Conversations on the art of creative entrepreneurship with David C. Baker and Blair Enns
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The X-Factor
Blair gives David some homework to identify patterns in the principals of creative practices who are successful and have that "je ne sais quoi." LINKS 2Bobs Episode 28 - "Positioning Cheats" Start With Why by Simon Sinek "Top 10 Podcasts Agency Owners Listen To" by Daniel de la Cruz Crucial Conversations - Tools for Talking When Stakes Are High by Kerry Patterson, Joseph Grenny, Ron McMillan, and Al Switzler TRANSCRIPT DAVID C. BAKER: Blair today, we are going to catch up with the rest of the world. I can't even say that with a straight face. We're only 80 years, 90 years behind. We're going to talk about the X-Factor. Okay. And the first time that phrase was used was in 1930, and we're just now getting ready to talk about it. BLAIR ENNS: You've actually done homework. That's not fair. DAVID: Well, a little bit. BLAIR: You went and looked up the first use of the word X-Factor... But hold on - you have to explain who used it. What was the context? DAVID: Well, it was like in the urban dictionary, so it's totally unreferenced, it's just somebody's idea of when it was first used. I probably shouldn't even brought that up. But the phrase that popped up a lot when I was researching the X-Factor 'cause you really wanted to talk about this and I'm intrigued too. It's the "je ne sais quoi" which means, "I do not know more." Have you heard that phrase? BLAIR: Yeah, "je ne sais quoi." I always thought it just meant ... And I should know because I'm Canadian. It's one of our official languages. I always it meant, I don't know. So it's, I do not know more. DAVID: I do not know more, it's a French phrase "je ne sais quoi." In other words, there's this X-Factor. I don't know more. There's just something about them. There's this X-Factor about them. It was pretty interesting. We're going to talk about principals that exhibit this X-Factor. BLAIR: Principles, the people: ...P-A-L-S. DAVID: Yeah, right. BLAIR: Not ...P-L-E-S. DAVID: I never use the other word anymore 'cause I'm so used to using principals ...A-L-S. BLAIR: So principals of creative practices who are successful, who have this "je ne sais quoi," this X-Factor of success right? DAVID: Yeah. You really enjoyed saying that with such a great accent didn't you. So you gave me homework. BLAIR: Yes. DAVID: Here's what you said to me: think of one recent client - this presumes I even have clients, right? But think of one recent client who is very successful, what three things come to mind about that person? So I dutifully answered my questions here just following the script. And then you said, "Now do it for two or three more clients." And so I did that. Now what do you want me to do with this? BLAIR: I want to talk about the patterns. If you've done it for three or four clients, when you think about the attributes of that person, how common are those attributes across those three or four people? DAVID: They were just surprisingly common, and I hadn't ever really thought about it quite like this. But I almost felt like I was wasting my time as I extrapolated to others, because they all came up about the same. Maybe the order of the three things is different from principal to principle but the same ones kept coming up. Did you do the same thing? BLAIR: Yeah and I thought of a couple of people and then I just kind of thought of a group of people and made my list even a little bit longer. So I've got six things, but I would say those six things, they all roll up into one word. So if you had to take all of those different attributes that you've identified of these successful agency principals, and you had to put them all under the banner of one word, what would that one word be? DAVID: So I popped back and forth between these two. But I think the one word would be confident. BLAIR: Yeah, me too. DAVID: Really? The same word? OK. BLAIR: Yeah. So the X-Factor is confidence. But I think we'll get into this and maybe a little bit later on, we'll talk about some kind of big picture ideas around confidence and the subject of overconfidence and how important confidence is. Did you write down different manifestations of confidence or different forms of confidence? What's on your list? DAVID: The early form of confidence would be just starting the business, like, "I can do this." That's one. Another where it seems to show up a lot is just in sales or prospect conversations and I've even actually listened to them and then of course, most of the time I haven't, they're just reporting to me what the conversation was. Then that's where it probably strikes me the most is just this confidence, even when they don't have a lot of experience in the promises that they are making to a prospect. You and I have probably done this in our own practices years ago too. BLAIR: Oh yeah. DAVID: You get on the phone on the way back to the office and you're saying you will not believe what I just promised we could do? BLAIR: Yeah. DAVID: That's where it seems to show up. BLAIR: Well, I think some of the best sales people in the world you cannot tell from the way the salesperson is behaving, what their external conditions or what their financial situation is, from the way they're behaving. So a really good salesperson can be standing in front of you on the brink of bankruptcy and you can't tell because they are not transmitting panic or neediness of any kind. DAVID: Wow. So they must be good poker players I would think. BLAIR: They're confident, but they're also good actors. But isn't that the same thing? I was talking about this last week in another podcast? Yeah, I actually step out on you and do other podcasts from time to time. I was saying the phrase, 'fake it till you make it', somebody on Twitter was saying, "That's just such a horrible saying, it's such bad advice." And I don't think that's true at all. And especially when it comes to confidence. You develop confidence, I believe, in part by faking, being confident, you just pretend you're confident and then you do that long enough, often enough, lo and behold! You become confident. I think good salespeople are able to fake, fake may not be the right word but just act confident even when the circumstances are dire. DAVID: Wow! Because all of us are growing by stepping slightly over our current capabilities. And that includes sales. BLAIR: Yeah. DAVID: There's just a fine line I mean, that I guess is technically the line but if we never do that we never grow, if we do too much of it then we really are cheating our clients and I think you're going to talk a little bit later about this overconfidence thing. So back up a little bit, what got you thinking about this in the first place? What intrigues you about this concept? BLAIR: I think when you work with enough people over time you start to make some initial assessments of how likely some people are to succeed and I was thinking some people have it and some don't. And in showbiz, it's not just conference, there's this star quality that really is "je ne sais quoi." I don't know more, other than to say, it's like, they've got it, they've got the X-Factor. That's why I assume the show is called The X-Factor. And it's really hard to nail down what it is but I think in business and in running a creative firm, I think that X-Factor it really is confidence but not going too far and having unchecked overconfidence. Which is actually kind of common in creative professions for reasons we'll get into a little bit later. So I think you've probably seen those patterns too, you talk to somebody and in the very early parts of the conversation, you get a sense of how successful this person is. Is that correct? DAVID: Yes, for sure. And like you were just saying, I couldn't tell you how I'm picking it up. But I do. I don't know if you remember many years ago, probably 15 years ago, I called you up late in the day, maybe even had been in the evening. And we've referenced this in an earlier podcast. BLAIR: You were in a snowstorm. DAVID: Yeah, exactly. And it hit me for the first time. It's like, "Oh, my goodness!" What I'm in the business of doing is being a substitute for the confidence that people lack. So most of the people that wouldn't hire me have enough confidence and they figure things out. Some people that are in that category would still hire me and then others need the marketplace to replace that lack of confidence they have. So many times I go into a situation and I believe more highly in their skills than they do but it doesn't matter what I believe they just simply are not going to absorb what I believe about how good they are. It will only be the marketplace that does. I remember talking with you about that, it became such a big light in my mind. So what are the things on your list? So confidence rolls up. But can you get more specific here about what you're saying? BLAIR: Yeah. The first thing you had in your list about like their presence in a sales situation is similar to what I have. I have talking about money. And what I have seen is the successful agency principals over the years and the successful new business development folks, they can have a conversation with a client or prospect about money and the size of the number does not faze them. So they can say $10 million, they can say $10 million, just as easily as they can say, $10,000 and vice versa. The size of the number is essentially meaningless to them from an emotional or a stressor, point of view. So that's, I think, a big one and I don't actually see that strength or skill very often, but when I see it, I know this is somebody worth betting on. DAVID: They might not even have a fantastic positioning. But this cover some of that. BLAIR: Yeah, we did a really early episode on things that mask poor positioning and I think we talked about that being one, the confidence of the principal. DAVID: Yeah. BLAIR: So that's the first one. I had the ability to talk about money. And the second point I had, I wrote down the word entitlement. A sense of entitlement. I also wrote next to it and assumption of success. Entitlement can be a bad word. It can have negative connotations depending on kind of how you use it, or even just how you're thinking about it in the moment. But I actually in this context, I really like it the idea that somebody feels entitled to success and there's just no question about whether they're going to succeed in what they do. DAVID: So does this show up in bad ways as well? I know you don't mean entitlement in the sense like a political program or something like that, that you're not talking about that. BLAIR: Yeah, or a rich kid or something like that, where the world owes me with a bit of a chip on my shoulder, because I'm not getting what I feel I'm entitled to. I mean, a healthy, positive sort of entitlement, which is that, of course, I'm going to be successful. Of course, there are lots of businesses out there that would see the value in what I do. Of course, the future ahead of me is big. Of course, I'm going to