeah. Here's a great metaphor that I think fits perfectly. You're going in for surgery next week and you have a meeting today with the surgeon. You're not looking for inspiration. You're nervous. You're worried about things that could go wrong because you're late in the buying cycle, right? DAVID: What would inspiration even look like? BLAIR: Imagine how good life's going to be with your new hip. The inspiration would be I can just imagine being pain free and you're still thinking about having the surgery. Then you decide I'm going to do this, I'm going to get my hip replaced, and then you go into talk to the surgeon a few days before the surgery and you're a nervous late stage prospect. So it's just the kind of an informational meeting and he explains a few things to you, introduces himself and says, "Do you have any questions?" and you say, "Yeah, I have a question. My question is how is this going to work?" "What do you mean?" he says. "Well, can you just walk me through how the surgery goes?" He might misinterpret your question. He might think, "Well, you're questioning my ability to do this?" Right? Or he might say, "You know what? You don't need to know. I'm the expert. Don't worry. Everything is going to be okay." BLAIR: But you do need to know and you're not reassured by that. There's a little bit of reassurance in him saying, "I've done this a lot of times." But the reason why you want him to describe the surgery is not because you have the capacity to judge the effectiveness of his technique, but it's because you want him to prove to you that he knows what he's doing. You want him to prove to you that he does this all the time and he knows what he's doing. His response could be, "Well, surgery is an organic creative process. I'm going to cut you open and then just figure it out once I get inside." DAVID: That's not going to be a reassuring statement, right? BLAIR: No, but that's the answer that creative firms give all the time. DAVID: Because they think that repeatability is death for them. BLAIR: Yeah, so the client asks, "How is this going to work?" What they really want to know is, "Can you describe in detail, thereby proving to me that you've done it before, you do it all the time, you have a bulletproof way of doing it?" and they don't even see the intent behind the question and it's, "Well, creativity. It's good. It's creative." I am overstating it obviously and being a little bit disparaging. We just need to see what the reassurance that the client is looking for in asking the question. What you want the surgeon to say is you want him to pull down a model of the piece of a hip and say, "All right, here's how it's going to work. We go in through here. I resect this, I do this." DAVID: Yeah. BLAIR: You want him to explain it to you in such detail and say, "And here's a video of the entire operation if you want to take it home and watch it." There's no question this person is the expert. DAVID: Yeah. BLAIR: So the answer can be anything, but it has to prove you've done this before. You do it all the time. You've got a bulletproof way of doing this. DAVID: In the middle of this long explanation that the surgeon's obviously given before, the patient may not even need more information and the surgeon shouldn't be so in love with explaining this, that they draw on and on, right? BLAIR: You got it. DAVID: They ought to look for sign that, "Okay, I've done." BLAIR: You, the patient might say, "Okay, no, I got it. That's enough. I don't even understand what you're saying." DAVID: Yeah, you're not going to leave a sponge inside me. Let's move on. BLAIR: Yeah. DAVID: This is very, very good. It reminds me of the days when we used to do this. We need to do it again some time, but this is fascinating, alternative forms of reassurance. I love what you're doing here and I hope you folks listening to this have picked up some good tips. Thank you, Blair. BLAIR: Thanks, David. That was fun.

