Aarni's Blog

Most designers offer their services through short-term projects, which means that the client-designer relationship is often temporary. What are the other types of designer-client relationships and how are they best managed?

The relationship quadrants

Two aspects are important when characterizing client-designer relationships:

1) The scope of the service

2) The role of the designer in the client's process

The scope of the service can be either a project or an ongoing process. In both cases, the role of the designer can be either assistive or participative. In order to compare the two types of scope and the two alternative roles, we can visualize a matrix with four relationship types (see diagram, below).

Each type has different goals, opportunities, risks, and competitive strategies associated with it. Here is a short characterization of the four relationship types:

A) An assistive role in a project – The Project Supplier

• Driver: Client’s need to get a solution to a single, well defined problem.
• Duration: Short-term agreements.
• Designer's goal: To be awarded the supplier’s contract.
• Competitive factors: Price or service performance.
• Critical success factor: Price-quality ratio.
• Designer should know: Decision-makers and their criteria for providers; customers’ needs; ways to improve your own productivity

A project can be the start of a successful designer-client relationship. However, many clients feel that they have to tender each project, which makes this kind of relationship potentially transitory.

B) An assistive role in an ongoing process – The Outsourced Process Provider

• Driver: Client's determination to focus on core business.
• Duration: Long-term, ongoing service.
• Designer's goal: To allow the client to focus on their core business.
• Competitive factors: Provision of cost-effective services.
• Critical success factor: Integration into the client’s processes.
• Designer should know: The right service scope and the client’s own cost for providing the same service level.

It is naturally good business practice for a client to focus on their core business. Therefore, many companies want to outsource processes that they consider complementary. This provides a design company with the opportunity to build a long-lasting relationship with the client. Clients are very cost-conscious in outsourcing deals, so the designer must be able to provide a high-quality service cost-effectively.

C) A participative role in a project - The Consultant

• Driver: A strategically important issue that requires a solution.
• Duration: An ongoing relationship with recurrent projects.
• Designer’s goal: To create and maintain a trusted relationship.
• Competitive factors: Strategic thinking; understanding the client-s business.
• Critical success factor: Ability to improve the client’s competitive position.
• Designer should know: The client’s strategy.

The difference between a type-A relationship and a Type-C one is that, in the latter, the designer contributes more directly to the competitiveness of the client. The designer can be, for example, taking part in a new product or process design that improves the client's core business. A designer is a trusted advisor, even though the relationship is formed around projects.

D) A participative role in a process – The Strategic Partner

• Driver: New business value that can be derived from working together.
• Duration: Long-term relationships.
• Designer’s goal: Shared business goals with the client.
• Competitive factors: Ability to provide unique value to the client.
• Critical success factor: Partnership-management competence.
• Designer should know: Strategic fit with the clients is key; risks related to working together.

This relationship type is the most mature and the most demanding. It is similar to a joint venture, where the client and designer share a vision and a strategy. They also share the business risk to a certain extent. David Lewis certainly had a strategic relationship with Bang & Olufsen. The work of Lewis’s company played a crucial role in B&O's success.

Which relationships to pursue?

All of the four designer-client relationship types have their pros and cons. Some designers are perfectly happy taking on projects that have a limited life span. Some strive to build long-term relationships. Whichever your strategy, it’s advisable not to rely on one single relationship model. By developing a range of models, your company increases its chances of success in a business world where uncertainty has become the norm.

I just devoured Find Your Next by Andrea Kates. What a timely book! She addresses the very questions that many companies are struggling with. The business environment has changed enormously in the last ten or even five years, and companies need new ways of thinking in order to prosper. This book offers tools for just that.

The next great thing in your business can begin when someone in your organization has an idea or a hunch. Kates writes that until now, the journey to follow that idea would have started with dissection; measuring strengths, evaluating past results, and scrutinizing industry peers. The existing silos of thinking would define the options for an analysis. But she insists that the new way of thinking is not to tweak each element individually. The way to go is to create something bigger and all-inclusive, and then create a game plan how to get there

Find Your Next taps into new patterns that have been proven to drive business growth. These patterns draw inspiration from genomics. Scientists have been able to identify, map, and learn from patterns of DNA. In the same way, you can break down the core DNA of your company into basic elements. 

