Why do Business Development in 2012? 2013.

A great deal has been written recently about the status of marketing with mass media fragmentation, CMO confusion and lack of agency leadership. It’s a brand new world for the industry and the companies that move forward with focus and conviction will win.

The 4A’s New Business Activities and Resources Survey Report for February 2012 was recently released and it included some fundamental insights to find that next big client. Since I spend my days leading business development for a digital marketing agency, I’ve highlighted a few of the data points that are critical to #winning.

TAKES SOME MONEY TO MAKE LOTS OF MONEY.

Reported as % of gross income, the aggregate investment in new business income was comparable across all agency size groups and agency service types. While that’s not all that interesting, what it does outline is that agencies of all sizes (note: they are segmented in 4 groups by # of ppl) spend on average between 1.5%-2.5% on new business (non-billable) expenses. It’s most interesting to look at <100 subset since many of those agencies operate on close to a cash accounting basis which means it takes discipline in deal sheets, time management and profit margin on existing work to not deplete the resources required to compete. Many agencies don’t allocate and reserve resources for new business other than ‘what can we afford this month’ which lacks the discipline, foresight and planning required to target new clients and communicate to them in a relevant way.

Speaking, here are the venues to do just that.

HUNT. THEN HARVEST.

It should come as no surprise that the methods used for different sizes of agencies vary widely based on their offerings. However, the perfect storm for every agency is highlighted in this chart and detailed below. The plan is the science. The pitch is the art. More on that next.

• Client Networking and Industry Events: Select an agency position. Craft a POV. Target verticals/categories/clients and then go find them in their natural environments. There are lots of nouveau shows (SXSW, All Things D, etc) and the old, crowded ones (CES) but one thing is certain: you must activate them with a strategy to make introductions. Good biz dev people know how.
• Website: Show the work. Show the work. Show the work. Rinse & repeat. Every agency has tons of experience, A+ leadership with fancy titles and long histories of client work and a new ‘next generation’ model. Prove it by showing the work with results.
• Direct Marketing: Consultants and/or potential clients – deliver consistent updates to the different segments with a combination of thought leadership, PR and recent work/client wins. Newsletters, personalized emails, press releases, awards – all of it matters and should be communicated to the masses. The key is consistency to enable the 3 phases of ‘know, like, trust’.

SAY SOMETHING (NOT JUST ANYTHING).

Crafting the agency growth strategy + value proposition and then delivering that message is serious stuff. Brand Ambassadorship is not to be taken lightly and it’s clear based on this data that smaller agencies rely mostly on executive leadership to handle that responsibility. Larger agencies have the manpower and resources to staff the department and chase big budget RFPs.

My philosophy on creative agency new business is that it’s best done by someone who both works with current clients and also has the time to plan and chase that next client (see above). The reason why is that its very difficult to sell work and POV when the business dev people don’t know the story behind the work. The art of the pitch isn’t in credentials and client rosters. It’s in telling stories about clients and work that begin with challenges and end with insights and results. It’s very difficult to do if Mr./s is always setting up that next meeting. Collaborate and share responsibilities as a senior team with clear accountability on revenue goals for both existing and new clients.

Biz Dev: Customer Acquisition vs Retention

In business school, you spend significant amounts of time evaluating the long term value (LTV), market size and break-even (BE) of customers in order to better assess revenue streams and budget allocation. The exercises are valuable to every company that sells a product in a developed market. Yet it’s always interesting to see how companies forget the last the product they sell: Loyalty.

The unfortunate reality becomes obvious upon reviewing corporate structures and leadership hierarchies as often times customer service falls somewhere beneath the sales department. And by beneath, I mean very near the bottom of priorities. Sales teams are motivated (and compensated) by the sell-in to retail and the sell-thru to customers. They are not rewarded by short hold times or positive customer surveys. Some data to support it:

• 9.5 minutes are spent on average trying to reach a human when trapped in an automated phone system
• 61% of consumers take their business to a competitor when they end a business relationship
• 71% of consumers have ended their relationship with a company due to poor customer service
• Globally, the average value of a lost customer is $243
• $83 billion is the cost of poor customer service in the US
• 65% of Fortune 100 global companies utilize @Twitter to engage with the world
• Companies focus on acquisition more than customer retention, even though it can cost 7x more to acquire new customers
• 63% of marketers felt that new customer acquisition is the most important advertising goal

These numbers are staggering. How could customer retention become such an afterthought? In a world of online customer reviews and powerful social networks, why do companies continue to focus only on acquisition as their primary business development strategy?