7 Nov 201829min

David disagrees with Blair (sort of) on his model for growing existing accounts in the post-AOR era, and then offers his list of 6 ideas on the topic.   Links The Peter principle The Challenger Sale by Matthew Dixon and Brent Adamson Tony Mikes   Transcript DAVID C. BAKER: Today Blair, we are coming to you live from the ReCourses Woodworking Shop, where so far I have done no woodworking, but a whole lot of podcast recording. Maybe I need to take my saws up to my office or something, but I can wander because I'm on like a corded mic and I can just look at my stuff. If you start to bore me, I just read the manuals for my saws and it's really fun. Is that okay with you? BLAIR ENNS:Yeah. I'll hear the table saw fire up in the background, right? DAVID: You know you need to start to get more interesting at that point. BLAIR: You know you're retreating further and further from civilization and identifying more and more with machinery and animals. DAVID: And the rest of the world thanks me for this. BLAIR: All right. Unabomber, what are we doing? DAVID: Today, we're talking about growing accounts. And as I was thinking about this, why are we so interested in this? I guess one alternative would be that we could just really land big accounts at the beginning but it seems like two things have changed in the world that our listeners occupy. One is that they are tending to start with relationships that begin smaller. That's one thing that I've noticed. So it makes it more critical to grow accounts. The other thing that's changed is that it's much more of a project-based world and so maybe growth isn't necessarily going to solve all of that, but we're talking about a chain of projects. So it's kind of like an AOR relationship disguised as a whole bunch of projects that follow on, which require the skills to grow an account. Why do you want to talk about this? Why is this that important? BLAIR: Yeah. And I think you're right in describing the environment. In this non-AOR environment, the emphasis is greater than it's ever been to go mine the account for the very next project because there aren't the guarantees, to the extent that there were guarantees at all in an AOR relationship. I guess in some of them, there were some form of guarantee. So you really do have to kind of eat what you kill in the modern project-based world.  BLAIR: As somebody who focuses on the new business side of things, I've worked with a lot of firms where they were really good at new business and then you look at how quickly their accounts or clients move on, you think, "Man, if you would just solve that problem, you would be killing it." DAVID: Yeah. And thank goodness they were good at new business because as fast as they landed them, they left, right? BLAIR: Yeah. So you've got a list of things, pointers that we'll review on growing existing accounts. And I have one point. And I don't think you agree with my point. Is this going to be the first podcast where we disagree? DAVID: Publicly, yeah. There's been a lot of ... BLAIR: You're so polite. DAVID: Maybe I read through ... You sent me one paragraph with some ideas when I thought, "I don't know about that one." BLAIR: And a PowerPoint deck.  DAVID: So this will be very interesting so you're going to talk about a concept called the account conference. Sounds very very official. And then we're going to, if you leave me any time at all. BLAIR: I'm not planning to. DAVID: Right. Then I'm going to provide just some very specific pointers, which I'm sure you'll agree with, right?  DAVID: When did you come up with this idea and what was the impetus for the account conference? It sounds like this is something that's been rolling around in your brain for a while. BLAIR: Yeah. Well, I'm looking at this deck, it was from a webinar I did in February of 2014. So it's been around for almost five years. And the idea was I invented the idea of an account conference. Well actually I observed it happening in a hospital. So I was in a hospital with a family member and the surgery was about to happen. And I was watching how not just the surgeons and other doctors, but all the medical practitioners kind of handled it. They had, they called it a conference, maybe it was a patient conference. And I kind of watched from outside of the room. And I asked them questions about it later. In hospitals, you have these hierarchies, where the surgeon is at the very top and then you've got the specialists, doctor and then you've got that nurses et cetera and the other healthcare practitioners. BLAIR: So there's this hierarchy. and in any hierarchy, there's a danger that the people at the top are kind of standing on the iceberg of ignorance. So they have this sense that they know everything because they're the master in that domain. And often there's people below, who are thinking, "Well, I'm not sure that's such a good idea." So the notion of the conference in a hospital setting as I understand it, it's basically stripes down in the military parlance. Everybody takes their hats off and put some stripes down on the table so there is no status, there is no hierarchy and it's an environment where everybody is free to say what they think about the patient, about the surgery that's going to happen. And so it's been developed over many years to change that hierarchical culture in hospitals, where you're not allowed to challenge people at the top, and it takes a while to implement to get everybody to buy in. So I was really impressed with that. So