Your intellectual capital strategy must transform your core capabilities and knowledge into a compelling POV and real tangible client value.
Audio: You’re listening to Rattle & Pedal, divergent thoughts on marketing and growing professional services firms. Your hosts are Jason Mlicki and Jeff McKay.
Jason Mlicki: Hi, Jeff. We were working through the five Ws here. We started with why, why intellectual capital matters. We went to what, what is intellectual capital? And now we are going to how do you develop an intellectual capital strategy? That’s the topic today. I guess I should preface that by saying, “It’s not how you develop a strategy, it’s how do you develop an effective intellectual capital strategy,” which is what we really made the case for last time. So, all right, go! That’s all I’m saying tonight. That’s it.
Jeff McKay: Fill in the blank.
Jason Mlicki: Fill in the blank.
Jeff McKay: Boy. Well, before I move forward, how about a quick summary of what we’ve talked about up to this point? Because I think it’s really important. If the purpose of marketing in an expertise, knowledge-driven, professional services type of firm is to communicate the value you provide to the buyers who value it in the most cost-effective and timely manner, then that, to me, dictates that you understand those components. And we’ve kind of beaten that up. Then we talked about what are the components of an intellectual capital strategy vis-a-vis all those other strategies that exist in a firm.
Jason Mlicki: [crosstalk] strategies.
Jeff McKay: We talked about where the shift needs to occur, that there are these parallel paths of the intellectual capital agenda, if you will, that are focused on demand creation. And generally, most firms stop at just building awareness of the firm. And we talked about [Big B]. But really, that demand creation has to go all the way down to sales and make sales more effective, right? It needs to actually drive revenue, not just hover up here and try to create some nice halo effect with the rest of the firm running around underneath it, trying to find some application for it. Then the second part of the intellectual capital strategy has to look at supply creation. So understanding the market and the issues and the creation of solutions, and I say solutions, that’s a catch-all for products and offerings and I would even say tools, and I’ll explain tools in a second, in how intellectual capital gets applied.
Then finally, how we deliver the service. I always tell my clients to keep in mind that how you sell me, is how you serve me. That’s the mindset of any prospect. They’re formulating an opinion about what it’s going to be like to work with you from the moment they come into contact with you. That’s why this is so important to drive this all the way down to client service delivery. Let me say this, as we outline how do you develop this strategy, it goes on the assumption at this point, given our other podcasts, that certain things. Those certain things are one, you have a very clear understanding of your core capabilities and the value that you provide and that you understand who your ideal client is, that firm or buyer that values that value.
And we beat that up, I think, pretty significantly, because you don’t want to be selling strategic solutions for IT to a buyer and an organization who doesn’t see IT as strategic, simplest example. You want to be aligned with clients that share your point of view because, in its very essence, intellectual capital is the way that an organization shares its point of view. Buyers want to hear how you think. The clearer the point of view, the easier it is for them to understand who you are and what you do. That point of view is going to be a combination of your core capabilities and how you think. But also that intangible that we talked about that really sets the great firms apart, that culturally-driven how you show up. That point of view to me is the one-to-many perspective of how you show up. The trap that firms fall into is they parse out their words around their point of view because they don’t want to alienate anybody.
They don’t want to take a stand on anything, because they don’t want to limit the market and turn people off, when the fact of the matter is you’re turning the market off by not having a clear point of view. And my feeling is if you’re listening to this podcast and you don’t believe that, then you don’t share my point of view. And we would probably not work together. But that’s okay. But you have to have a clear point of view because everything that cascades down from the intellectual capital agenda is coming through that point of view. We look at the market, with these core capabilities, we see these problems that we can apply our core capabilities to. And here’s our point of view about the best way to solve those problems. That’s what intellectual capital needs to make clear to the market.
Jason Mlicki: Let me pause you for a second because I’m drawing a flow chart and a model, as we speak. At the top of the model I have a box and the box is, there are four things in that box. It’s the definition of the ideal client, problems that they face, the opportunities that they seek, or you might be able to help, which I think derives topics and leads to a point of view. That’s the master box. Then underneath that master box, once the point of view is defined, you’ve got two tracks. You’ve got a demand track and a supply track, is the way I’m hearing this. The demand track defines all the things that are going to come into the marketplace to create content, or not just to create content, excuse me, create demand for the firm.
So it’s content and other things that need to happen for that point of view to be real in the marketplace and be understood and be relevant and create conversations. Then the supply track comes down to what are we going to actually sell and deliver? And how are we going to deliver it? Before I go further, check me, is that a good rubric for describing this?