Kates presents a framework of six key elements of business DNA that define the success of a company. The six elements of the business genome are:

1. Product and service innovation
2. Customer impact
3. Process design
4. Talent and leadership
5. Secret sauce
6. Trendability

A company that wants to "find its next" can use the framework as a system to sort through ideas and use them to create a new, integrated combination. Kates underlines that business genomics combines art and science; identification of business opportunities is part intuition, part analysis. "The last era was about models and forecasting. Today's era is about foresight."

The sections detailing the use of the six elements of the business genome contain great ideas and tools for business developers. Kates also introduces a four-step process to use the framework. The process starts with simple questions:

• Are you at risk of becoming obsolete? Are you facing a shift in your market?
• Are you off-trend?
• Do you have a hunch that there's a new direction you should be pursuing?

One of the best ideas I got from the book is to use other industries as a source of new perspective. Often the signs of your future already exist in related and even unrelated industries. Influences from other industries are shaping customer requirements and that is happening at a faster pace than ever before.

Kates refers many times to the new role of the customer. The product and service discussion belongs to the customer now and it is often global. Manipulating customers to tell us what we want to hear does not translate into market leadership. Brands are defined by customers not by the companies that own them.

Companies face challenges internally as well. “Old school” leaders have learned that new generations have values, modes of communication, and beliefs that are foreign to them. Diversity is on the rise and employee motivation is not based on money alone. 

"The age of innovation is here to stay, and the bar for inventiveness will only continue to get higher," Kates claims. However, she draws attention to a disturbing fact. Leaders might want their organizations to be more innovative, but often fill their top positions with non-innovators.

The book presents great case studies of the way genome thinking works. Most examples are from B2C companies, but many of the ideas are applicable to B2B. In fact, the book encourages cross-disciplinary thinking. "Don't think industry-specific, think focus-specific," she advises.

I second Seth Godin's praise for the book: "Every great strategic thinker uses the ideas in this book...but it took Andrea Kates to write them down for the rest of us."  I'm certainly going to recommend Find Your Next to my clients!

Find Your Next: Using the Business Genome Approach to Find Your Company’s Next Competitive Edge, at amazon.com

If you are a solo consultant or run a small consultancy, you can face a situation where you either lack the manpower or the expertise to serve prospective clients. In that case partnering could be a feasible solution. There are three basic ways to invigorate your business through partnering: operational, tactical, and strategic.

Operational partnership

If you just need "more hands," an operational partnership is the way to go. Connect with peers or junior consultants who can work side by side with you. For example if you need to interview 100 people or do some other resource-intensive work you could use a trusted companion. 

A good operational partner respects your business relationships with your clients. However, I recommend that you have a mutual written agreement with your partner. In the agreement, define the distribution of work, the responsibilities, and the duties of both parties.

Operational partnerships can offer cost savings and increase your capacity.

Tactical partnership

When you see that you could offer more by having a good partner, then you are building a tactical partnership. For example a marketing consultant could partner a sales expert or an R&D consultant.

Sometimes a client needs services in locations where you cannot operate easily. Form a partnership with a local consultant to serve your client optimally.

Tactical partnerships expand your reach and they open new opportunities when partners market each other's services.

Strategic partnership

If you and your partnering company together can offer something unique that is vitally important for both parties, you are in a strategic partnership.

I know examples where a large and a small organization have created a successful partnership. The smaller consultancy is the innovator whereas the larger has an extensive clientele that needs the innovative solutions that the companies create together.

Strategic partners share a vision, they have the same kinds of values, and they want to work towards common goals. They exchange and accumulate knowledge openly with each other and develop their abilities together.