(Thanks to my friends @KissMetrics for the data. See more here.)

The (Perceived) Career Cul-de-sac of BD (Rant)

I wrote here a few months ago on the principles of biz dev as it pertained to the values and patience required to help any business development person be successful. As someone who’s been on both sides client and agency, it’s easy to see why business development is seen by clients as sales and why agencies view the position as well, sales.

I am not on the fence about BD driving sales. They should be at the front lines with clients and customers. That said, I believe they should be equally challenged and focused on the business strategy as the execution. I am surrounded by all sorts of talented and motivated sales people in business who work for the world’s largest technology companies. These guys are into the management of global sales teams and hitting ‘their quarterly numbers’ and moving units and well, you get it. I applaud them. It’s aggressive.

And yet I know thats only one dimension. Much like I’ve highlighted prior, there seems that there aren’t many good business development people out there. Either that or they are in high demand. Based on these results, I bet the latter. The primary reason this comes to mind every so often is that I get an increase of inquiries from headhunters wondering if I am interested in interviewing for various positions. And most often the answer is no. It’s often not because of the position or the company – its because of the description. See there is a very close relationship between job success/failure and the expectations that are set at the beginning. If the position is well-defined in an organization that has sound values and requires accountability, its usually quite clear what success looks like and leadership knows it when they see it.

My point: Leadership, human resources and/or the job search community have a responsibility to develop accurate, detailed and  highly targeted job descriptions. From startup to Fortune 50, people fail at their jobs often not because they aren’t capable, but mostly because they don’t know what success looks like. Good business development people are highly focused, social and motivated experts who work in organized and methodical ways. They understand the network, class and fortitude it takes to lay the groundwork for the future sell. And they should require agreement of method, timing and discipline in similar fashion from those with whom they work.

The Emerging Markets Parallel – Part 1

The Next Frontier

Emerging markets have become the sexy conversation throughout boardrooms and business schools worldwide. As global brands look to take advantage of high growth markets that include China, India, Russia, and Brazil, they attempt to evaluate which countries economics best fit their brands. The intent is for brands to find yet to be tapped new customers which increases adoption, lowers costs, speeds innovation and facilitates GDP growth. Fair to say thats its a high-risk, high reward proposition.

As detailed in the book Winning in Emerging Markets, the object of all things emerging is to converge buyers and sellers via information share that promotes the mass growth of the consumer middle class to access such goods at a reasonable price. Scarcity demands higher prices through reduced supply and the hope is to build mass revenue with mass access. The biggest challenge is that these markets have resisted prior growth due to a broader macro structure that lacks the infrastructure (labor, capital and product markets) to create the platform.

Sound familiar? It should. Global brands apply the same logic in the hot pursuit of leveraging the next frontier of emerging technologies.

Every day, we wander into business, retail and digital environments that have yet to build a critical infrastructure to develop innovative products. This is not about Best Buy selling the best gadget or developing an iPad app. It’s about big brands finding emerging tech to build experience. Think of Virgin America integrating interactive social gaming via RED or the GAP developing an avatar fashion business to create secondary revenue streams. Commentator Fareed Zakarai sees emerging markets as the ‘rise of the rest’ as a transformative, tectonic shift in the distribution of global power. I believe the same can be said for emerging technologies.

Very few business and industry are similar (much like emerging countries) and each have to evaluate these decisions with strategic goals to get to the bottom line. Here’s the place to start:

Replicate or Adapt?
Integrating first time technology is expensive and time consuming. It requires courage and patience to test how the market receives it. The ability to transfer models that have been proven in different arenas, especially those with institutional voids, starts with research and ends with intuition. Build profiles of consumers that specifically correlate to early adopter status and employ the granular knowledge base to interpret such data and react. The tech might already be in another industry (see: the Proliferation of Pandora) or they could be something completely new built for your customer.