Jeff McKay: I think it’s a fair one. It’s a good way of looking at intellectual capital and its specific purposes. In reality, it might not be two divergent lines. It might be a helix, where they’re intertwined, where demand and supply overlap one another.
Jason Mlicki: Well, let’s not go there yet, because now you’re just overcomplicating it like you always do.
Jeff McKay: Yes. Yeah.
Jason Mlicki: Keep it simple. My point in saying that is that I think about this episode and this is really all about how you develop intellectual capital strategy. I want you to pick a starting point for you. My starting point is we can look at this one of two ways. We can assume that the firm knows its ideal client and has an understanding of the problems and opportunities and the topics that they need to pursue. We can say that those things are already understood. They’ve been defined by maybe a firm strategy or some other strategic exercise. Now, the question is how you develop a compelling point of view and go forward?
Or we can go back upstream to that very beginning and say, “How do you get at the right topical strategy and at the right problems and opportunities that come out of the ideal client?” So I think in terms of thinking about and giving listeners some thoughts on how to develop that effective IC strategy, I’m asking you where do you want to start in that mix?
Jeff McKay: Well, let’s go up to the highest level and talk about a value proposition. And it’s the value that you offer someone. Everyone describes value differently. That’s why you need the ideal client. Value is going to take one of three forms at its highest level. And these are in business terms. I realize there are personal wins and stuff like that, that play out in the sales process. But at the highest level, clients are buying one of three value areas. The first one is growth, whether that could be marketing or sales or customer experience or some kind of technology that drives growth, the focus and the outcome they’re buying you for is more revenue or however they’re measuring growth. And we had a whole podcast on how you measure growth.
The second one is efficiency, investing in the things that make you more efficient, that drop more profit to the bottom line, and divesting of things that take away from efficiency. There’s any number of operational-related things in there. Lots of technology-related in there that take cost and time out of the system.
And then the third one is what I call financial performance. This is about lowering the cost of capital, making the financial engine, if you will, within the organization, stronger, better cash flow, higher amounts of working capital, access to cost-effective capital, inventory turns, accounts receivables turns. I mean all of those types of things. Those are generally the three overarching buckets. Then they’re going to cascade down into issues that prohibit the accomplishment of one of those areas. With me so far?
Jason Mlicki: I’m with you 100%. I wanted to comment real quick. I really liked the way you… Value proposition and ideal client, what comes first? I think they’re tied at the hip, right?
Jeff McKay: Yes.
Jason Mlicki: Neither one comes first. With this, they go hand in hand. And that leads to issues. Okay.
Jeff McKay: Right. So with my clients, at that very highest level we establish what value do you want to be known for delivering? Because you can deliver all of them. One might argue that they’re opposite sides of the same coin. But for the most part, if you’re looking at growth, you have a certain mindset. Of course, you want to grow efficiently, but growth is the primary driver. Within those value drivers, you have to decide. And this is again, we went back to our first conversation. You have to make some strategic choices. What do you want to be known for? So the value proposition, the brand positioning is around the value that you want to provide. You’ve got to pick one of those, maybe two, that you want to be known for. This, to me, is the starting point that most firms miss, is they don’t put a stake in the ground and say, “At its highest level in the unchanging world, we want to help firms grow. Or we want to help firms be more efficient.”
But you have to put some marker in the ground, because this gives you the true umbrella that is unchanging, that allows the intellectual capital agenda, as we talked about, to evolve into those peripheries outside of that core of the performance envelope. So go back and listen to that podcast. But this overarching value proposition encompasses the core and the periphery. It is the brand, if you will, outside of how you show up that you’re managing. Most firms really don’t think that way. It’s so simple. They just do atomized stuff and they don’t get the lift. We talked about, if you don’t have a Big B brand to build awareness, every exchange and interaction you have has to build a Big B brand. This gives you the scale to do that.
Audio: You’re listening to Rattle & Pedal, divergent thoughts on growing your professional services firm. Your hosts are Jason Mlicki, Principal of Rattleback, the marketing agency for professional services firms and Jeff McKay, former CMO and Founder of Strategy Consultancy Prudent Pedal. If you find this podcast helpful, please help us by telling a friend and rating us on iTunes. Thank you. Now, back to Jason and Jeff.
Jason Mlicki: Okay. So do you want to talk about the hows on that a little bit? If I can’t answer that question of value proposition, maybe that question is so root level and so simple it’s the wrong one. How would you suggest that firms go about answering it? If you want to skip ahead to issues, that’s totally fine. Because you know, like Jason, that’s pretty obvious. I’ve never dealt with a firm that doesn’t get that.