take advantage of most of the opportunities that come my way, of course, everything's going to be okay. All of these things, and I think maybe without being polar opposite of that conflicting idea that's still valid, is the idea of the healthy paranoia of a principle. I don't think that's part of the X-Factor. I think that's a part of kind of general success as an entrepreneur, I think you have to have a healthy paranoia. But I think these people that really have it the X-Factor, they're not really driven by paranoia. They're not driven by fear. They're driven by almost entirely positive things. I think both of those are valid. But I'm just saying in the X-Factor, these people who have that kind of special X-Factor, there's just no doubt that they're going to succeed. DAVID: Almost unapologetically, which is not necessarily arrogant. You've talked quite a bit about the fact that one of the mental, I guess, principles of the newer entrepreneur is that it's not a zero sum game. So when there's this entitlement or this assumption, or this confidence, it's not at the cost of the client, it's not like we're taking things from the client. It's like we're both going to succeed here and I'm unapologetic for mine and unapologetic for yours between us we're going to do great things. So first one was how they talked about money, that's really interesting to me, especially the way you phrase that the other is entitlement or assumption, an unapologetic approach to this What's the next one? BLAIR: The next one is leadership. They lead their people and their clients. I don't know if they're natural leaders, it's probably fair to say that when we're talking about X-Factor, we're talking about natural leaders. I know some really strong leaders who've had to work to develop their leadership skills, whether it comes naturally or not. I saw this in a couple successful clients and then I was thinking of some other clients that I've worked with, that are still kind of successful, but struggle with this issue. You probably see this too where you're offering guidance to an agency principal and his or her response is "Yeah, I know I should do that. But I'd have a hard time selling that to my people." When I hear that I think, "who's running the show here?" DAVID: Apparently, "my people" are. BLAIR: Somebody with that X-Factor is never going to push back on a valid idea by saying, "I'm going to have a hard time selling that to my people." Unless it's something that's really ridiculous. Remember that seminar I did years ago in Bermuda in the beginning of 2009? DAVID: I do. Yeah. BLAIR: It was you and me and four other people. We drank $1500 worth of champagne, because I had to hit the food and beverage minimum. DAVID: Great food. And a lot of it. BLAIR: I had two different agency principal say to me, "I really want to go to the seminar you're doing in Bermuda, but I just laid off people and I can't justify to my people that I am going on this thing and I think that is perfectly valid. That's not what I'm talking about. I think in both those cases, and probably the other cases that just weren't stated to me, I think that's a perfectly legitimate area where you should be concerned about what your people think. But when it comes to say, the positioning of the firm or how you're going to go about selling these more strategic decisions, those people who have the X-Factor those leaders with supreme confidence, they don't stop and think, "Well, I hope my people are going to go along with me." There's the sense of, they look to me to lead it's my job to lead I'm going to lead, and even if they're unsure in the beginning, they will follow me because they trust me to lead. BLAIR: So that's one aspect of it is they lead their people, but they also do the same thing with their clients. DAVID: Yeah. Is that the same as directing their relationship? Or is that something different? I've heard you use that phrase. BLAIR: I use what I think is a healthy generalization when I say there are really only two positions you can occupy in your client relationships. You can be the vendor or you can be the expert practitioner, and the expert practitioner leads they don't dominate. It's got to be this kind of servant leadership role where the client willingly lets you lead but they are seen as the expert and they lead. So you should have that relationship with your people and you should have that relationship with your clients. These people who have this X-Factor, they're able to grow these usually large but just always successful and profitable firms. They show up to a client engagement or a new business meeting and they feel like they should be occupying the expert practitioner position, and they feel it's their job to lead in this situation. And they don't comfortably slot into that polite, compliant, rule follower role that is the vendor, where you sit and take notes and nod your head. DAVID: There's some overlap here between what you just explained and the personality theory stuff that we've talked about multiple times. And that's that somebody with the personality profile of a leader like you're describing is typically somebody who sees a situation and says, "This could be improved." That's the opposite from the other half who says, "Oh, this is good enough, we can work within it." So they say, "This can be improved." Then they go on to the second part B and says, "And I'm the person to improve it. Right? BLAIR: Those are the four dichotomies or quadrants. Right? It's the situation can be improved or not. DAVID: Yeah. BLAIR: And I'm the one to do it or not. DAVID: Right exactly. BLAIR: And that's essentially the basics of most personality theory. DAVID: Yeah exactly. BLAIR: So those are the first three things I have three other things. You said the first one on your list was how they sell, what do you have after that? DAVID: I have risk taker and I'm cheating a little bit because I did a research project on that. So they are risk taker, they don't always take the right risks, but they do take risks. BLAIR: Yep. DAVID: And then the third one is that they - and I haven't heard you talk about this, it's interesting that it's on my list and not yours - it's that they soak up all kinds of knowledge and then they ruthlessly choose just a small part of it to follow. BLAIR: Oh yeah. DAVID: Some people read voraciously and other people don't read at all. Then other people latch on to some expert or somebody else, and they have their favorite ones, and so on. But they're always just soaking up knowledge but they don't try to incorporate all of it. They make a quick snap decision like, "Yeah, there is something there. I'm going to follow them." Or, "No, that's really interesting. But no, I think I'm going to go over here to this other expert." That's one thing I see everywhere. BLAIR: That's a keen observation because those are the two categories of people who don't read it all. You see that not a lot, but you see it, it's a pattern. But the other pattern is actually fairly common, isn't it? Creative people are naturally curious. It's kind of in their nature to gather information from all sorts of different places. But there are these trends, we won't name names. But there's like the TED Talk du jour or the business book du jour and that comes out and it peaks. And for the next two and a half years, every third agency principal you talk about is building some sort of proprietary methodology around one point that came up in a TED talk or came up in a book and it's like, "Oh, man, you too.?" Yeah. How proprietary, is it if ... Yeah, I probably, yeah, I'm not going to name names, but... DAVID: I will. I'll name names. The thing is that there's some really good truth in these movements, right? BLAIR: I agree. DAVID: Michael Gerber was one for sure. BLAIR: Work on the business... DAVID: Not in it. Yeah. Exactly. That is brilliant principle. But then there have been three or four since then. And currently it's traction. That's what everybody is doing. BLAIR: So the one that comes up for me all the time is Simon Sinek's Start With Why. DAVID: Oh yeah, right. BLAIR: "What's your why?" And I'm a huge fan of that. But you see people trying to work it into something that they think is a meaningfully differentiated offering to their clients. Well, first, we start with your why? Well, everybody is starting with their why now. That's not to pick on Simon Sinek. I quote him too. He's got some great stuff. It's just for whatever reason. It's just a sign of his success. But then so many of these creative firm principals glom onto that and try to make it something that's theirs, that helps to differentiate them. DAVID: Which is separate than traction, traction is more of a management system. It's interesting. We kind of grow through these things. Who's the guy that occupies the number one podcast position above us? BLAIR: Tom Ferriss. DAVID: Oh, Tim Ferriss. Let's not talk about that... BLAIR: Yeah, we better say - somebody did a poll recently, he polled a thousand agency principals on what podcasts they listened to, and we came up number two. We're right behind ... We're probably really far away behind the Tim Ferriss and I joke to you on Twitter, "well, let's find out who this Tom Ferriss guy is. DAVID: We'll take him out." I'm just kidding. BLAIR: What's next on your list? DAVID: Okay, next on my list then is that they are visionary/persuasive. I think there's a lot of overlap between this and your leadership idea. So they not only have a vision for the future, which is not all that useful unless you can successfully bring other people around you into that same excitement. So the two things together, visionary and persuasive, that's one. Another is that they make really quick decisions, so quick that it drives people nuts. And I'm not saying it's bad. I'm just saying that this is almost a universal characteristic of these people with the X-Factor, is that they do not deliberate a long time before they make a decision. They tend to make quick ones. That's another one I've seen. BLAIR: Do you think that's maybe too broad to be in the category of X-Factor? Do you think like all agency principals and entrepreneurs are like that? DAVID: I don't know, you might be right. BLAIR: I usually am. DAVID: Well, I'm just going to skip right past that too. BLAIR: Can I back up to what you said earlier about visionary and persuasive? So I had they lead their people and their clients. Then the next item I had was eyes on the horizon. So that's your visionary part. DAVID: Yeah. BLAIR: Visionary and persuasive, that really is leadership, right? When I think of these people who are the most successful agency principals that I know that have the kind of it thing, they see things so much earlier than their people do, and they see things in their business so much earlier than I do. In fact, I think of a friend of mine, he's, one of the most successful friends I have. DAVID: You can mention my name, it's okay. BLAIR: You're very successful David. But by almost every professional measure, he is even more successful. He's one of these people where we