You know when your car (TV, house, life) isn’t in great shape, and you think “weeeeell, perhaps I’ll just go get a new one?’ instead of fixing what you already have?
And you end up spending a load of time and money without actually being any happier in the long-run? That’s what I see a lot of Partners doing when it comes to new service development!
Don’t get me wrong. The mantra of ‘Niche! Niche! And Niche again!’ is a good one. However, sometimes the market evolves, competition encroaches on your client base, or the market simply won’t generate sufficient sales for sustained expansion.
In such cases, it may be time to consider expanding your offerings. However, the risks can be significant – not only the wasted time and money of a failed service, but also the reputational damage both inside and outside the firm.
In this blog post, I’ll explore five essential questions to ask when considering new services, along with five key points to keep in mind as you develop and launch them.
By ensuring you’ve thoroughly evaluated the opportunity and devised a strategic plan, you can set your consultancy up for continued success.
The Five Questions to Ask When Considering New Services
1. Are Your Existing Services Struggling With Growth or Margin?
There are two good reasons to create new services. The first is if you existing services aren’t selling. This may be because you are new and you’ve chosen the wrong niche (too much competition? too difficult to access buyers?) or because the market has shifted and you haven’t.
The second is when you’re existing services ARE selling well, but you wish to expand by cross-selling. This might involve selling existing services into a new market, but more commonly (75% of the time) involves developing new services to sell in the same markets.
The second is most common with established firms, and I would usually recommend hitting a specific target of EBITDA (usually 20% – but sometimes more in ‘hot’ markets) before seeking to invest. Building new services takes resources!
2. Is the New Suggested Service Strategically Sound?
A strategically sound service should meet several criteria:
- Allow for cross-selling opportunities
- Serve a growing market
- Be requested by your existing clients
- Offer equal or better margins than your current services
If the new service doesn’t meet these requirements, it may not be the right fit for your firm.
3. Does the New Suggested Service Align With Your Firm’s Strategy?
Consider how the proposed service aligns with your overall business strategy. Will the payback for investment be quick enough? Will the service attract target buyers or investors, or could it deter them?
And, most importantly, will it strengthen or dilute your value proposition? If the service doesn’t align with your strategy, it’s worth reconsidering whether it’s the right move for your business.
4. Can You Access Sufficient Quality Resource at the Right Price to Make the New Service Successful?
Launching a new service requires investment in resources, such as skilled personnel and technology. Will you need to rely on contractors for an extended period, or do you have internal staff who can easily manage the new service line?
Additionally, does your senior team have the capacity to oversee this expansion? Ensuring you can access the right resources at the right price is crucial for the success of your new service.
5. Do You Know Who Will Sell the New Service and How Prospects Will Be Reached?
A solid sales strategy is essential for the success of any new service. Identify who will be responsible for selling the service, and develop a plan for reaching prospective clients. This may involve leveraging existing relationships, networking, or implementing targeted marketing campaigns.
If the answer to any of these questions is ‘no,’ it may be more prudent to focus on improving your existing services rather than expanding into new areas.
While I’m here, let me give you some ideas from the workshops I’ve run on service development and service strategy (see here for the workshop template slides).
Five Points to Consider When Developing New Consulting Services
1. Validation
Please don’t take the ‘build it and they will come’ approach. Be by your clients – ideally, they will be not only asking for, but also prepared to pay for, the new service. Be ways of general ‘market research questionnaires’ where clients are asked ‘how much would you pay for this service’.
I’ve seen these looking very optimistic, and then no sales result when the think is built. Pre-selling is the obvious answer here, or even getting paid by a client to develop the service that you then sell elsewhere!
2. Focus on Value, Not Cost-saving
With the collapse in the cost of SaaS development, online course hosting, AI and mobile apps, many seniors think ‘oh, I can see a chance to provide roughly the same level of service but with cheaper costs’.
While I’m all for automating the back-end of consulting, I’m a big fan of being top of the ‘value creation’ table. It’s simply not a sustainable way of building competitive advantage to focus on cost reduction as the raison d’etrefor consulting services. Value must come first.
Moreover, as I’ve written about before, building a new SaaS product alongside a consultancy offering is highly risky. I estimate that this only ‘works’ 10% of the time, and usually involves more cash and time than you would imagine.
3. Pricing Strategy
Determine a pricing strategy that aligns with your target market, value proposition, and competitive landscape. This may involve offering tiered pricing, bundling services, or implementing a subscription-based model. You can see my service pricing video here.
4. Who’s Designing the UX?
Too many great ideas fail because the UX is awful. This is especially the case when the development and test team is led by a partner with no aesthetic taste or humility to put themselves in the shoes of the client.
If you can, use a product manager to design the thing and test it thoroughly with people outside your firm.
5. What’s the Marketing and Sales Plan
Develop a comprehensive marketing plan to promote your new service. This may include content marketing, social media, email campaigns, and industry events. Consider partnering with complementary businesses or influencers to expand your
By the way, the best thing I’ve read on productization is Productize by Eisha Tierney Armstrong (2021). Self-published, but very good!
While I’m Here: Some Interesting Stats on Niching Down!
According to a B2B International survey, 71% of professional service buyers believe that the main differentiator between providers is specialization in a specific industry, sector, or service area.
This statistic underlines the importance of offering specialized services to remain competitive in the consulting industry.
Reference: B2B International (n.d.). The 6 Key Criteria for Evaluating Professional Service Providers. Retrieved from https://www.b2binternational.com/publications/evaluating-professional-service-providers
A report by Bain & Company revealed that firms offering a clear value proposition can generate 50% more revenue than those with vague or broad value propositions. This emphasizes the importance of aligning new services with your firm’s strategy and value proposition.
Reference: Bain & Company (n.d.). Elements of Value®. Retrieved from https://www.bain.com/insights/elements-of-value
A study by Source Global Research found that 82% of clients want consulting firms to provide more specialized services, which indicates that there’s a demand for niche services in the market.
Reference: Source Global Research (2019). Clients want consultants to specialise but struggle to find the right expertise. Retrieved from https://www.sourceglobalresearch.com/clients-want-consultants-to-specialise-but-struggle-to-find-the-right-expertise
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