Compete Alone or Collaborate?
The benefits of partnerships are obvious and need not be reviewed. However, two additional points should be made: (1) local environments of technology adoption should be viewed as highly important and deserve specific expertise for integration. The technical prowess to anticipate first time integration problems will reduce significant delays and painful learnings. (2) Bigger brands bring capital, talent and economies of scale that small brands need. Both have a very important seat at this table.

The primary reason for competing alone is to protect intellectual property with the intent to completely revolutionize a category. That’s very often a goal reserved only for those with large capital reserves (or tremendous hubris). There are exceptions but not many. Which leads to the next point…

Accept or Attempt to Change the Market Context?
Emerging technology without assessing its environment is destined for failure. Pandora’s iPhone app catapulted it from small time internet service to the face of new radio. Why? Because of the user platform and right delivery. Same can be said for Virgin America. They developed a first to market hardware interface supported by an on-board experience that delivered on what customers’ wanted. Its fair to say that RED is not nearly as impactful without the dim mood lighting, ambient noise, credit card integration and progressive video content.

Enter, wait or exit?
Where ideas meet dollars.  Its an easier decision for big companies since they have more capital to spend, assume more risk for failures (most notably lost customers) and have alternative revenue streams (see: Google/China). Startups often have one shot. One thing is certain is that transaction costs to adopt emerging technologies are high and those that best make these decisions will generate sufficient initial barriers to entry for their competition.

The opportunities of globalization in both market expansion and technology adoption provide exciting (and inevitable) opportunities for those companies willing to accept the inherent risks. Stay tuned for part 2 as I asses the specific role of product innovation within this parallel.

*Footnote: I’ve reconcepted subjects from Winning In Emerging Markets to broadly apply to emerging tech products (versus countries). If you are looking for a great book on Emerging Market Economics (for countries), I highly recommend.

Hacking Our Way To The Future

Reinvention is not new. Taking an old idea and creating a better, faster, cheaper version is called capitalism. And its what technology is doing everyday. Led by a generation of young developers, the syncing of devices, software and buyer behavior: enterprise and consumer is creating endless business opportunities by disruption. Its aggressive. And it will save our economy.

Macroeconomics says that if a company grows in perpetuity faster than the economy, it will eventually become THE economy. Its fair to say that many of the leading tech companies of the past year believe they can become the new digital economy. Dream big and see what happens. We are all witnesses.

This type of orderly chaos (aka disobedience) is what makes product strategy (what I do) interesting. Find opportunities, reinvent them and then see what works. Incubate, aim, fire and measure. Over & over & over. I’ve outlined three areas below of interest to me that remain the frontiers of innovation for hackers. These are the corners of technology where innovation-hungry, opportunity starved companies will focus on to bring new ideas to life in the near future.

MOBILE AS A PLATFORM
Its assumed Verizon will join forces with Apple in the coming year with a iPhone derivative to then have a share of the two largest mobile platforms. That’s big news considering they employ completely different playgrounds.  Apple is closed. Android is open.

The data:

• Apple has shipped 47 million iPhones in 2010 and expects to ship 21 million more in Q1/11
• Google Android adoption is projected to grow 51.2% from 2010 to 2014 despite the fact that most enterprises have no plans yet to support this platform
• Android went from 30,000 activations per day to 300,000 in 2010
• Near a half a billion smartphones are expected to be sold worldwide in 2011

What does this all mean? In short, smart phones will become the primary device worldwide to access the Internet, which will drive down prices creating more usage and bring down wireless data prices as well. Mobile consumption will rise bringing more attention to creating a reliable, scaleable application platform. DIY apps will level off in the coming year as the focus becomes how to the build the best cross-platform mobile development tools.

UNIFIED COMMUNICATIONS (UC) DEFINES USER BEHAVIOR
Bringing together chat, email, messaging telecommunications and video isn’t a new concept. But with the dedicated resources of Apple, Cisco, Citrix, Google, Microsoft and a few others, the race is on. Various companies began setting this table with M&A a few years ago and now software leads and hardware is following.

The data:

• Apple reports that sales of its new Apple TV will hit the one million mark by end of 2010 –  remarkable for a device that was just released in October
• Integration with the iPad, iPhone, and iPod Touch may also have appealed to the first million; all can be used to control Apple TV via the free Remote app
• Vizio, Sony, Logitech (with Google), Plantronics among many others each launched UC devices in 2010. Look for social and cross platform integration to be all rage in accessories at CES.