don't speak very often, but we're talking he tells me what he's thinking, and I hang up the phone, I think you're straddling the line between genius and insane because that conversation didn't really make sense. Then I swear to God, it's a really long time later, it's like three, four years later, I'm seeing everywhere that thing that he mentioned to me years ago, and now that conversation made sense. He is so far out ahead of anybody else I know and it really shown up in his business success. The stuff that he sees and thinks about and acts on, before it's even on my radar is just mind blowing. So I characterize that as eyes on the horizon, they don't have their eyes down on the minutiae of their business. They're not dealing with all the kind of ankle-biter issues for whatever reason, or whatever mechanisms they've used, just good delegation or great team members, or whatever it is, they're able to focus on the horizon and not just focus on the horizon, see further out than other people. Then this kind of speaks to what you were talking about before, the ability to act on it, the courage and the decisiveness to act on it. So these people act on trends that are way further out than most of us are even capable of seeing let alone seeing and making a decision to act on. DAVID: Yeah, and for them to be able to do that, it presupposes so many things about how they're running their business. You alluded to some of them, they can't be down in the minutiae. They had to be inventing, or however you say, inventing future value, creating future value as you talk about. Absolutely. But I'll bet you that a lot of his near certain ease about the future do not come true. But that doesn't dissuade him. So he throws things at the wall and then he sees fairly early on whether or not it's actually going to be true and if it isn't, then he moves on. What I like about that is he's looking up and he's making quick decisions. BLAIR: Yeah, agreed. Anything else on your list? DAVID: I have a burning question. I have to ask you at some point, when we're done with this list here. But I've found that they are not generally conflict averse. And I mean, with employees or with clients... BLAIR: That's so funny 'cause I wrote down crucial conversations. That's the next thing on my list. DAVID: Yeah, same thing, exact, same thing. BLAIR: The ability to have those crucial conversations and not avoid conflict. DAVID: Right, exactly. The ones who avoid conflict tend to not really thrive except I know some exceptions to that where they do even though they're conflict averse, but generally yeah, they have to be willing to have those ... And conflict averse is not as good a way to say it as you did, those conversations are. That's a better way to say it, 'cause we're not really trying to butt heads with people. We're just having the tough conversations. BLAIR: There's the great book called Crucial Conversations and it's written by five people (if five people can write a book). So it's written essentially by a consulting company. In the introduction, they're talking about following an executive team around for a while to figure out what the traits of the best leaders were. They talk about this meeting where the CEO is saying there's an invitation to be challenged on all the key issues. But in the meeting, he steamrolls over top of his executive team, and the executive team just kind of sits there quietly and takes it. Then one VP speaks up and challenges the CEO very politely and said, "Okay, you just kind of ramrodded us here. Can we back up and have that conversation again." So the CEO, apologizes and then he opens up the floor and a real discussion happens. As they're leaving the room, somebody says to the consultant, "Do you see what that guy just did? If you can figure out what that is, that is the key to his success." And that's where the book Crucial Conversations came from. I read that book and I remember I wanted to have a crucial conversation with my wife, who's also my business partner. She was driving me to the airport, I was driving and she's in the passenger seat. We're going to the airport and I've read the book and I still myself to have the conversation. I don't even remember what it was about. And I say what I have to say, and I've got my eyes on the road and I'm thinking, "Oh my god! This book works great. I feel fantastic." And I look over at her and she's crying. DAVID: I thought you were going to say she was asleep. And that's why it went over so well. BLAIR: Then I thought, "Okay, there's probably other chapters of the book I need to go back and read." So I'm not great at those crucial conversations but that is absolutely a trait that I see in the most successful agency principals, is that they don't steer away from conflict. But they head right into it and when it's done, it doesn't feel a conflict, it feels like a big step forward for everybody. DAVID: Yeah, absolutely. I've learned so much just from you on a personal basis about not being afraid of the truth. So if you swallow that, if you can get to the point where you're not afraid of the truth, then the second thing I've learned just listening to you talk about this stuff is like, "Okay, if you're not afraid of the truth, then let's find the truth as soon as possible." I'm not talking about just in a sale setting, which is where you talk about a lot I'm also talking about it like in relationships. As you were telling that story about the leader who backtracked successfully you know what was even just as significant is the key manager who was capable of stopping that conversation without embarrassing the leader. That is an amazing skill too. That person probably went on to be a fantastic leader in his or her own right as well. BLAIR: That's who the feedback was on the team member said, "Okay got you." That vice president if you can figure out what he just did that's his key to success the ability to basically confront the CEO in a polite way to challenge, to have that conversation that everybody wanted to have and nobody else could bring themselves to have. So that is the key. DAVID: Yeah, without embarrassing him. So both of those are good. BLAIR: Well, I appreciate the credit you've given me for your successful marriage for all these years 'Cause I will take credit for that. You're welcome. DAVID: Yeah, 38 years now. Okay. So here's the big question. I have of you, it's this. When you come across a situation and you've discovered you've said already you've admitted that confidence is a really significant, maybe the most significant factor and you come across somebody who struggles with that. What do you do? BLAIR: That is a good question. I've heard you talk about this. It's really hard to build up somebody's confidence. I was in Strategic Coach for a few years founder Dan Sullivan is a brilliant, brilliant man. One of the brilliant things I heard him say is the most valuable asset that an entrepreneur has is his or her confidence. When I heard that I just almost screamed, "Yes." Then all of these crazy things that I do that I'm somewhat embarrassed about to build my own confidence all started to make so much sense to me. Then I went home and explained to my wife like, "These things that I do that drive you crazy and I'm a little bit embarrassed, like some of the things or things that I spend money on." If I want to feel like a million dollars if I want to feel my most confident I pay somebody to ... You cannot put a monetary value for me. I cannot put a monetary value on having shined shoes because it's the world of difference. BLAIR: I've heard people say that underwear does that for them. I've never experienced that where you go out in the world thinking, "This underwear feels great. If anybody could see me without these clothes on, they would be super impressed. I feel like I could walk on water." I've never experienced that. But I've heard women say that a few times and I'll just take their word for it. But for me, it's having my shoes shined. DAVID: And the flip side of this too is, since we're in a little bit of the confidence business, you can see how an undermined confidence just can wreak havoc in your mind. Whether you're in a consulting world, or whether you're in the marketing world or design world, whatever it is. Because part of what makes you work is this confidence and if you've struggled with some mental health issues, depression issues, I've struggled with depression issues. It just messes with you and it takes this internal fortification that you have to just hold on to while you get through that tough stretch, because this innate confidence is so central to your own success. BLAIR: I'm so glad you brought that up. I think that's entirely valid in my entrepreneurial career I've never really had that moment where my confidence has disappeared on me. But it happened when I was an employee for a really large ad agency. I worked for somebody who was very good at eroding the confidence of the people who worked for her. I felt like I was in an abusive relationship and I doubted my ability to do anything. If I've felt this way, for any extended period of time, in my own business, I don't know how the business would survive it. I used to think you could take my entire business away from me, as long as I had my list my opt in subscriber list, I would be fine. Then I thought you could take my list away from me, as long as I had my reputation, I would be fine. Then I realized you can tarnish my reputation. But if you just took it away, and I was unknown to anybody, I would still succeed. In fact, I think I could probably even build a better business as long as I had my confidence. But if you took my confidence away from me, I'm done. DAVID: Wow! BLAIR: I'm done. I think once that was pointed out to me by Strategic Coach and Dan Sullivan, I realized all these crazy things that I do and that others do, we need to keep doing them. And the people around us need to understand that in the agency, the most valuable asset in the firm is the confidence of the principal. There are no categories for this, whatever anybody else in the firm is doing, if it is eroding the confidence of the principal, it is counter productive. DAVID: We should probably just end on that, it's such a great thought. I'm thinking too, about putting employees in places that erodes their confidence promoting them when they shouldn't have been promoted or whatever and they're swimming around feeling very uncomfortable or sentencing them to something rather than blessing them with something. All of this works in so many different areas. This is such an interesting that makes me wish that we were on a like a live town hall, where we could answer questions from people and get some of their thoughts on this stuff. Too bad it's a two way conversation here. BLAIR: Yeah. DAVID: Fantastic. This is really interesting. Thank you for bringing this idea. Say the French thing one more time for me. Say it really well. BLAIR: Eh, je ne sais quoi David. DAVID: Okay. Bye Blair. BLAIR: Apologies to all my French friends. Francois if you're listening I'm sorry.