the goal of that in the hospital is to reduce the likelihood of a mistake happening because people are afraid to speak up. BLAIR: And I took this notion of the patient conference, let's call it, in a hospital and I applied it to one of my clients who is having a challenge in growing an existing account. Really the initial challenge wasn't actually growing the existing account, although there were some growth challenges, it was kind of this surreptitious, if that's the right word, or indirect approach to diffuse power from power that had been consolidated among one and individual account person. Does that make sense? DAVID: Yeah. Which is a common problem and one that everybody listening would think. Yeah, I've seen this happened or maybe it's happening right now for them. BLAIR: Yeah. But let's forget about that first instance because ostensibly, the purpose was to help grow the account, enlist others to help grow the account. Now, I've since rolled that out in other firms. And here's the idea, the idea is that not every good account person is necessarily good at growing their account. So if that's the case, why don't we enlist others to help? So the way the account conference works is, I think it should be done roughly twice a year. Some people do it once a year, some people do it once a quarter, which seems a little bit too frequent for me.  BLAIR: So just imagine this, twice a year, you take your entire senior account services team off-site for an account conference. And one at a time, the account lead for any given account presents an overview of their account, "Here's what we've done lately. Here's the progress we've made and here are three key issues affecting the client's business. Not necessarily affecting what we do for the client, but the big strategic issues facing the client. These are the things that as best as the account person can discern or keeping to see you up at night." DAVID: Can I just interject that you hit on something that frames all of this. This is not a self serving event, where we're looking to mine money. I mean that's going to happen naturally, if we do the right thing in the bigger picture. The bigger picture is what is happening at the client level, whether or not it involves an opportunity for us to make more money. It's about leading that account. That's really hidden in what you said. I just want to make sure people don't miss that. BLAIR: Yeah. It's about leading the account, growing the account and it's also about recognizing the fact that the person who is leading that account for the agency is actually quite close to the client and probably has some biases. And they probably have some ideas in what the client should or shouldn't do, but also a basket of ideas of why the client won't do what those in the agency think they should do. DAVID: Right. BLAIR: So in this situation, the senior account person on this account is presenting an overview of the account to the team. And then the rest of the team, they can ask some clarifying questions and once they get those answered, they brainstorm amongst themselves as the account person sits there quietly on what they think the client should be doing, and then they put together some proposals to take back to the client. And they again, with the account lead who's responsible for that account kind of watching silently, they don't really have a vote or say in this beyond asking any questions that are directed to them, the rest of the group decides on the proposal that is going to be taken forward to the client to help grow the client's business and grow the account for the agency. DAVID: So the client knows that this is happening, but is not a part of this discussion until it's distilled by the account person back to them. BLAIR: Yeah. And just think of that point, if you adopt to this account conference approach, it's actually a really interesting new business tool. When you explain late in the sale, when the client's nervous and looking to be calmed down and you're explaining your methodologies, how you work, it's really interesting at that point to the client to say, "Oh and twice a year, we have this account conference where we essentially retreat and brainstorm on your business. We're briefed by your account lead, but they don't really get a say in it. And then the rest of us, as a group, come up with proposals to help you move your business forward and then we come forward and present those proposals to you." BLAIR: Now, one of the most interesting things about putting the proposals forward to the client under this model is, it's not necessarily the account lead who does it, the group decides. The group might decide that, "Okay, the account lead is the right person to put this proposal forward." But they also might decide that for whatever reason this type of selling to and growing the account is not in this person's wheelhouse or strength so they assign somebody else to do it.  