The fascination with UC is paid for by the enterprise space and made interesting by consumers. B2B technology is driving work efficiency and cost cutting measures in Corporate America while consumer electronics bring Facebook, Pandora and Twitter to your TV screen. And sync it with your Bluetooth headset. And then allow you to access it in your car.  While it might seem like just more noise, engineers and developers now need to be adept at building and scaling applications on numerous devices.

THE TABLET AS THE DEVICE
New e-readers seem to launch on a weekly basis throughout 2010 and that will continue as we near CES in the coming weeks. Yet no one wants to become the ‘betamax for books’ and that means the device war will come to an end. Convergence doesn’t mean more devices and the jury is still out as to how consumers will integrate the tablet, yet we can’t ignore that the tablet has become a very powerful tool for innovation.

The data:

• One out of every five Americans plans to own a tablet by 2014
• E-book sales almost doubled in 2010 and make up 9% of total consumer book sales
• The third-gen Kindle surpassed Harry Potter and the Deathly Hallows as the bestselling product in Amazon’s history
• The tablet computer’s share of the PC market may rise to 9.2 percent next year, based on 402.7 million PC shipments in 2011

Only about 3% of the current U.S. population owns a tablet of any sort – yet the POSSIBILITIES in publishing, gaming, entertainment and user-interface have created a worthy buzz. The yet to be solved tipping point is when companies can devise a business model that monetizes and deliver fresh, interactive content at a sustainable price that users will buy. From newspapers to books to music to video, the evolution from commodity content to proprietary access via search will be where the tablet (and entrepreneurs) find the future.

Citations:
Facebook Forecast 2011 Mobile e-Commerce
Monday Musings: How the 5 consumer tech macro pillars influence enterprise software innovation
http://www.fastcompany.com/1711425/apple-tv-hits-one-million-sales-this-week
http://www.fastcompany.com/1711439/a-demography-of-the-ipad

The Way Product Dev Should Work

“You can tell when you’re working with people who love music as much as you do because there’s an excitement to it.” - Mark Ronson

Whether its an album or device or an interface, the process for development is creative and collaborative. And should be valued as such.

The Value of Human Capital

Circa 1979

Last week I traded emails with a good friend of mine who works for a hedge fund on the financial intricacies of large University endowments. The genesis of our conversation came from this NY Times post on If We Should Invest Like Harvard. To clarify, Harvard is one of many private and public universities that invests a substantial amount of it’s endowment with hedge funds. Like the rest of us, these schools recently suffered some of their worst losses in history, but the principle stands: these guys know what they are doing.

Harvard’s fund stood at $25.9 billion in 2005, more than five times its $4.7 billion level 15 years earlier…(it) averaged gains of 16 percent a year in his last decade. Among the biggest U.S. endowments, it trailed Yale University, in New Haven, Connecticut, and Duke University in Durham, North Carolina, which averaged 17 percent. (site)

When we got into discussing how these schools have created such enormous stockpiles of cash, the same point kept coming forward: its not just about the capital. Its about the people running it – which is the basis for any service model looking to create value.

My friend went on to further explain how these firms have raised the capital and smartly managed it for long term returns. They use disciplined and patient mechanisms to evaluate smart investments with clients who trust them to make the right decisions. Yes, hedge funds have brilliant PHD’s from prestigious schools and a long history of investing experience – but thats not what distinguishes them from other each other. What does make them different is two things:

• ACCESS: To quote Groucho Marx: “I don’t care to belong to any club that will have me as a member” – the same stands for great businesses who carefully select their clients. They don’t just take anyone’s money, they look for the right type of clientele who believe in what they are doing and have the patience to prove it. Its a 2-way street and unfortunately most businesses aren’t willing to show the discipline to say no to some business because its not aligned with their core values.
• PASSION: Most of the market knows pretty darn close how Harvard does it – almost down to 1% of their asset allocation (ie they know exactly how they invest). And yet thats not good enough. And its the same in every other service model. From customers to clients to consulting, the process isn’t the mystery. Its about the access to best and brightest people who achieve the highest net returns (notice I didn’t say the cheapest). Its about finding those people that aren’t worried about hiding in process or behind the institution but rather delivering breakthrough work that challenges others to emulate you.