Strategic partnerships can lead to a unique position in the minds of the clients. If implemented correctly, they can also lead to growth that both partners would not be able to create on their own. Strategic partnerships are, however, very demanding and are seldom realized as planned.

Success factors

Whatever your partnership model is, it must be based on mutual trust, open communication, and a real win-win opportunity. Written agreements are necessary, but it is more important to understand why you are partnering and how much effort both parties are prepared to take in order to make partnering successful. Finally, it is the client who decides if your model creates a triple-win situation.

Photo: iStockphoto

How do you align development ideas and projects with your company's strategy? Portfolio management is a methodology for managing value, resources, and risks strategically.

The model that our clients have found useful is comprised of three types of portfolios: Ideas, Project, and Assets portfolios.

An Ideas Portfolio is an internal market for development ideas that are the seeds for possible development projects. If the idea gets enough interest, its presenter will be allowed to suggest it to the project portfolio.

A Project Portfolio is a top-down view of proposed, on-going and completed projects.It is in a way a presentation of the company's strategy. It answers the question "are we doing the right projects?" Steering groups at different levels of the organization use project portfolios for decision making and project reviews.

Finalized projects create strategic assets; processes, knowledge, customer relationships, technical systems, and so on. An Assets Portfolio presents the existing operational reality of the company. It shows how well the implemented strategy is performing.

Assets require renewal and improvement in order to serve the company's strategic and customer requirements. These development needs inspire people to present new ideas. The same feedback loop is between ideas and project portfolios.

Our product, Thinking Portfolio®, is a simple tool for implementing the portfolio management model that I've presented here. If you want to know more about it, please contact me.

There are no bad customers, there are only wrong customer strategies. Bad customers are a sign of a mismatch between their needs and your offering.

How do you define the "right" customers? A simple way is to look at how profitable each customer is, and what their purchasing volume is. This very simple approach -in many cases- shows that 20% of the customers generate 80% of profits. So, what do you do with the 80%?

Instead of drawing hasty conclusions, you should have a more holistic view of customers. Think of customer relationships as a portfolio. Define the criteria for the customer value, taking into account their profitability over time, purchase volume, loyalty, growth potential etc. Then you may come up with 3 to 5 customer portfolios, for example

• Key customers: e.g. most profitable, repeated
• Long term customers: loyal, moderately profitable
• Partner customers: innovation partners
• Growth customers: customers with most growth potential
• New customers

Different portfolios have a different set of offerings. For example some customers can have very individual needs, while others can be served with a "standardized" offering.

If you take in customers that do not correspond with your portfolio criteria, you won't end up with a win-win relationship. Focusing on the right customers is one of the most important business decisions you can make.

How does your customer want to access your service? Is personal, face-to-face service always the customer's first choice?

A Finnish marketing professor, Jaakko Aspara, wrote in a magazine article today that most customers don't want customer service. They want their goods delivered where they are needed, preferably to the front door. They'd like to have products that don't need special training and maintenance. They also like to buy online, as easily as possible. In other words, customers are not looking forward to having to communicate with service personnel.

Why do customers need help from service personnel anyway? Most often it's because they don't have enough information, skills, or time to do something. When considering a channel of access, you should in fact first look at your product or service. Does it need special physical premises because it is too complicated to take to the customer? Can you do something about it before requiring the customer to come to your doorstep?

In the days of the Internet and global trade it might seem odd to limit your service's geographic coverage e.g. to a city, state, or country. However, in some situations this is a viable strategy.

According to Craig Terrill and Arthur Middlebrooks* location-based focus is valid when one or more of the following situations are present:

• There are significant and sustainable barriers to geographic expansion, such as regulations
• Customer needs vary significantly across different geographies, and continue to evolve in different directions
• Economies of scale cannot be realized across geographic areas
• Customers operate in a geographically limited area, or purchase decision authority resides in each area
• Customers, e.g. some governmental organizations, require that the company be locally owned and operated

Large corporations have traditionally been less interested in small, locally operating businesses as customers. That is an opportunity for a geographically focused service provider. Small firms are often more reputation and brand conscious. They can have different needs that large or mid-sized companies. They value services with a "local face".