DAVID: So the client knows about the cadence, obviously they may not know the first time, but they're going to know after that. What happens if the client says, "I'd like to be a part of that." What do you say? Is it important that they not be there? BLAIR: I don't think it's important that they not be there. I actually think it's an interesting idea. I haven't talked through this with any of our clients before. I actually like the idea that the client is sitting there quietly and the client too, can be asked some questions, some clarifying questions. It introduces another variable. It gets a little bit risky. It would really depend on the client, your relationship with the client. I think if you're going to adopt this approach, you should try it without the client there first. And then after you do it a couple of times, if it seems to make sense to you to involve the client, then go ahead and try it. DAVID: I want to go back to how you introduced this whole idea where it kind of spring to your mind in a healthcare setting and the motivation for it in that setting was to reduce risk. It's like less people will die if we do this. BLAIR: Yeah.  DAVID: It's easy to dismiss that and say, "Well, that's an interesting model but it's really not about reducing risk." But I would say, it really is about reducing risk because the risk that were trying to mitigate here is that we quit leading. And some of my specific suggestions that we'll get to later, talk about how to make sure we don't quit leading. Because that's how you get an account in the first place and that's how you lose an account when you quit doing that. So the risk that we're mitigating is that we quit leading.  DAVID: It's so interesting. One of the things that I'd love to explore, if somebody wants to do this in a really deep consistent disciplined way, would be how do we overlay this with really great techniques for brainstorming because brainstorming is really misunderstood. And there are a lot of personality profile elements that relate to brainstorming. You have people who simply don't think well on their feet, but who make consistently great contributions, but they just do it 15 minutes after everybody's moved on from that part of the conversation. To make this effective, you'd have to really understand how to effectively brainstorm, how to effectively run a meeting as well. But the main point is just that the risk we're mitigating is that we are not leading the account. I think that's such a fascinating, valuable concept. BLAIR: I think you're right and I also agree that there are elements here like a framework for brainstorming that are missing. Like this is something that I introduced about five years ago and I've come back to it from time to time, but it's not something that we kind of teach on an ongoing basis. When I have a client with an issue around account growth that comes up, I usually introduce the model to them. So I think there is an entire area or adjacent areas of exploration that would make this model better.  BLAIR: I believe strongly in the model. I think one of the reasons why it's valid and we've talked about this previously, it occurred to me that the saying that I and so many other people keep repeating, that it's everybody's job to sell, just isn't true. And if we embrace the fact that it's not everybody's job to sell, that your people and in particular, your senior account people, some of them are very good at growing their accounts and some of them are very good at just kind of responding and keeping them happy. And if we embrace the idea that let's put sales responsibility or account growth responsibility into the hands of those who are good at it, this is a model that really suits that. That last part of deciding who's going to present this to the client. You can say to the account lead, "All right. Here's the proposal. Here's a little bit of coaching on delivering it. You go ahead and do it." Or you just might decide that, "Actually, you're better off and it's more appropriate for some other account person who's really good at growing their own accounts to go have that meeting with the client." So if you're the account lead in that situation, you really do have to let go of this idea of the ownership of the account.  BLAIR: One of the things I was trying to do initially back in that first scenario with this model was transfer the equity in the relationship from individuals to the organizations. So when you build advocacy among your client base, typically you want multiple people in the client organization advocating for your agency. But every once in awhile, you get this concentration of power where you get either one person or multiple people on the client side only advocating for one person on the agency side. And that's a very dangerous thing. And this model, If you're in danger of that happening in your firm, by involving others in growing the account, it helps to transfer that advocacy or the equity in the relationship from individuals to multiple individuals in the firm and hence really the firm itself. DAVID: So the only thing that gives me pause in this is the notion that some account people are good at growing accounts and some aren't. On the face, you can't disagree with that. It's absolutely true. But what I say to my clients is that, if somebody is not good at growing an account then they are not a good account person. In other words, I think that is not an optional part of the job description. DAVID: By growth, maybe we need to define that. I mean it seems like we shouldn't have to define growth. It could obviously mean more volume from the account or it could mean more ongoing projects without necessarily increasing the total volume, or it could mean moving upstream. I find that in about a third of the firms out there, they have the wrong people leading those client relationships. These are people who are really good at the details and they don't mess things up. In fact, many times, they are the ones who have stepped in to rescue an account that you were going to lose because the person who was good