Jeff McKay: Well, almost every firm I deal with doesn’t get that. Our listeners aren’t alone. It’s not that they can’t get it. They just haven’t thought about it or they’ve thought about it, but haven’t made the hard choice. We did a podcast on value propositions. We can put that in the notes about how you create one of those. But you have to make a choice. You have to make choice on ideal client. You have to make a choice on value proposition. Otherwise, you’re just never going to get the scale and focus that you need. I just want to keep moving, because I don’t want to be professorial about this, pedantic about it. So out of that overarching issue, you’re going to cascade down into other significant areas. It’s in those areas you need to look at that align with your core capabilities and your value, where is there the opportunity?
In my model, I call this market opportunity. These are the areas for growth. So how do you identify an area for growth? One, the market is unserved and there’s a huge upside. There’s any number of ways to looking at the upside. Two, the issue that you want to solve and that you want to examine as part of your intellectual capital agenda is immature. People don’t know they have the issue, or they do not have their arms around what the issue and its ramifications are to them and their business. They need to more deeply understand the threat or opportunity associated with that issue.
Then the third is brand relevance. Do you have permission to play around that issue already? Or if not, what would it take to get there? What is the strength of your brand’s relevance or permission to play? If you’re thinking of a four square, up the left axis would be the maturity of the issue, mature, immature. Down the right side of the four square would be the growth. At the top would be high, the bottom would be low. Then along the horizontal axis would be your brand relevance. To the left would be low and to the right would be high. Depending on where a various issue maps in that four square is going to dictate whether or not you should be pursuing it. If you’re in the bottom left quadrant, where it’s a mature industry, your brand isn’t relevant and the growth opportunity around or associated with that issue is low, you want to avoid that like the plague.
Unfortunately, that’s where lots of people put their investment, thinking that somehow they’re going to move the ball. It’s a huge waste of money. You should avoid that bottom left quadrant at all costs, reallocate that money elsewhere. If you’re in the far right quadrant, where you have strong brand relevance, it’s a mature issue, but there’s not a lot of growth, and this is where you would find a lot of the cores of the performance envelope, you really don’t want to be investing any money in that from an intellectual capital perspective. What you want to do is have sales, be calling the people that know them, that know they have the issue and just be taking orders because your brand is strong. People know they have the issue. You just want to get your share of what little growth there is there.
Then the upper right quadrant, where there is high growth and your brand is relevant and the issue is immature, but you have permission to play, you should just be pouring on lead generation. And we’ll talk about what types of strategies you would do in that situation because I think it differs. But let me just round out the quadrants and then we can come back to that. The fourth is where I think most Big B brand firms think they’re playing or want to be playing. That’s an immature issue with lots of growth, but you have no brand relevance. So you have to make a decision about whether or not you can move the ball of relevance. This is why relevance is so important to driving growth.
Jason Mlicki: Ultimately, that’s where your intellectual capital, thought leadership resources are most likely going to go.
Jeff McKay: Depending on your business strategy and what your brand is. If you want to be an innovator and a leader and set the market, yes, that’s where you would play. But if you’re an order taker, then no, that’s not where you would invest your intellectual capital. If you’re somewhere in the upper right, you may use a somewhat different strategy to drive leads. If you think of the upper left as demand gen, the upper right is lead gen and the bottom right as sales or sales support as areas to focus on with intellectual capital, it would start to give you a little clarity. So this is the important part. I think this is what brings it together and where people fall down, if you will, in developing a strategy and executing it, is they don’t delineate along those three axes. But more importantly, they get stuck in the idea that intellectual capital is all demand gen. That’s the wrong way of thinking.
This is why I love the concept of dissecting the buyer’s journey. Most firms all focus on problem definition in terms of their intellectual capital. But intellectual capital has application from awareness building and problem definition to familiarity and consideration for a given buyer and even choice. Because if you do a really great job of understanding your ideal client and dissecting the buyer’s journey, it opens up any number of different ways of looking at intellectual capital. Because the whole purpose of understanding the buyer’s journey and doing all this intellectual capital research is tied to identify the areas of friction along that buyer’s journey, things that get in the way of solving the problem. And I don’t think firms think that way. There are some marketers who say, “Oh yeah, we did a buyer’s journey.” I don’t think they look at it deeply enough to understand what is blocking the purchase decision.