Starting...Existing...Thriving
Blair interviews David on what each of the three levels of success in running a creative firm looks like. Links 2Bobs Episode 39 - "Replacing Presentations With Conversations" The Win Without Pitching Manifesto, by Blair Enns The Business of Expertise: How Entrepreneurial Experts Convert Insight to Impact + Wealth, by David C. Baker Built to Sell: Creating a Business That Can Thrive Without You,by John Warrillow Pricing Creativity: A Guide to Profit Beyond the Billable Hour, by Blair Enns 2Bobs Episode 31 - "Mastering the Value Conversation" TRANSCRIPT BLAIR ENNS: David, it's been a while. DAVID C. BAKER: Has it? I haven't missed you all that much. Have you missed me? BLAIR: Since we've last recorded a podcast, I was listening to one that aired recently and it was talking about my first book is in its fourth printing. It's now going into its fifth printing and I realized that it just aired and we recorded that over a year ago. So if Marcus is digging into a backlog that far, that means we haven't been together for a while. DAVID: Yeah. And it's scary too because imagine how much our thinking has changed in a year? 'Cause you were wrong about so many things. BLAIR: That's an old joke, you need new material. DAVID: Okay, sorry. BLAIR: So since we've last recorded a podcast, I know they keep airing because we've got all this in the can, but you and I did an event in London and then we came home and then you and your wife came up to Kaslo and we celebrated. I was just looking yesterday at a photo of your wife and my wife in a bear den together on her birthday. DAVID: Right, I didn't want to go in it, it's why I took the picture. BLAIR: You're too smart. I took it from inside the bear den, you were outside. DAVID: Right. BLAIR: And then you went to Chile on vacation and then you've probably been in some other places. DAVID: Yes, I have. I'm kind of off the road right now. I head back out of the country on Friday but I've been back trying to get our 61 acre farm livable. So just a few minutes ago, if you'd seen a picture of me, I would have been covered in white from head to toe because I am still trying to figure out how to use a paint sprayer and I realized I have a lot of expertise to develop yet. BLAIR: That's why on a hike I was carrying the bear spray. Okay, so it's been a while since we talked. Today we're going to talk, I want to call it good, better, best but it's really the three levels of success in running a creative firm and I think you've broken it down into the categories of starting, existing and thriving. And you sent me an entire spreadsheet to help navigate this conversation. Things like utilization, positioning, financial, marketing, etc. All of these different things that should be true or should be happening or you should be aiming for at these three different levels of success. Do you want to just take a minute and talk about those three levels of success? Are there lines that delineate between starting and existing and existing and thriving? Well, I think there are. We'll find out I guess, right? But I tend to think in triads. And so as I'm getting a question from a client, I'll sometimes just play this mental game, are they starting out or are they existing or are they thriving? And there seem to be these three different categories. And then you can expand that and say, "Okay, what about financial performance? What about how they think about service offerings or how they think about positioning and how they think about management?" And so I think it's useful to think in these categories because it's not as if a single firm is all in the existing, the middle category. They might spread across different ones and just gives us an eye opening into what our world looks like from the outside. DAVID: I think it'll be kind of interesting to talk about. But you're probably going to let me know how interesting this is or not. If you rush me through these, that'll be a sign that it's not that interesting. BLAIR: Well, let's just see. Let's start with utilization which is the first thing on your list. DAVID: Right. 'Cause such an exciting word, right? Utilization. BLAIR: Yeah. So I'll just have a little nap here while you talk about utilization. DAVID: Like I said to you one day, I'm pre-interested. Okay, so starting would be subsidizing clients and the typical firm in a developed country is charging and getting paid for 42% of their time and they should be getting paid for 60% of their time. So most firms are in this starting category and they never really get out of it. It's more of a typical category. So there's some significant degree of underpricing and/or overservicing. And that's the first one, subsidizing clients. And then hopefully, we get to the point where we get paid for everything we're doing, that's the middle category of existing. And then thriving is package pricing where we're applying what you would call value pricing. Where there's very little corelation between what we're getting paid and the amount of time we're putting in. It's really more about outputs and accomplishments and so on. The thing that interests me about this and I'm curious to hear your thoughts on this as well, is that most firms want to skip the middle step. So they're not getting paid for all their time and they want to jump right to value pricing without going through the middle step of getting paid for all the time that they're working. And some of this is influenced by this hatred that everybody has for timekeeping, but it's also driven by this sense that people have of they're being cheated. It's like, "My clients are not paying me what I'm worth and I feel rotten about that, I feel anxious, I feel resentful and I want to jump right past that and go straight to getting paid for more than the time I'm spending." So that's the first one, utilization. BLAIR: Well, I wonder if that leap isn't because they're not really thinking about value-based pricing in terms of getting paid for the value that they create but they see it as kind of a packaged way of actually getting paid for what they do. Does that make sense? DAVID: It does. So they're using a very advanced way of sort of eliminating this subsidization without ... Yeah, it kind of does. I feel like people, they have this resentment level about not getting paid for what they're doing but they don't really know how to solve it and they jump into different plans to solve it without really understanding all of them. This is what you've spent so much of your professional life doing in the last couple of years, is helping them think through. Like we did a podcast recently about the value conversation and all of those things. And in London when you and I were talking, I was listening when you were talking about practicing the value conversation. And it was so interesting for people, the light came on on their eyes. And I don't know exactly why but I feel like they need to at least go through this second phase first because it's like learning to walk before you can run and run before you can whatever the next thing is, leap I guess. BLAIR: Yeah. And I wonder about that. I kind of think if I were giving somebody who's starting out right now some advice, my advice would be to skip over that middle section of getting paid for what you do. But if I may, I want to back up a little bit and just talk about these three categories of starting, existing and thriving and let's just put some description around them. I think we can agree that in the starting phase, essentially you have a hypothesis and your hypothesis is that you have something of value that the market values and that maybe there's a business there. So you open your doors and you're essentially exploring your hypothesis. You don't know whether you validated or not. There's all kinds of fear and there's all kinds of experimentation and there's all kinds of hard work and you're trying different things and you're seeking validation. And I would say in the existing stage, you have validation, there's a business here. You're not going to go out of business tomorrow but probably you're earning like what you would in a job, maybe a little bit more. So it's okay, I have validation from the marketplace and then the next step is essentially optimization or getting ... Another way to look at it would be the third category which is thriving. Beyond existing, beyond earning what you would in a job. And I know I'm probably jumping ahead and maybe screwing up some of your things that you want to talk about here but we all have a sense of what thriving is and we all have a sense of what starting is. Starting is you were working with a hypothesis. Existing in the middle is I validated it. There's something here, now we need to take it to the next level. And thriving is the next level. Are those good enough descriptions for the three categories we're talking about? DAVID: Yes. BLAIR: Or would you change them? DAVID: No, I think they are good enough. What's interesting to me though, is that some businesses that have been around for 10 years are still in the starting category and they don't ever get to that other one. And those are the ones where I might go in and say, "Hey, just an idea here, but have you considered that maybe you shouldn't be running a firm? You could be making a lot more money working for somebody else, you'd be working fewer hours and you'd have no financial risk." BLAIR: And you'd be sleeping better at night. DAVID: Right, exactly. All those things. Most folks just sort of look at me and grin and say, "Yeah, I know all that but I'm willing to invest that much just so that I don't have a boss." You don't automatically go from starting to existing after you cross, say a two year threshold or something like that. There is some mentality that has to change on your part. BLAIR: Yeah. Okay, so you talked about the first point of how utilization is different in these three categories of starting, existing and thriving. You go from essentially subsidizing your clients to getting paid for what you do to charging based on the value that you create or package pricing. The next thing that you want to explore under these three categories is positioning. So how does positioning change? DAVID: And this is a little bit different than we would have talked about it probably 10 years ago maybe. You and I both noticed that that's changed in the marketplace. So in the beginning, you're usually an undifferentiated firm. So there are many viable substitutes for what you do. And most firms make this transition for sure, they go into the existing category. And in this phase, and I delineate this scientifically in the book, The Business of Expertise, you need between 10 and 200 competitors and then we can talk about what that means in terms of your prospects set and so on. How many prospects you need. But most firms don't go into that third phase there where there are no competitors essentially because of some process they have or some proprietary IP or some black box. That's where you see firms thriving and they're making so much money. It's not wrong at all, it's just that they really control their marketplace. And so, most people in this category are probably in this existing, the middle phase, and very few are at the undifferentiated and very few are at the proprietary IP side. I'm not sure what that number is, I'd be interested to see what you think. I would guess that maybe 10% of firms are in that high level, less than that maybe. BLAIR: I'm going to recap what you said here. So positioning-wise, when you're starting out, you're saying the firm begins as fully undifferentiated. You're basically saying yes to everything and taking whatever you can. And then when you get to the existing phase where you kind of validated your hypothesis, you typically have 10 to 200 competitors. And then in the thriving phase or stage, you say you essentially have no direct competitors because you have proprietary intellectual property. Is that right? DAVID: Right, a black box. Something that they just simply cannot get somewhere else. And that's built on the second phase for sure. You start at the 10 to 200 competitor phase but then you figure out some magic and you bring it to the marketplace. And that's where just the light comes on and everything just falls in place for you. BLAIR: I want to suggest the slightly different way to think about this. And that is at the very beginning, you starting out, when you have one client, your firm is highly specialized. DAVID: Specialized in what? BLAIR: You're specialized in the discipline for market, you're doing x for why, you have one client. And then I'll suggest to you that your second client is a lot like your first client. And it's often because that first client maybe you took that client with you from another firm or whatever. He was attracted to you for whatever reason. Your second client