Geographies and languages coincide. There are around 6500 living languages in the world. Understanding the local language and culture can be a definite competitive edge in many cases.

*amazon.com affiliate link

Some service companies succeed by focusing on a limited range of benefits, often over a broad range of services. The goal is to "own a benefit" in the minds of customers. For example speed of delivery can be a benefit that is critical to a certain set of customers.

I have personal experience on focusing on benefits. I've been involved in developing software -Thinking Portfolio- for strategic project portfolio management. Our mission was to create a system that would be as simple as possible, but not too simple. The users of the system are busy executives who require a very intuitive user interface and quick access to project information. We decided to make simplicity as the leading theme for Thinking Portfolio - from purchase to delivery and use.

In our case simplicity became the distinctive, competitive factor. Simplicity contributes to fast implementation, short learning curve, and the fact that people will actually use the system. Whereas other similar services are large and comprehensive, our offering is compact and limited. We've managed to find customers who value just that.

Here are some other benefits that you can focus on:

• Ease of use
• Low risk
• Security
• Confidentiality
• Adherence to standards

If you've been a generalist, should you consider becoming a specialist? Specialists usually do quite well, but only if their market meets certain conditions.

Choosing between specialist/generalist strategy depends on

1. The total number of potential customers to your service
2. The percentage of those customers that you can reach and serve
3. The sustainability of the demand over time

For example it is hard to be an IPR attorney if you operate in a small town. However, if you can operate nationwide, you can even focus on a certain niche of IPR advisory services.

I've often used Hermann Tilke, a German architect and engineer, as an example of successful specialization. He turned his passion for car racing into a design career. He started off with a short access road design at the Nürburgring in the 1980s. Now he's the leading designer of Formula One motor racing circuits. His company, Tilke Engineers & Architects, provides complete solutions for motor racing and test facilities. There can't be many Formula One circuit designers in the world, but if you can specialize in something like that you'll probably profit more than a generalist engineering firm.

There are two ways a limited menu strategy can succeed (C.Terrill and A. Middlebrooks: Market leadership strategies for service companies):

• Companies can develop deep expertise in certain types of services and therefore charge a premium price
• A limited menu strategy can enable companies to "cherry pick" high-profit margin services. A company can develop specialized services that are very efficient and repeatable, e.g. certain auditing or reoccurring medical services. These can give higher profits than more complex, one-off services, even if their price level is much lower.

Photo: bobaliciouslondon

Why do service companies diversify? I think that there are two main reasons: either they have an actual diversification strategy, or they have been unable to employ a focus strategy.

Companies can add new lines of business in two ways. They can add related services to create a comprehensive offering to cover a wider market. Alternatively, they build a menu of unrelated services. Both strategies present challenges.

A one-stop shop must perform preferably better than separate services combined. A service "department store" has to maintain and manage many separate skills, processes, and systems simultaneously. Each additional business requires special management attention and investment money.

In their book Market leadership strategies for service companies C. Terrill and A. Middlebrooks demonstrate how too many lines of business can become a burden. In the 1990s, Waste Management tried to become the one-stop for the entire range of services in the areas of environmental consulting, engineering, and chemical and solid waste hauling and disposal. They made several acquisitions. That lead to problems like

• Integrating different companies' sales forces, operations, organizations, processes and IT systems
• Creating a cohesive culture while still recognizing the uniqueness of each operating unit
• Creating a brand identity
• Bringing together the portfolio of services in a way that made sense to customers

As a result, the company became largely unmanageable. Later on it divested itself of several lines of business and merged with another large waste services provider.

Focusing on certain lines of business and markets is usually easier for the customers to understand. A focused company is easier to manage. Branding is straightforward. However, this strategy makes the  company more susceptible to economic turbulence if its customer base is very narrow.

Book link to amazon.com affiliate program