at growing the account was not good at managing the details, or were good at the relationship and not the details. The client got very exasperated. You decided to put this person in as an emergency move because they have demonstrated over and over again that they're really good at getting the details right. DAVID: The problem is that, that person's approach is to not lose the account, instead of taking risks. And so my perspective has always been - maybe I need to rethink this - but my perspective has always been, if you can't grow the account, you are not a good account person. You're saying that it's possible to be a good account person as long as other people can help you grow the account. BLAIR: I largely agree with what you're saying. I think what you're talking about is really the Peter principle, where people are promoted beyond their kind of abilities because lower level account people are more server responder types. They're very good at the details. They're very good at taking care of the client, checking things off the list. And so you get a really good junior or mid-level account person who fits that profile, then you promote them to the senior account person. Now, you're actually looking for quite a different personality. You're looking for somebody who will kind of create tension in the sale. A challenger type, if you want to go back to the book, The Challenger Sale. Somebody who's comfortable creating tension in the sale because to lead, often you have to look past what it is the individual client wants to what's good for the client organization.   BLAIR: Okay so we're talking about ideas on how to grow an existing account. I've put forward my model for the account conference and you have a list of key points here that we're going to cover. And your first one on the list is, to do what's best. That seems straightforward. What do you mean by that?  DAVID: I mean that if we're trying to grow the account, let's not hold on to it. It's like let it go and it'll come back to you. Almost like an errant boomerang that hit you in the eye. I don't mean it quite like that. I mean if you really want to grow the account, don't grip it, do what's in the client's best interest, even if that means that you need to direct them somewhere else. Because in the bigger picture, we're really trying to build that bond of confidence and trust, and we need to encourage them to do - very much like this account conference you described, where you talked about how we're trying to brainstorm not in how to build more work for the agency, we're trying to brainstorm on what the client needs. What are the existential threats to that client. The same here, we need to do what's best for the client. And it may hurt us in the short term, but it will really help us in the long term. DAVID: People know this instinctively, but especially in panicky situations, especially in situations where the client is already too big or if the account person has power, any of that little erosion of our own confidence makes us grip things too tightly and then we start to mess up. That's what I meant by do what's best. BLAIR: So you mean you should find yourself trying to sell something into the client that maybe isn't in the client's best interest? DAVID: Yeah. Or maybe they're set up to do it themselves and we should not fight that. BLAIR: Yeah. DAVID: We cannot view the client as the enemy anymore like we used to. You know, 15 years ago, even as as recently as 10 years ago we would say, "Oh my god, they think we're competing against the client and the client department is tired of all this low level shit work they're getting an they want this juicy project but those are the ones that we're really good at." Nowadays, we cannot think like that. It is definitely a partnership and we have to view it that way. Our job is partly overflow work. Mainly, it's external objectivity and training them. And that's okay. We have to get used to that world. BLAIR: Yeah. We could do an entire podcast on that one. DAVID: Yeah. BLAIR: That's a really valid point. All right, so do what's best for the client. Don't grip things in a death grip, if the right move is for the client to go elsewhere for that work or take it in-house, then let it happen or even encourage it. What's next? DAVID: Next is lead with a point of view. The freshest ideas you ever have are the ones you present to the client, where you are on your best behavior, you're doing your best thinking, you're taking a risk. And that's because you don't have the account yet. There's nothing to lose here. You're just out there playing with house money. Nobody expects you to win, you're plus 21, you're going to lose this game like you got nothing to lose. And that's why you take all these risks at the beginning. And then you get the thing and then your whole mentality changes and now you're holding on to it. Meanwhile, there's somebody in the bushes over there. It's going to be nine months from now or 36 months from now who's going to come in and they're going to do the exact same thing that you did to the other firm. And if you are not continually leading with a point of view, you have to be willing to lose this thing at any point.  