is a lot like your first client so you're a highly specialized entity. And then you think, "Oh my god, I have to mitigate my risk. I don't want to put all of my eggs in one basket. I don't want to pigeonholed." And then you broaden out. DAVID: And then you mess up your positioning with all these other clients. BLAIR: Yeah. DAVID: That's interesting, I never thought about that. That is really interesting. So the secret is to never have more than one or two clients and then your ... That's Blair's advice for the day. BLAIR: Okay. Now let's move on to the category or employees. How does your employee base change as you go from starting to existing to thriving? DAVID: This one is really fun to me because I think everybody will identify with this. In the first phase, you're hiring what you can afford. It's just like, "What? I can't pay more than this and I know the kind of expertise I would like, I just cannot afford it. So the primary thing is this is what I can afford and I'm just going to get the most capable person I can with this amount of money." That's the first phase. BLAIR: Yeah. We can all identify with that. DAVID: Yeah. And none of those people are still working for you but you still remember those days. BLAIR: Yeah. DAVID: And the second phase is existing. And here there's this flip that occurs in your mind and you begin to hire for what you need even if it stretches you financially and you grow into it. So it's not what you can afford, it's what you need and you've built this new assumption on the fact that you're tired of training people, these blank slates that come to you and infusing them with everything you know. But the firm never grows beyond that because who's smarter than you is getting hired because you can't afford them. So the second phase, what do I need even if it costs more than I really I'm comfortable spending at this point? The third phase is a really fun one. And that's where you are on the lookout for amazing once in a lifetime hires. And even if you don't need that person at this point, you go ahead and snug them because you're running your firm so well that it's not going to put you under to have an extra and actually a highly paid extra person on staff. And this is that third phase where you make the once in a lifetime hire every once in a while even when you don't quite need them yet. BLAIR: I immediately recall a number of conversations I've had with my most successful clients and I'm sure you do too. You've had the same conversations where you asked about a particular team member and they said, "Oh, that person came to me, I didn't have a job for them but I just couldn't believe there skillset. So I hired them and I created a job for them." DAVID: Right, exactly. That's exactly what we're talking about. And it's so fun to be at that point in your businesses' history where you can do that. It's such a luxury. BLAIR: Yeah. Let's talk about financial. You've got some financial numbers and I want to know where the hell they came from. First, why don't you walk us through them. When you're staring out, you should be earning what? DAVID: So this financial thing is about how much money you're making. And in the first phase, it seems like principals are making 160 to 200 in U.S. dollars and there's not much more beyond that. That's pretty much what they get. They may not even get every pay check, they may catch up sometimes or they may not, but they're making 160 or 200. If they stop and thought about it, they would say "You know, I could make more money somewhere else." That's the first phase starting. Existing, they may make the same amount of money. 160 to 200,000 U.S. dollar equivalent, but there's significant profit at the end of the year. And this builds up starting at their fiscal year and they may take out some quarterly or when they're getting ready to buy a boat or another house or whatever, but there is some profit. And then in the thriving, the final one, the third one, they're making 400,000. Now, we have to index this if there's more than one principal but there's 400,000 plus a bunch of profit. And there are not many ... Again, they're probably on a 10 to 20% of firms in this third category with all the things that we're talking about and especially here, 400,000 plus profit. That's where firms are really thriving. BLAIR: So I'm imagining the principal of a firm who's in the starting phase, they've been at this like 15 months, they're into their second year. They're still starting, they're still figuring it out and they're thinking, "Whoa, I should be making 160 to 200? When does that happen?" DAVID: Yeah. Where somebody who's making 400 says, "I can't remember when I only made that amount of money." People's expectations are so different based on what they bring to the table. BLAIR: Yeah. DAVID: But what principal could not make that and more as a key leader at another firm? It kind of gets crazy when you think about it. BLAIR: But are you saying if you're at the starting phase, let's say you're a year in and you're not at 160, what does that tell you? DAVID: Well, I think we need to make allowance for the fact that we're going to invest in our businesses. But if somebody's starting out and they don't have employees, it's hard for me to foul them. Anybody making less than 160,000 equivalent U.S. dollars, I have to search a long time before I find somebody making less than that. So it tells me that either you're really starting out and haven't figured out some things or your expectations around money are very different than mine are. Or you're really making some huge investments in the business and you'll grow out of that at some point. But it should signal that something's wrong if you're not regularly making that amount of money very quickly out of the gate. BLAIR: Yeah, okay. And we could do some math on that around utilization rates and hourly rates etcetera, to come up with something, but we won't. Let's keep moving. BLAIR: So the next category you have here is marketing. And when you're first starting out, how do you about getting new leads that ultimately turn into clients? DAVID: Yeah, most people don't do anything because they usually don't start with the blank slate. They usually start because some client has said on the Q.T., "Hey I want to work with you." And so they start with some promise of work. Or they're kind of the new kid in town and for the first, and I find that it's about three and a half years, that's about how long it last, they have enough referrals or just word of mouth kind of stuff happening. And then if things slow down a little bit, they'll do some cold-calling. That's what usually happens at this first phase and it kind of creates these bad habits for folks in the early days because it lasts for three, three and a half years and then it starts to tail off. Then we go into the second phase of existing where most firms rely on email marketing these days. Now you have some outliers who are doing different things but that seems to be the basic recommendation, email marketing. And it's still very effective and some firms are getting very wealthy doing that as their primary lead generation tool. But not many firms are really in the thriving category who are relying primarily on email marketing. They're doing something else, they have some notorious thought leadership and there are many things that fall in this category. They could have written a great book or they could be a great speaker who gets invited to different keynote conference opportunities or maybe they have a podcast or something like that, but it's moving beyond the email marketing. And so cold-calling, referrals at the beginning, email marketing and then they leave that behind and they have this luxury of moving to more of a notorious thought leadership platform. BLAIR: I love your choice of an adjective there, notorious. What do you mean by that? DAVID: Notorious as in hated? No, that's not what I ... What I mean is well-known I guess is what I mean. So it wouldn't count to have a podcast that nobody listens to or a book that nobody buys. I'm talking about well-known type of thought leadership. And like you talk about often, it's probably something that's singular. Like it might be a conference that you do or it might be a book or it could be a podcast. It's usually not a combination of a lot of things. You've just fallen into a groove, a pattern that fits your personality and your particular focus in the marketplace and everything is working well. And as long as you're disciplined and you still take risks with your thought leadership, then you don't ever have to go back to just doing email marketing like you used to. BLAIR: Yeah. And so you've got referrals along with cold-calling in the starting category, but I think when done properly, referrals follow you at every level. And at the thriving level, I would suggest referrals really do come back. But I think your point is that like in the very beginning, it really is just about referrals. The first client is referred to you or they were a client at the firm that you worked at, you took with you. And you said there's a three to three and a half year cycle for referrals. I don't know if it's referral-based but I've talked about this before. And one of the first patterns that I saw as a consultant is there's a seven year window. There's a point at which where roughly seven years where organic growth just stops. And you explained to me, your hypothesis was that's when you thought natural referrals quit working. And then there's school of thought around how you actually worked to cultivate referrals, that's an entirely different level. But I think we should probably do a podcast on referrals at some point because that's a topic in of itself. And I agree with you, it's vital early and then most people kind of let it go. But some of those firms that are really thriving, they have formalized how they get their existing advocate, loyal clients to refer other clients to them. DAVID: Yes, exactly. They're intentional about it. And the difference seems to me is that they bring their referral sources along with them. So as their capabilities change, they are providing the correct language to those referrals in an active way, so that the referral sources are given them even better business than they did in the past. That is something we should talk more about. BLAIR: Okay. Let's talk about fee billings per FTE. This is one of my favorite numbers that we often refer to it as AGI per FTE, which is ... Do you want to explain that acronym? DAVID: Sure. So AGI stands for Agency Gross Income. The rest of the world would say adjusted growth income but that's a very different meaning than what we mean by AGI in this industry, and it's basically your fee billing. And then if we define FTE equivalence, if there are nine full-timers and two halftimers, then that's 10 full-time equivalent. So the starting phase is less than $150,000 per full-time equivalent. So we have a 10 person firm, that means that their AGI is less than 1.5 million. There's some sort of a transition here that firms struggle to get beyond and they don't exactly know how to break out of that. It's a combination of all kinds of marketing and positioning and lead generation and confidence and all those things that we talk about quite a bit. But in this first phase, they're somewhere below this. The second phase is a really narrow band. It's really interesting. I can almost say on the phone, I can say to somebody, a prospect that I might be talking with, I can say, "Let me take a guess, you don't have to tell me if I'm right or not, but I'll bet your fee billings per full-time equivalent ..." And then I'll give them a number between 150 and 160. And this very narrow band is the second place they get stuck. And most firms, the vast majority, never get above 160. And the ones who thrive in this third category get above 160, and I've got clients that are even above a million, many of them above 450, 500. Now, you can't get there without value pricing obviously and packaging the work that you're doing with expected service offerings and so on. So those are the three, less than 150, 150 to 160, the big stuck point, and then above 160. BLAIR: So, again, I'm going to give you another way to think about this because when you say starting, that first phase or stage that we're talking about, I'm thinking about a solopreneur. And a solopreneur, if you're making 200, you're clearly billing more than 200. If you think of the solo creative person who goes out on his or her own, they're subsidizing the clients so they're not billing for all of the time that they're actually spending as you pointed out at the beginning. So they run into this maximum of how much they can based on the fact that they're subsidizing their clients. And it's probably around ... What do you think it is? Like what do you think somebody's