My head space has recently been consumed with where startups succeed and fail. When you ask VC’s what makes a business plan exceptional, they answer the list of people on the back page. Every smart business has conceptual ways to monetize and almost every time, they pivot when the market responds (or doesn’t respond). There are all sorts of metrics to evaluate risk (Monte Carlo, anyone?) yet the decision ultimately is made by people. And thats the value of human capital.

Treasure Islands Treats Social Innovation

Treasure Island Music Festival

As a bit of a music festival fan, I’ve come to really enjoy good music in the outdoors in a generally socially policed environment. Its good for the soul. And it usually allows people to do some of their favorite things: dance, drink and hang out with friends outside. Increasingly, its also allowing people to share that experience with those that can’t be there.

My point: the ongoing tech innovation hasn’t just shaped music, art and how we share it – but shaped how we enjoy it.

I had the good fortune of attending the Treasure Island Music Festival on Saturday to witness a number of good DJs, bands and festive people enjoy a cold, but sunny day and night. The festival was supremely organized with constant shuttles running from the SF to alleviate the parking issue caused but such a secluded little island. In typical SF fashion, good food, merch tents and clean outdoor toilets were even provided. Its all about the little things.

Yet the reason I was profoundly struck by the crowd was the very casual yet progressive integration of innovation from its attendees. There were the usual CE sponsor tents allowing people to hide from the wind trying their new toys yet it was the cameras, TVs, phones, headphones (Silent Disco, anyone?) and video recorders as part of the experience. You had people watching the Giants games from lawn chairs, stages were people danced all together listening to headphones and the constant pictures of bands, friends and those on the fringe everywhere.

No doubt much of this footage will end up online being passed around between friends and really, thats the point of all this social media: To share experience. For those of you that couldn’t make it from those of us that did, we bring everyone a little closer through the gift of technology.

AS ALWAYS, MY POINT IS TO WRITE THESE POSTS A FEW TIMES PER WEEK IN LESS THAN 30 MINUTES EACH. THEY ARE SIMPLY MY WAY OF PUTTING WHAT’S ON MY MIND ON PAPER. APOLOGIES FOR THE TYPOS.

Email is a Technology. Not the Savior to Acquisition.

UPDATE: I have reposted this from awhile ago since it seems more relevant everyday. Email is for loyalists. Not awareness.

In light of all the economic drivers pushing marketing budgets south yet with raised expectations for delivery, I want to confront the assumed easy route to marketing awareness: the email campaign.

The genesis (and genius) of email was to distro shared data files with short pieces of actionable information. This remains its most effective use. Yet, the email campaign has assumed the responsibility of actually doing the marketing for clients – instead of providing the information-share medium. It’s a classic case of false identity.

Below are 5 creative ideas to use email correctly and drive business development. Important to note: these tips are designed to help modify how you use email – not confirm its the preferred (or only) medium.

#1: The Premise: Make everything B2B
You are selling something. Your list better be interested in buying it (if not – your attention should be on list development). So it’s a business transaction. B2B communication is more direct because it assumes knowledge and need of the product. Its why average click rates of B2B emails are 20% and B2C rates are um, not. Email campaigns are not for awareness. They are for conversion.

#2: The Content: Need to Know Vs. Nice to Know
Email provides a valuable tool – information share. So share it. Send information your customer base MUST know. This creates a dialogue of RSVPs, appointment times, and inquiries about directions, delivery dates and pricing. From window washing (services) to widgets (products), your dialogue starts here and it works.

#3. The Dialogue
Driving real-time messaging based on online (analytics, SEO, competitive announcements) and offline information (cultural news, sales information, tradeshows, retail, etc) confirms you are listening and drives credibility. Police and respond to your customer’s behaviors daily. They will notice and find you as a credible resource. Proof: customers are trending to blogs for product reviews and not magazines for this reason.

#4. The Call to Action: Time Sensitive
The last and most straightforward – but oft the most misaligned – is the call to action. Develop time sensitive incentives such as price promotions, response rates, and reservations. The first 10 responses to this email receive a Starbucks card. A 10% discount. Free shipping. Make it attainable and consistent to generate open rates for your emails.

