How improving operational excellence boosts customer loyalty
As the concept of brand loyalty continues to decline for many consumers, the importance of operational excellence and service execution to maintaining strong customer relationships has never been clearer. According to Bryce Wolf, a senior manager in industry solutions with Unit4, the professional services world must also adapt its business model, to deliver the level of service customers expect and keep them coming back for more.
In business, there tends to be two main ways to succeed: that is, product or service. If organisations build a reputation for superior quality and reliability, they will create lasting customer relationships. So why is it that in the professional services sector (PSOs), the very sector that embodies people-centricity, service excellence appears to be in decline?
According to the 2023 SPI Research Professional Services Maturity Benchmark Report, delivery levels have been eroded by almost all relevant KPIs. SPI’s general view of the state of PSOs is far from being all bleak but there is clear evidence of increases in late delivery, overruns and other factors that contribute to client dissatisfaction.
The sweet spot
Client relationships are critical to the success of any services organisation and maintaining these successfully is a wide brief that requires effective sales, marketing and partner strategies. The ability to communicate effectively (across employees, partners, and customers) is key to generating and closing business. That means PSOs must have a cogent, appealing go-to-market strategy where buyers are identified, their requirements are clearly defined and the PSO solution is uniquely matched to those needs.
Doing this isn’t just about having a fully functioning sales and marketing engine, though. It requires strong infrastructure and business processes with aligned campaign management, lead generation, quote/sell solutions, contract management and partner solutions.
The related sphere of service execution focuses on engagement and delivery, and encompasses several factors, from effective asset control and delivering projects in a timely fashion, to lowering costs while improving project quality and building a knowledge base for continuous improvement. Ingredient processes include resource management, capacity planning, project planning, quality control, knowledge management, methodology and tools development.
Successful PSOs need a combination of both client relationships and service execution. For those that can blend this potent cocktail, the rewards are big. It is no surprise that high performers over the last year have been more productive at sales, but there is little difference in performance whether it is delivering existing services to current clients or new logo clients.
The fine margins between the best and the rest are at their starkest in terms of operational efficiency and client relationships. For example, the new deal pipeline is 32% higher and the bid-to-win ratio 28% higher for high performing firms. This greater efficiency suggests these organisations are very focused on outcomes and are also using resources effectively, which perhaps enables them to focus more effectively on service delivery, leading to them securing 13% more referenceable customers.
Certainly, quality client service execution also stands out as a factor among top performers. They are responsible for larger and more critical projects but still deliver on time and within budgets, thanks in part to disproportionately strong use of standardised delivery methodologies. Again, this has benefits in terms of client happiness but also consulting staff: nobody wants to work with an underperforming team.
There were other concerning issues highlighted such as on-time project delivery declining, reduced use of standardised methodologies and other factors that are often root causes of late delivery, slashed margins, and unhappy clients.
Ultimately, it’s hard to overstate the importance of service execution. As SPI, puts it, “In an increasingly competitive consulting marketplace, success most often comes down to operational excellence … Done right, gross project margins of more than 60% are possible. Done wrong, project yields can drop to single digits, or go negative.”
Customer satisfaction bounce-back
Will customer service satisfaction numbers bounce back? They need to, judging by SPI’s data. And one aspect of the Covid pandemic fallout that may assist PSOs is the ability to do more remote work. SPI found that on-site delivery was much lower for high-performing PSOs that were able to cover more projects virtually and at higher margins.
As with so much related to the pandemic, we may see that the behavioural changes forced by lockdown and related restrictions have become a positive. Where once clients expected to be able to see and physically interact with consultants (and employees) they are now content to operate a virtual model, having seen through their own eyes the benefits of operating virtually.
The results of this are many. Clients get faster turnaround of work and potentially happier consultants who stay the course. PSOs on the other hand benefit from retention levels too, because they can provide interesting projects that change rapidly and don’t force staff to travel long distances or make claims for accommodation and meals.
The next challenge will likely be providing the collaborative environments that let clients work closely with PSOs, even if they seldom meet. Conferencing, messaging, scorecards and portals may all come to the fore as PSOs seek to combine the best of the virtual world with the best of the physical world.
Changing terms
Selling professional services is getting tougher as savvy clients demand pay-as-you-go and subscription tariffs. As they have become more concerned about risk and cost overruns, fixed fee and shared risk contracts are on the rise with over 48% of all contracts now priced as time and materials.
But everything must be considered with the long shadow of the Covid pandemic which made winning new business difficult. That is now changing with sales cycles accelerating for well positioned players. In other words, for those that can build sustainable client relationships and execute rigorously using modern business processes and tools, there is scope to capitalise on a market upswing.
Bryce Wolf is a senior manager of industry solutions at Unit4, and is responsible for the delivery of Unit4’s product strategy for the firm’s strategic verticals.