earning, just say in kind of gross sales, before they have to hire that first person? DAVID: They probably should never hire anybody until they're at the quarter of a million dollar range, so about 250 I would think. When you hire somebody before that, you're really restarting the clock and now all of a sudden you're spreading this income that you've generated across more and more people. I don't see much connection between billings per full-time equivalent and the size of the firm. In other words, some of the most profitable firms are smaller but not always. So when I say starting, I don't necessarily mean the business is young, I mean they're starting on this path of entrepreneurial experience and success. So many firms could be 20 years old and they've never broken that 160 category per employee. So it's just something about like how do I get over this hump? And it may take people two years or it might take them 20 years or they may never get over that hump at all. BLAIR: Yeah. So you have these three categories of you're below 150 in AGI per FTE and then the middle category, where I see a lot of it too, you're stuck at 150 to 160. And I would say it might even be a little bit lower than that, 140 to 160. I don't know where the line is, you're drawing at 150 to 160. And then beyond that 160, once you tend to break free of that 160, then you kind of gain momentum again and it's easier to get out into the 200s and even 300s and that's almost always because you're moving to a value-based pricing. Is that right? DAVID: Right. Or you're very, very confident. But usually, yes. It's about value-based pricing. BLAIR: Yeah. All right, the next category is succession. So in a starting firm, it seems a little bit ironic that a firm that's in the starting category would think of succession. Because if you're just starting out and you're thinking of getting out, then something's not working therefore you don't have anything to sell, do you? DAVID: Well, again, I'm not talking just about chronology, I'm also talking about how successful they've walked this road of entrepreneurial success. And so many firms really are ... You have a 20 year firm and really they don't have 20 years of expertise under their belt, they have 20, one year periods under their belt. They don't operate like a 20 year firm, they just had the same one year 20 times, that's what I mean by starting. BLAIR: It's Groundhog Day 20 days in a row. DAVID: Exactly, right. And these are the firms where they're not just remarkable per financial performance and therefore nobody on the outside is going to be all that intrigued with buying the firm and yet the principal is tired. They're tired in part because of the lack of financial performance. If that wasn't the case, they probably wouldn't be that tired so they have to settle for either just closing the firm or getting almost nothing for it by selling to employees. That's that first starting phase of entrepreneurial success. DAVID: And then in the second one, in this existing phase, they sell or merge within the industry. And you and I have seen huge changes here. There aren't many firms who are selling to the holding companies because the holding companies don't have all that much extra money and those purchases are so typical and the principal is not that interested in it but that's what happens in this existing phase. And then in the thriving phase, they get rich by selling in a very nontraditional sale. So it might be a consulting firm that buys them or it might be a huge digital firm that buys them. Or they could sell themselves to a client or maybe a roll-up in some rare circumstances. So it's just interesting to think about these three different categories that firms tend to think about from a succession standpoint. I put this on the list 'cause I do so much succession work and I see people strange expectations about what the firm will be worth. And they have this very glorious ideas about what somebody else will be pay for the firm and I have to have an awkward conversation. It's like, "You know, this has been more of a lifestyle business for you. You haven't made a lot of money, you've not made a lot of profit, there's not much to sell after you leave." But that's fortunately not true of every firm. A lot of firms are very, very saleable these days which is great news for them. BLAIR: And it reminds me of John Warrillow's book, Built to Sell. It's a business novel and the owner of a design firm is fed up and he goes to his business advisor or his accountant and says, "Okay, I want to sell the firm." And the guy laughs at him and says, "You've got nothing to sell." DAVID: Yeah, a great day in his life to find himself. BLAIR: So he helps him navigate to building a business that is built to sell. It's actually a great book and well worth reading. DAVID: Yeah. All right, so I am going to do something here. Are you ready? BLAIR: I'm always ready David. What are you going to do? DAVID: Well, I'm going to flip this on you and I want you to come up with three categories around pricing. BLAIR: Oh yeah, that's easy. DAVID: Okay, well you should have some thoughts about this, you just wrote a book. So what are the three categories for pricing that you see out here? BLAIR: Essentially, you have three things that you can sell and I think the three categories really mirror perfectly your categories of starting, existing and thriving. In the beginning, you are selling time, you are selling the inputs of time and materials. And then when you get to the next level which you're calling existing, and I'll just say it's the next level in pricing, is that's when you're selling outputs of deliverables. So instead of charging based on the time, you're charging based on, I'll put in air quotes, the market value of something. And you're still counting your inputs of time and materials but you're essentially pricing based on what the market will bear and you're probably commanding a premium. The client is getting price certainty. So instead of saying it's going to be $200 an hour and we'll finish when we'll finish, you're making an estimation of the number or hours, probably a range, and then you're pricing it in the higher range and the incentives are for you to come in a bit below that. So your AGI per FTE is going to go up. You're trading a price premium for price certainty because you're selling the deliverables, the campaign, whatever the output is. And then the third level is when you let go of both of those things and you're selling based on the value that you help create. So you're pricing based not on the inputs of time and materials, not on the market value of what you think the market value is, that service or that output, but based on the revenue gains or cost reductions or other emotional forms of value that your solution will help to deliver. And very often when you do it properly, it's really almost fully untethered from the inputs of time and materials. So those are the three levels of pricing. First you're selling inputs, then you're selling outputs then you're selling outcomes or value. DAVID: So if somebody's in the first category of selling inputs, can they skip the second step and go right to value? BLAIR: Oh yeah, absolutely. DAVID: Okay. Oh, that's interesting. BLAIR: Yeah, and so we talked about the value conversation before and if somebody hasn't listened to that, they might want to go back and listen to that episode. Really, the big shift that happens when you learn to conduct a good value conversation is you completely let go of the solutions and if you're letting go of solutions, you're letting go of cost. So you're actually setting price before you even think ... And this is the trick that you've got to learn to do. Before you even think about what it is that you would do for the client. And when you're able to do that, when you're able to set price before you think about your solutions, let alone your cost, then you have made that transition to the next level. DAVID: I hope people will go back there and listen to that one. It's called "Mastering the Value Conversation," April 4th. That was a really interesting one. Allright, this was fun. BLAIR: Hey, I'm driving here, this was fun David. DAVID: No, I'll tell you if it's fun. If it's ... We should do one like: what's starting, existing and thriving to do a podcast together? What are those three categories? I don't think we want to do that. BLAIR: Oh god, yeah. Yeah, we're still starting. Hey, when we reconvene (we're going to record again in a few days) we're going to talk about the X factor. Now, I'm going to send you some homework on this, I'm going to ask you to think about your most successful clients and what did they have in common. And then we're going to talk about that in the next podcast. DAVID: Okay.
Replacing Presentations With Conversations
David re-reads the 2nd chapter of Blair’s first book, leading to a discussion about how sales people have to choose between either presenting to clients or being present to them. TRANSCRIPT DAVID C. BAKER: Blair, we are going to talk today about replacing presentations with conversations. BLAIR ENNS: The second proclamation. DAVID: Yeah, it's actually the second chapter in your book, which I'm holding right now in my grimy little hands. The book, it's black with red, looks like foil to make it look expensive, so you could charge an extra couple bucks for it probably. It says Win Without Pitching Manifesto, and the second chapter is about replacing presentations with conversations, but I think if you would let me, I'd like to make a public confession before we get into this. BLAIR: Sure. DAVID: Your book actually sells better than mine, and I want you to know that that pisses me off. BLAIR: I read a great quote the other day, maybe it was Gore Vidal who said, "Every time a friend succeeds, a little part of me dies." DAVID: I don't know if this was the third or fourth printing, but since we published the book, we got these three skids of your books. Not only do I hate the fact that your book has sold better than my last book, but I have to haul these skids of your book like for punishment, to remind me constantly that they're selling. BLAIR: That's what you get for moonlighting as my publisher. DAVID: Yeah, instead of focusing on what I should be doing, yeah. BLAIR: The fourth printing should arrive any day now, it's larger than all the other ones. Can I just keep bragging here? I'm surprised it's been, well I think it's somewhere around seven years, and sales just keep going up, I can't explain it. DAVID: I'm more surprised than anybody, because I've read it and I know you. The idea is replacing presentations with conversations, and actually I read through chapter two again, it was actually fun to read that part of the book again. You talk a lot about avoiding the big reveal, and the first thing I could think of was several episodes of Mad Men where they have the single pitch board on an easel in the conference room and it's covered, and when they say "big reveal", they mean big reveal, they lift this thing up and there's this tension in the room. You talk about the fact that we're addicted to that. I'm not sure that people would admit that they're addicted to that, can you talk more about that first, to start us off? BLAIR: Some people might listen to that and think, "Well, I'm not addicted to that," but I think you and I probably have different definitions of creativity. You might have kind of a broader look at what it means to be creative, and I take my cues from Mihaly Csikszentmihalyi, who wrote the book Flow, and he studies happiness and creativity. He says creativity is the ability to see, the ability to bring kind of a new perspective to a problem. It's not the ability to write or draw, he refers to that as "personal creativity". BLAIR: Creative people who can look at things differently, they just see things differently, that's kind of to me the hallmark of creativity, one of the things that goes hand in hand with being creative is the ability to think on your feet, so these two things, for reasons I don't fully understand, they're tied to each other. When somebody has this really strong ability to kind of bring a fresh perspective to a problem, they also have a really strong ability to go with the flow and deal with whatever kind of objections are thrown at them. If your strength is standing in front of a room, saying something, hearing an objection, and then having to react to it, and then kind of sell in the situation or recover from a situation, then you are going to look for as many situations like that that you can create. BLAIR: I'll give you a great example of a friend and a client from many years ago, creative director at a small design firm, and he was presenting a new identity to a consulting firm. He does the big reveal, and it's very quiet, and then he's a little bit nervous because it's so quiet, and