DAVID: You talk a lot about how not needing to get something is one of the most powerful perspectives you have in new business. Not needing to keep something is one of most powerful perspective you can have in client service as well. Having a point of view, I don't mean being an ass, I just mean really being an expert and not being afraid to have that perspective. BLAIR: And so you're talking about bringing fresh ideas to the table the way you would if you were competing for the business, where you're trying to unseat somebody else. DAVID: Yeah. BLAIR: It seems to me, this speaks to this you know the death grip that we just talked about because you win the business and then a loss aversion bias kicks in, where we essentially value the potential of losing something about twice as much as we value gaining something. So we get racked with fear over losing the account. DAVID: Yeah. BLAIR: And you're saying, let's let go of that fear. Keep bringing strong point of view, keep challenging the existing thinking and conventions, even if the existing thinking that you're challenging is thinking that you brought to the table initially. DAVID: Yeah. Exactly. Like, "You know what? Uh - we were kind of wrong there." BLAIR: "I know you paid us $2.5 million to implement that wrong idea, but it was a mistake." DAVID: Yeah. We need to be a little more reckless here and it's okay. That's what I mean by that point. And you know your clients are always asking you to do zero-based budgeting, which simply means don't add 3% to what you did last year, start over. Like re-justify everything you're doing from a budget standpoint. Well, we need zero-based ideas as well. Are we really going to do the same thing we did last year? And your clients that are protecting a position are nervous about change. The ones who are not protecting a position, they've got less to lose. That's the perspective you got to have I think. BLAIR: Okay. So one on your list is do what's best. Two is lead with a point of view. I've already written down zero-based ideas. I'm going to tell people I wrote that. I've already tweeted it. Now we're getting to the provocative stuff. What's next? DAVID: Offer a resignation whenever there's a CMO transition. BLAIR: Boom!  DAVID: Yeah. I really believe in this one. And it's not my idea. Tony Mikes had this many years ago. My first time I heard it, I was like, "What? Tony, what are you smoking or drinking? This is crazy." So you've got this account, you won this account a while ago, you've been doing work for this client and then there's a change at the CMO. So the boss person that you're going to be answering to ultimately is new. And you go in to keep it mode. Like everything we need to do. And I'm saying no, go on the other way because you've got new CMO. She wants to put a stamp on the agency here. And the former CMO was fired for a reason. And if the head coach was fired then it's possible that the assistant coaches need to be fired too and the trainer. And so there's suspicion about this relationship you have and they're not sure they really want to inherit that. And everybody knows that, but nobody necessarily wants to say it.  DAVID: So what you do, a few days later, you write a letter. I really mean this. A real letter and you hand deliver it and say, "Here's our resignation letter. It's not that we don't want to work for you. We really do want to work for you. In fact, we think that, from what we know so far, the perspective that we're hearing from you, we might actually be able to do better work. These are some of the things that we wanted to do and we were held back from them. And here are some of the mistakes we made, here's what we did really well. But we do not want you to feel like you've inherited this relationship. If you would like to keep working with us, please let's do it, but we just want to make this easier for you." You hand them that letter and then walk out. What have you got to lose?  BLAIR: Yeah. This happens at high levels of government and even some corporations where it's, "You're hired, now give me your undated resignation letter." DAVID: Yeah. BLAIR: I think it's a fantastic, really provocative idea. I tend to stop short of actually like handing over a letter and just having the direct ... So you're one-upping me here. DAVID: This is the first time I've been more ... These are the kind of silly ideas you come up with all the time and I cringe and here I've come up with one that makes you cringe. This is a first. BLAIR: Well, clearly you're wrong then. Clearly you've overstepped. Yeah. But I think the spirit of it, absolutely, I fully agree. I think you don't go into a defense mode, you say to the new CMO, "Listen, we'd love the account. There's things we weren't able to do. There are mistakes we've made. Part of us is really excited about the opportunity to do these things we could never do with you, but I understand you might want to bring your own people in. If that's the case, just let us know. No hard feelings, it's just business." DAVID: "And we'll provide a very smooth transition for you, no hard feelings." I think that's an important part of this too. BLAIR: Yeah. What's next on your list? DAVID: Next is to speak, blog and podcast together, whatever the things are that you do. For one thing, if you're having trouble getting speaking engagements, it's a lot easier to get them if you kind of co-speak with a client because this association putting on this event thinks you're going to stand up there and just sell your services. But the person paying the dues is your client and the client is well-known and there might be a great story to tell. You, recognizing that business is personal, a lot of personal elements here, I think it's really useful to build a relationship that way. So do what you can to not just help the company itself, but to help this person's career, whether that's introducing them to be on somebody else's podcast or speak at some event, but just the personal bonding at a high-level. This isn't about the lower implementation kinds of stuff you've done, but talk about how you've approached things very differently. And I don't mean in a gratuitous way, a silly sort of way, I mean genuine. DAVID: If your client is an idiot, don't do this, but if your client is intelligent and they have something to say and you wouldn't be embarrassed being on the stage with them, then I think this is a fantastic way to build that bond.  