Here’s why I say that. Research shows, and there’s some great research from CSO and Miller Heiman, that buyers are so inundated with content marketing that they’re overwhelmed. They can’t even cut through all the noise in order to make choices. What it’s doing is just making them shut down. The real value that’s being delivered right now, along the buyer’s journey, isn’t all that demand gen or lead gen stuff, it’s around the consideration and choice and the best consultants and salespeople are helping their buyers make the best decision for them by sorting through all of that chaos. That chaos isn’t just a single buyer. I mean, most of what we saw in professional services are complex B2B sales.
So it’s like a buying committee with six to 10 people in it, all confused, all trying to figure out what’s the right decision. They all have different agendas and priorities and where the real value of intellectual capital right now is sorting through the validation of given solutions and building consensus within an organization, because all of these organizations are much more consensus driven now than they ever have been in the past. So marketing should be thinking in terms of what tools or approaches or redesign solutions would make it easier for people to buy, to eliminate that friction.
Jason Mlicki: All right. Well, I think that was phenomenal. At one point, I decided just to wind you up and let you go and see where you took us, because I think you… I think in this particular episode it would be wise, maybe we should have said this at the outset, for listeners to grab a piece of paper and a pen and not do this one from the car or do this one on the exercise bike, but to literally sketch this out. Because if you sketch that model out, it becomes very clear. I really like where you went around friction, the idea of looking at the buyer’s journey and understanding what friction is in the sale. Then really, I guess, my takeaway was that’s where intellectual capital resources need to go, is to those points of friction to try to unlock the friction. Frequently, that means that it’s tools that are used in the sales process more so than content used in demand gen.
Jeff McKay: Yes, or the reinvention of the solution itself and how the solution gets delivered. I had a recent conversation with a good size, well, actually several conversations, I guess, as I think about it, of firms wrestling with this. They have certain components of it, like maybe one firm was able to identify the issues or the value they want to present. And they created a beautiful model and everything that goes with it. But when you dive into it, there’s no there, there. There’s really no substance beyond conventional wisdom. It’s not translated into an ideal client’s perspective. It really was a collective to try to get practices together, which is a real benefit of this type of approach, but it’s not any good unless you start to fill it in and cascade it all the way down to sales and what does that look like.
I have another firm that I had conversations with that was thinking about its audit of the future. This is a really sharp firm, with really sharp people in it. But they get caught into the trap of the only way for us to be a leader and be considered the best or something is to be innovative. They’re thinking about, well, how do we do innovative audits and how do we sell this thing as innovative when the firm was incredibly risk-averse, didn’t want to put out any comments that would push the innovative envelope. So their actions and their messaging were going to be inconsistent. But the firm was known for another important of those three brand preference drivers and it was being easy to do business with. The thing about audits, is they’re a pain in the ass. Nobody likes them, because they’re invasive.
So the intellectual capital, and the way of cascading it down through that intellectual capital model, is the problem you’re solving is make the audit easy and painless and that your firm delivers very effective, but painless audit. That’s the attribute you want to own, because everybody else is going to try to own innovative. The people that are going to own innovative are going to be the [Big Four]. It’s not going to be some smaller firm, because they don’t have the resources to do that. You have to go to places that you may not normally consider as a professional services firm, because you have a bias towards an attribute. But if you have your ideal client and your ideal client is not in the market and does not value innovation, it values being easy to do business with, that’s the lens you have to align your intellectual capital agenda with and be looking at how can we make our business easier to do business with. That drives your IC.
Jason Mlicki: Hate to do this, Jeff. We go to [crosstalk]-
Jeff McKay: I want to keep talking.
Jason Mlicki: But we got to wrap. We got to wrap. I actually don’t know where we go from here. I have to internalize this. Normally, as you know, at the end I’ll set the stage for what’s next. I think there’s a lot left unsaid on how to develop an intellectual capital strategy. My gut says we’re going to come back to this, but I don’t know. I’m not going to make any promises to our listeners right now. I’m just going to say that, hopefully, you opened their eyes to the space between the ideal client’s value proposition and issues and where intellectual capital energy needs to go. I’m not even going to say strategy. I’m just going to say energy because I think that’s about how far we got.
I’ve got a whole page worth of notes here and sketches, really trying to elucidate this. I think there are multiple parts of this that will still need to be explored further for people. But on that note, we’ve overstayed our welcome. And so I don’t want to lose [inaudible]. I want them to kill to come back next time, the next version. As always, it’s been a great, great call and we’ll talk next week.
Jeff McKay: See you, buddy.
Audio: Thank you for listening to Rattle & Pedal, divergent thoughts on marketing and growing professional services firms. Find content related to this episode at rattleandpedal.com. Rattle & Pedal is also available on iTunes and Stitcher.