he says, "What do you think?" One of them says, "Well interesting, I notice you've changed our name from XYZ Consulting to XYZ Consultants." It was just a mistake, an error on his part, and he responded immediately. He said, "Exactly, because consulting, that's what you do, consultants, that's who you are." They bought it, so they changed the name because he just responded in the moment. BLAIR: Creative people love being in that situation of presenting, having to deal with an objection, and then coming through it, because the euphoria is profound, it's huge. If that's who you are, if that's your strength, commanding a room, having to dance, having to respond to objections, et cetera, not knowing what's going to happen next, then you will create as many situations as possible where you get to do that, and the whole time you will tell yourself and tell others and tell me and tell you, "No no no, that's the way this business works, or that's the best way to communicate this information to the client," and it's not. It's all about you and your personal need to present as a creative person. DAVID: You would say that that's pretty widespread in the creative field, because most of the creative field has been walking down that path for many years, there's something about that personality. I think of it as diving into an empty pool and inventing water on the way down, that's how I think of it. When I think about public speaking, to me that's sort of what's happened, or when I'm doing consulting where I know that within a few hours, we're going to have to have some at least provisional answer, and we don't yet, and that's terrifying but also thrilling. There's something about the creative feel of creative entrepreneurs that's bringing that. Now, would this equally apply to presentations in a new business setting as it would to presentations as the work is unfolding? BLAIR: There are different types of presentations, and there are different times in the relationship in which we feel like it's appropriate to present. If we start with the idea that we are addicted to the presentation and the presentation does not need to exist, if you come around to my way of thinking on that, then you will look at the presenting that you do in a new business situation, and you'll realize that this is not necessary, I'm doing this for me. You really first have to come to grips and be honest with yourself about your own need to present. What I recommend is, reform yourself when it comes to your existing clients. DAVID: First. BLAIR: Yeah, first. Replace the big reveal with a series of little reveals, and then once you get your head around that, then you will be able to think about your need to present in a new business situation a little bit differently. There are all kinds of creative people outside of the creative professions, so most entrepreneurs I think fit this description of a creative person, because I think you have to be somewhat creative to be ... I test for this in the tests that we do for all of the people who enter the Win Without Pitching program, so I can get an objective measure of how creative in that sense, or how much they crave standing up in front of the room and being forced to dance. BLAIR: There's a rudimentary question that's, and I'll ask the audience right now, and I've asked this in many seminars or workshops I've led. Usually I do it after break, I come back into the room and I say, "Hey," and I'm clearly kind of roleplaying or playing a scenario, I say, "Hey, in the hallway, I just ran into the chairman of the board of your most highly coveted client. Think of the company that you've always wanted to work for. They're having a board meeting in the meeting room right next to ours, and I told them that I was spending the day with you, and they said, 'Oh great, can you send somebody in to do a 15-minute presentation on their firm? Because we're looking to hire a firm like theirs.'" BLAIR: Then I say to the audience, "You have 10 seconds to get over there and present. You have no time to prepare," you get up out of your chair and start walking, and then I say, "Okay, stop. What's your reaction? Everybody just measure what your reaction to that is, I've just told you you have no time to prepare, you have to go to a 15 minute presentation, you have to be there in 10 seconds, what's your reaction?" You look at the audience, and you can see the range of responses in their faces. Some people are grinning, these are the people, they would say, "I'll think of what I'm going to say on the way over there," and they love the stress of that moment because they have this great ability to respond, to think on their feet. BLAIR: These are the people, as you say, who love to dive off the diving board and invent water on the way down. Then you've got the kind of low autonomy people that are very systematic and process-oriented, and these people are horrified, they need vision and clarity of what's going to happen next. They need to know what their steps are, they need to be prepared, it's their worst fears to come off unprepared. They haven't even considered what they might say or the objections that they might encounter, and they need to be able to think through all of those things. BLAIR: If you're in that first category, then I can all but promise you that you have built your business around that strength of yours, and you have driven your cost of sale way up, and probably your closing ratios down. Now obviously, there's some places where it's served you well, but for the most part when it comes to getting new clients, I'll bet you it's hurt you more than it's helped you. DAVID: Do you remember years ago, when some creative firms, especially designers, would take a portfolio book, and there were pages that you'd flip? I remember reading this study, I don't remember where it was, how the pacing was so different if you controlled it as, say, the principal of the firm making this presentation, or let the client control the pace, how much faster the pace was. They were not interested in the presentation, they were much more interested in getting to their issue. I think that plays into what you're talking about, but the question specifically that's coming to my mind right now is, like so you talk a lot about how the expert needs to direct the relationship, how is the expert directing the relationship if they're not talking that much, if the client is doing most of the talking? In other words, if we're letting the client fulfill their needs here, how are we not relinquishing this need to direct the relationship? BLAIR: Well, I think you know the answer, because if you're not talking, what's left? DAVID: Listening, or asking questions. BLAIR: Yeah, if you map out the role of the two parties, buyer and seller, over the length of the sale, you will see that when it's done properly, a proper consultative sale, early in the relationship, the salesperson is talking about 25% of the time, and they're using their 25% to ask questions, and the client is taking 75% of the time, and they're using that time to give their responses. Then at the end of the sale, the close, it's reversed, the client is speaking 25% of the time, and they're asking you, the seller, the questions, and you're taking 75% of the time to respond to their questions. Nowhere in there are you standing at a PowerPoint deck in presentation mode, you're either asking questions or you're responding to the clients' questions. BLAIR: It's interesting, that portfolio book and the amount of time. I had a really interesting conversation just a week or two ago with a principal that I know well, and we were talking about capabilities presentations, and I was saying, "No, the capabilities presentation does not need to exist." We were getting into a very constructive, respectful argument or a discussion where we're each advancing our views on the subject, about capabilities presentations, he was saying, "No, it's valid, you have all this information you want to communicate about your firm." I said to him, "How long does it take you to get through your capabilities presentation?", and he kind of looked a little bit sheepish, and I said, "Is it more than five minutes?", and he kind of looked at his feet, and I said, "Is it more than 30 minutes?" He said, "Well, it's about an hour." DAVID: I'm already bored just listening to that. BLAIR: Yeah, just by answering that question, I think he got the realization that, "Okay, this is all about me," but in fairness, this person is more kind of on the low autonomy process-oriented type person who's more comfortable, and it takes more training, more practice, and never comes completely easy to him to kind of stand up and be responsive. DAVID: Right, so we're going to have different perspectives on this based on who we are as people. BLAIR: Yeah. DAVID: One of the things that you say, and as I read through this I made a note of this phrase because it really intrigued me, you said, "We cannot be transparent if we are withholding information for the presentation." First, I'm not sure I completely understand. My mind first went to, are you talking about like putting the price at the end of the presentation? I don't think you're talking about that necessarily, but what do you mean and why do you say this specifically? BLAIR: I'm talking about in your relationships with existing clients. The big buzzwords of the last, I don't know, decade or so, authenticity is one, we need to do a whole podcast on authenticity. DAVID: God, I'm so tired of that word. BLAIR: My least favorite word on the planet. DAVID: "Storytelling" is close second for me. BLAIR: People talk about authenticity, transparency, and collaboration, these are three of the big buzzwords of our time. Let's just put authenticity aside, and talk about transparency and collaboration. Firms are out there saying, "We work transparently and collaboratively with our clients." Okay, well if that's really true, transparent means the client has a window into what you're doing, what you're thinking, where the project is at any time, you're not withholding. DAVID: Like and they know that you haven't even started it, and you've had it for three weeks and it's due in three days, that's transparency. BLAIR: Yeah, and they know it, that's transparency. Collaboration is where you're working with your client, rather than going away and coming back and presenting, so transparency and collaboration. You think about it, the presentation can only exist in the absence of both, right? The need for presentation is only there if you are withholding information from the client. DAVID: Yeah, if you're delivering new information that you previously had and chose not to give them, you're saving it for the presentation, so that's what you're talking about. BLAIR: Yeah. When I was still a consultant, I had been writing about this and talking about this for years, and then one day I realized, "Oh my God, I still do this." When I'm doing a business development audit, I withhold all of the learning until the end, and then I unveil my genius findings that makes me feel great. DAVID: I'm just going to let that pass, okay? BLAIR: Yeah, but it's like, "I'm going to rock this person's world by letting them know the really insightful things that I've discovered about their business," and my reaction is I want them to go, "Oh my God Blair, you're so smart, I never thought of that before, this changes everything!" That's the reaction I'm looking for, and all of us who go into presentation mode, we need to admit that that's the reaction we're looking for and it's really all about us, because what if I'm wrong? What if I got the name of the company wrong, like my friend, the creative director? There's a renamed company out there because of a slip like that. BLAIR: I realized I was admonishing my clients for doing this, and I realized I still do it too. What did I start to do? As I'm learning key things, I would share them with the client. I would never get rid of the final reveal, the final share, I knew I was being transparent and collaborative when in that final phone call, when I was delivering my findings and recommendations. I would begin by saying, "Okay, I've already shared with you most of what I'm going to share with you here today, we're just going to put a nice little bow around it." I'm just letting them know, "There is no big reveal, because I've already shared with you." BLAIR: If I would get a hypothesis, I would reach out to my client and say, "You know, I think I'm seeing this pattern," et cetera. That doesn't come naturally, but I felt like I needed to take my own medicine, and I realized that when I was doing this, I was far less likely to make a big mistake or miss something vital altogether. Like how often does that happen in a presentation where you think you've killed it, and the client goes, "Wow, that's great, what about