#5. The Follow-Up: Customer Service as a Product
There is lots of research and analysis on the importance of customer service. Not sure why AT&T has figured out but that’s me & my Iphone’s issue. Whether my cable is down or I need to buy a home, use email as a preferred medium. Consumer information confirms we prefer it that way. That’s called a dialogue (refer to #3) and will drive the most effective and cheapest type of growth – the organic kind.

A Principle Isn’t A Principle Unless It Costs You Money

Within the past year, the economy has forced companies to evaluate where they are making money, often killing the most creative projects for those that drive revenue in the short term. And this rational has also extended to the workface. The unemployment rate (and Obama’s SOTU) is a clear indication that companies continue to trim the fat to save the bottomline – and I agree that for the most part, companies were overstuffed and slowed by too many layers. Yet there is one position that is very high demand right now:

Business Development

From advertising agencies to technology companies to financial institutions, everyone is looking for a biz dev person to drive inbound interest.  Here are a few examples all posted in the past 10 days on LinkedIn.

Digg – Director of Business Development
Yahoo – Senior Business Development Manager
Pandora – Business Development Director
Paypal – Senior Business Development Manager
Palm – Senior Business Development Director
Vook – Director of Business Development

Yikes – an amazing list of  high powered, progressive companies needing help. As a biz dev consultant, I get weekly calls from headhunters, agencies and clients looking for the right person. And consistently I find major issues in these  principles that rule out opportunities.

Here are four successful principles for any organization looking for long-term, measurable success from their business development leaders. Notice that they require financial and time investment in the upfront to pay off long term.

1. Just Because You Exist, Doesn’t Mean Your Relevant
The irony of most companies is they spend an intense amount of time thinking about a product, its technology and competitors without thinking about how their brand is selling itself. The same goes for agencies. They sweat over their clients business without having any regard for what it says about their own business. Creating a brand that someone can SELL needs one thing: relevant distinction. It sits at the cross-section of vertical experience, target understanding and category point of view.  You can prove it. Most businesses either won’t admit what they stand for or constantly change it. When it comes time for contract, you can’t fake it. Your work and lack of knowledge exposes you.

IMPORTANT SIDENOTE: Management teams must completely and totally buy-in. A divided leadership team will be the sole reason a company fails to be exceptional.

2. One Discipline Always Leads to Another Discipline
Once that distinction is created (and agreed upon), have the focus and desire to keep selling that value proposition until you find a buyer. Don’t compromise. It might cost you money in the short term, but it will be your platform at a premium in the future. If you are sitting in meetings and you tell potential customers what your firm does and they look confused, you need to evaluate your pitch. Not your position. Countless clients suffer from RFP ADD because they want to chase revenue yet likely have no chance of winning – wasting company resources, valuable time and most of all, sacrificing employee morale when you lose.  Have the tenacity to create prospect criteria and chase passionately.

3.  Regulate Revenue
The health of new business thrives in 2 areas of growth: acquisition (new customers and/or M+A) and organic.  Determining how to best allocate resources to these initiatives should be evaluated with one eye on margin. Sacrifice accounts that demand constant service but don’t have the orders to justify it. It’s a slippery slope to be motivated by only what is selling today but focusing on the 20% of business that creates 80% of the revenue is wise. Use additional resources to find similar opportunities. The most talented new business people feel biz dev is a career cul-de-sac not because of the intense pressure to win, but because of how siloed their position is. Involve them not only in acquisition but current customer growth and ways to maximize profit. These people know how to sell the company – involve them in running it.

4.  Patience to Execute
Most often, biz dev teams are non-billable overhead to organizations, which means they seem expensive. Regardless of the market dynamics involved, new business needs the principle of patience to succeed. Yes, it might seem costly in the short term but all it takes is one. Developing market positions, evaluating industries, creating criteria and executing takes time. Inbound calls don’t happen overnight. They also don’t happen just because of strategy. Shame on leadership for trying to shortcut the process by attempting to buy a rolodex. And shame on the paralysis of many business development people who won’t chase. New business isn’t a game for those content with today but it shouldn’t be expected to deliver everything tomorrow.