BLAIR: Now, when you said podcast together, I imagined a client and agency principal actually launching an ongoing podcast together. And now, wouldn't that be interesting? Because at some point, that relationship's going to end. So I would listen just for the inevitable train wreck. DAVID: I had not thought about that.  BLAIR: Like this one, right? DAVID: I hear the train coming. That's a really interesting idea. Yeah, that's not what I envisioned but wow. Yeah, that's even riskier than handing a resignation letter. BLAIR: Yeah. That could be horrible. It could be incredible too though, right? DAVID: Yeah. It could.  BLAIR: Breaking up on air. All right. You got a couple more things on your list. I think we've got time to do both. What's next? DAVID: So an annual off-site planning with their team. This overlaps a little bit with what you talked about. I just think there's something to be said for and it needs to be off site, if possible. I've got clients who charter a plane and go to a place in Montana and they have this for a day and a half. So there's a a mix of social bonding, but also really serious planning and obviously this bonds both parties together, but it also gives you a clue to everything they're planning, even if it doesn't necessarily involve you. It gives you a chance to see you where you can worm your way in. It gives you an idea of what services you might beef up overtime and so on. So that's the fifth idea. BLAIR: What about an annual event called, If We Were Pitching Your Account. You know back to an earlier idea about leading with a point of view and the need to keep bringing fresh ideas. DAVID: Yeah. BLAIR: There's an interesting concept there. You could have another team in the agency, if your firm is large enough, come in and try to dislodge the current thinking. You could have fun with that. DAVID: Oh, you could. And something else that would work really well here is - presuming that you are focused and your clients share some similar characteristics - gathering your clients together on an invitation-only basis once a year too is a fantastic experience. They're going to stay around and talk about that forever. Like a round table.  BLAIR: We should do a podcast on using events to drive leads. DAVID: Yeah. Once we figure that out. BLAIR: Well, we've got some clients who have figured that out so maybe we could take credit for their work. All right. So we're talking about core ideas to grow an existing account. You've got one more thing on your list. DAVID: Yeah. And we've kind of touched on this, operate to win and not from a fear to lose. I feel like, and you've talked about this a lot, the fact that the relationship is going to go downhill is inevitable. It's just a matter of time. That's the only variable here. So we've probably beat this one to death, but just don't fear losing the account. You know where you see this happen the most is when somebody slowly develops a client concentration problem. So the client becomes too big. And inevitably, I've never seen this not happen, when you have a client that gets too big, you end up with a client concentration problem because you're afraid of losing them and you quit leading and that's exactly what you shouldn't be doing. So enough of that. BLAIR: So we're talking about ideas to grow an existing account. I led with the idea of the account conference and then I'm just going to read off your list: Do what's best for the client. So don't grip everything so tightly. If it makes sense to send work somewhere else, send it somewhere else, including in-house. Lead with a point of view. So bring that strong point of view to the relationship, throughout the relationship - the one that you brought right at the beginning when you're trying to win the business. The most provocative thing on your list I think is to offer a resignation at every CMO transition. Then speak, blog and podcast together. Create content together and essentially get the client's endorsement of your work. Consider an annual off-site planning with the clients team. And then operate to win and not from a fear of losing. And that last one is really kind of a recurring theme throughout. That's really the death grip that you talked about at the top, isn't it? DAVID: Yeah. Absolutely. And it kind of wound its way through everything we talked about. This has been really fun. BLAIR: Yeah. It has been fun. As you pointed out at the top, it really is a new era from what it was 10 years or so ago. Those skills of growing existing accounts are even more important now in the non-AOR era than they ever were. So I think this is a really valuable topic and hopefully we've given the listeners some ideas. DAVID: Yep. See you in Australia I guess, huh? BLAIR: Oh yeah. Right. I'll see you in a week or two. That will be fun. Looking forward to it. DAVID: Safe travels. BLAIR: Likewise.

24 Okt 201831min