The challenges and opportunities associated with building a marketing research firm have been a constant source of stimulation and challenge. The bad days – losing a client, firing an employee I love who just is not getting the job done and certain kinds of truly painful negotiations – can be painful and sap your strength. The best days – solving problems, winning breakthrough projects, truly making our clients’ lives easier and converting their toughest challenges into opportunities – produce fist-pumping adrenalin rushes and a true sense of accomplishment.
When MRA asked me to discuss the lessons that come from building a successful marketing research agency, I welcomed the chance to reflect on my last 12 working years, and to glean some lessons for others. And while in some ways, our agency might not be typical of the marketing research community as a whole, many of our lessons and guideposts can help you develop new ways of looking at your own businesses and the challenges you face.
The Job of CEO
Despite everything we read about the need to coach, teach, cheerlead and provide compelling overall vision, I have always believed the CEO’s primary responsibility is acquisition. The CEO’s job is strategic above all else, and the essence of strategy lies in decisions about when and what to acquire vs. when and why to say “No.” The other interpersonal skills are the tools that CEOs deploy in pursuit of acquisition.
CEOs acquire four different kinds of assets for the corporation: clients, talent (employees and consultants), the products and services for which clients pay us and resources in the form of capital and partnerships. The definition of these assets and their relative importance in the CEO’s job changes as agencies shift through different stages of growth.
The Four Stages of Organizational Growth
On our path from a one-person business, to a firm with close to 40 employees and sales in excess of $10MM per year, we have observed four distinct stages of development. In this model, each stage entails a higher level of organizational complexity and a greater need for individuals and workgroups to work harmoniously and efficiently. The CEO’s task is to acquire the resources necessary to speed the organization through these phases as smoothly and effortlessly as possible. These stages resemble the biological processes by which organisms increase in complexity:
Single-cell – Many businesses start with a single owner or small group of partners who collectively undertake all activities of the business.
CLIENTS: During this phase, the CEO’s primary challenge is to acquire 1-2 loyal customers who will help the firm pursue and refine its vision of a core quality offering. TALENT: The CEO acquires relatively little full-time talent – perhaps a bookkeeper or administrative assistant. It is critical that outside professional support such as attorneys and accountants be affordable and first-rate. PRODUCTS: The CEO should focus on creating or acquiring a single product or product suite that expresses the firm’s unique view of excellence. The CEO must ensure that the firm’s 1-2 lead clients will not push product development into directions that the firm cannot sustain or would not wish to support over time. RESOURCES: The key resource to acquire is enough money to keep going. Frequently, CEOs raise money from family, friends and savings, and also commit their homes and other assets against the personal guarantees necessary to pay the bills and keep moving ahead.
Early division – Usually, agencies grow beyond the CEO or initial partner group by hiring individuals to assume specific functions in the product/service creation process. CLIENTS: The CEO must maintain 1-2 core customers who provide a significant share of assets, while laying groundwork for a broader client base so that the agency can distribute risk against the inevitable falling-out with a major client. TALENT: At this stage, the CEO’s primary new challenge entails hiring individuals who can bring excellence – even brilliance – to their tasks and fit into the kind of culture that the CEO seeks to develop for the firm. PRODUCTS: The CEO should look to add 1-2 complementary products to the initial core offering. At this point in development, core clients invariably serve as an excellent source for product development and nurturing. RESOURCES: The key to moving forward is to develop sufficient borrowing capacity to sustain the investments in staff, process and equipment necessary to keep moving forward
Vertical division – The next stage in business growth entails creating internal working groups, with supervisors and junior employees in key work areas. CLIENTS: To distribute risk, the CEO needs to acquire a broad set of key clients so that losing a single client will not cause undue disruption of revenue or workflow. Our firm uses a “20/50” rule, where our largest client should not represent more than 20 percent of a year’s revenue, and our largest three clients should not exceed 50 percent. TALENT: The CEO needs to begin hiring people who can introduce and sustain process and continuity within the organization. A major risk at this point is the “entrepreneur’s trap” – the desire to keep hands on everything so that it will be “perfect.” In reality, this behavior demotivates employees, destroys creativity and causes the firm to miss critical opportunities. PRODUCTS: The firm should seek to create a suite of coordinated, integrated products and services. RESOURCES: The CEO/owner should seek to limit personal exposure to risk by eliminating personal guarantees on debt and/or seeking some kind of outside partnership or investment in growth.
Full differentiation – The matured firm has several key work groups, each with a leader and other associates. The overall challenge becomes to coordinate an increasingly diverse set of assets in pursuit of broad corporate strategy. CLIENTS: The CEO should seek to broaden the client portfolio without diluting the agency’s positioning in the market. TALENT: Usually, agencies need to redo either their sales models (seller/doer to sellers and doers) or execution models. PRODUCTS: The firm will need to tweak its recently developed product/service suite to respond to market needs. Frequently, this activity will include adding new offerings that fall outside the firm’s established set of core competencies and/or geographic reach. RESOURCES: Given the increasing diversity of growth opportunities and needs, the CEO will need to create partnerships that expand the firm’s reach. Some partners may bring complementary capabilities, while others will provide resources necessary for expansion.
This is an Exciting Time to Lead a Marketing Research Firm
Throughout recent American history, the rate at which companies and industries have recovered from economic downturns has correlated highly with their ability to listen aggressively to customers and stakeholders. During this period of prolonged economic challenge, the need for our customers to listen has never been greater, and we are their ears. Our time is now. Go innovate, serve and profit.