Singapore?", "What do you mean Singapore?", you've forgotten something significant. DAVID: This is an early test along the way, so if you get your hand slapped it's not a big slap. It's not getting hit with a baseball bat, it's like, "Silly man, no, that won't work." I hear people objecting though, because I know that a lot of my clients and your clients are listening to this and saying, "Listen, I have the answer early in the process, and I just withhold it because it makes it seem to easy if I just blurt it out." I'm going to say, "Okay, I really know the answer, but we'll get back to you in about a week or 10 days, and then we'll embellish and clean up and prep the answer and give it to you," because they feel like they're not going to be able to charge the fees they want to if it looks that easy to them. What are you going to say to somebody that's, I guarantee you some people are going to think that when they hear what we just talked about. BLAIR: I completely sympathize, I mean I operated the same way for many years as a consultant. I know you, I'm not going to give away your secret, but when you've modeled out how it works, when you've seen all the patterns, you know the information that you need. When you have true specialized expertise, it's really just small pieces of information that you need. That's the difference between an expert and a generalist, a generalist needs to collect all of this information and then sift through it all, and try to find some sort of relationship and pattern. The specialist comes along and says, "I've done this 1,000 times before. Give me these four things," and then you can deliver, like in your case, it might be 20, 30, $50,000 worth of value probably really quickly, like probably in minutes, but you let things unfold and you reserve the right to, "Well, maybe I'm missing something." BLAIR: I think that's valid, "Maybe I'm missing something, let me just let some ideas kind of gestate, let me think about things a little bit differently," but I see the pattern, I have the hypothesis right away, it's pretty clear to me. I sympathize with that, and I think there's some sort of middle ground here where I think that's valid. I think that some clients, not the best clients, but some clients have a real hard time with the fact that it took you 10 minutes to come up with a solution, and I've just paid you $50,000. DAVID: Yeah, and I think I do ask for more information than I need sometimes to make the process to look more thorough, so that it looks like a better value proposition for the client. That's an immediate sort of recognition on my part. I think just as the recommendations I'm making to my clients are shorter and more on point than they used to be, we should not be giving clients more homework than we need to either. Let's just ask for the things that we really need, they should only be allowed to answer questions, they should not be allowed to talk unless they're answering a specific question. DAVID: We can't be transparent if we're withholding information for the presentation. Another thought that popped up as I was reading through chapter two again is that when you are presenting, you are not listening, you're not being present. In other words, you can't effectively multitask here. Do you want to talk more about that? BLAIR: Yeah. I think I've said this on other podcasts, you can present to somebody or you can be present to them, and you can't do both. You're either transmitting or you're receiving, and another kind of sub-point under this is when you're presenting, you're kind of in violation of some of the principles of value pricing, value pricing where you're getting paid to deliver value. You're not on inputs like time and materials, not on outputs like delivering X or Y logo, et cetera, a campaign, but on the value that create for the client. Ideally, that's the place where we all want to get to or get closer to, where we're commanding fees or remuneration for the value we're creating for the clients. BLAIR: For you to value price, you need to have a really meaningful value conversation, and there's steps to a value conversation. One of the keys to a value conversation is, you need to be focused on uncovering a desired future state of the client, it's this duality of zen mind, beginner mind, like the blank slate of a beginner and the mind of the expert. You need to be expert enough to know the questions to ask, but you need to be beginner enough to kind of move off of the solutions, as Mahan Khalsa would say, and just quit thinking about what you're going to sell to this person. BLAIR: The ideal state of somebody who's selling creative services or marketing services or any consultative services, the ideal state of that salesperson is you are present to the client, you're intently focused on understanding them, learning about their situation, learning about their desired future state, and you are letting go for the moment of how you are going to help them get there. I think in a large enough sale and a long enough sale, you want to uncover the information, and ideally go away, and then start thinking about solutions. That's not always possible, but you want to have this line in the conversation where first it's all about you, Mr. Client, and then I'll start thinking about solutions. When you're presenting, it's not how focused are you on the client, you're up there with a PowerPoint presentation talking about you. DAVID: Or inane things about them that an intern could've gotten with a Google search. BLAIR: Yeah. Here's the section of the deck, "strategy', or, "Here's everything we know about your business that we Googled last night." DAVID: "And that you already know and don't need to hear again." BLAIR: Yeah, "I'm just showing you that I have great search skills." As you can see, I have an opinion on this, it drives me crazy. People are listening to this and thinking, some people are just never coming back. I believe this so strongly, and I believe most of the creative profession gets this entirely wrong. I get, I don't know how often anymore, it's not once a month anymore, but for awhile there was once a month, inquiries saying, "Do you do presentation skills training?" My reply is, "No, I deprogram people of their own need to present." BLAIR: Now, they always go away after, "Okay, thanks, I'm going to go get some presentation skills training." If you are focused on presentation skills training, your mind is in the wrong place, it's all about you. There are some things you can do, some courses, there's a woman out there by the name of Anese Cavanaugh, she has this methodology called IEP: intentional energetic presence. It's basically how to show up, how to show up at work, how to show up physically and emotionally in a meeting, how to deal with situations. DAVID: How to be authentic. BLAIR: I don't know about that. DAVID: See how I slipped that in? BLAIR: You should do IEP training instead of presentation skills training. Presentation skills training is the wrong thing to do. Now, there's a time and a place for the presentation, internal presentations, even the odd client presentation when you're collaborating with your direct client and they need you to present to a larger audience. All of that is valid, public speaking, you want some presentation skills around that, all of that is valid. Looking for presentation skills training to improve your new business development results- DAVID: Like your close rate. BLAIR: It's exactly the wrong thing to do. DAVID: I'm just pausing here just to let that sink in for people. BLAIR: Good, yeah, I'm going to have a cigarette now. DAVID: You're saying, don't look for training to do presentations better, don't do presentations at all, but there's obviously room for training about how to listen, how to ask better questions. You're not dismissing that sort of training. BLAIR: No, not at all. In fact, I think that's what IEP is about, that's what some of the things that we talk, you know the ideas, I forget where this comes from, I've stolen it from somebody who has a book on leadership, the idea of what I call the physiology of leadership. Leadership as a social science, that's a great model for selling. You can study anybody's model of leadership, and you'll become a better salesperson, but I refer to the physiology of leadership as two things: calm presence. You're calm, you're not anxious, and you're present. That should be your demeanor every time you're selling, and there's all kinds of different ways and different methods and models that you can use to improve your calm presence in a situation. BLAIR: You and I have done seminars on IP development where we've used constraint-driven exercises, and we use constraint-driven exercises in the Win Without Pitching program, I use them in speeches and workshops, I've become a huge fan of constraint-driven exercises. Just think of this as a constraint-driven exercise, I'm talking to our audience here. DAVID: We can't present naturally normally. BLAIR: Yeah, what would you do if you were not able to present, how would you go about trying to win this business if you were not able to give a presentation or use a PowerPoint deck of any kind, what would you do? Well, the short answer is you would have a conversation, right? DAVID: Right. BLAIR: Then there's all kinds of things that you need to sort out about, "Well, what questions do I ask? What framework do I use for the questions?", but you will find most of the time that the need for presentation, it's really on your end and it's not really reciprocated by the client. Now, there are some caveats. If you work in packaged goods, CPG or FMCG as it's known in Europe, and you're dealing with brand managers who deal with creative firms all day long, they kind of want to see the dog and pony show sometimes, so you might have to make the odd exception. BLAIR: Now, I remember a client of mine many years ago, a very strategic firm, but not the best creative in one of the largest markets in America, and they were competing against the hottest creative shop in that market. When we set up the final meeting, so it was down to the two of them, I had them put all of the creative stuff that they wanted to present on a table over in the corner of the room. When they were facilitating the conversation, they made the point that, "The quality of our creative is good, you know that or else we wouldn't be this far. You've already seen it, if you want to see more of it, it's on the table over there, let's get to why we're really here," and so they move onto the more kind of valuable part of the conversation. BLAIR: Of the three people on the client side, there was the president, there was the COO, and there was the brand guy. The brand guy got a little fidgety at this, and at the end of the conversation, the president and CEO of the client business, they didn't need to see the creative again, but at the end of the conversation the brand guy got up and said, "I'm sorry, I just need to have a look through this," and he flipped through some stuff. He came back and he sat down, and he had this sense of relief, "Okay, good, I'm good," and they won the business, they beat the hottest creative shop. BLAIR: If they had stood up and gone into presentation mode to try and match this other firm at their own game, instead they facilitated a conversation. The point I'm trying to make is, the senior people at the client side, they don't want to sit through a presentation. DAVID: Right. BLAIR: You know, we all have websites, right? DAVID: Especially nowadays, you could see maybe that would've made sense 15, 20 years ago, but not so much today, it's boring to people. BLAIR: I'm fond of saying, "Sometimes it's better to be different than it is to be better." If you are going into a competitive situation against three or four other firms, and everybody else is doing the dog and pony show, you have an advantage if you treat the situation differently. If you try to break down the walls and facilitate a conversation, and if you can go first and do that and set the tone, then things will feel really different, first or last I'm a fan of. DAVID: Really not trying to sell things, but I'll do this for you. I really do think if you folks, listeners, if you haven't read The Win Without Pitching Manifesto, I would recommend it, it's $25 list, and there's also an electronic version of it. I think it's one of those books that just has a really long life, because it's perennial, there's some core very human points in the book that you can just read and reread, and it's a great book. It's the second-best book that I know of at the moment, but it's a good book. BLAIR: It's success is due entirely to its publisher. DAVID: Yes, that's right. BLAIR: Thank you very much. DAVID: Thank you Blair. BLAIR: Thanks, David.
Reviewing the "Surveillance Footage"
There are seven patterns that almost all principals are guilty of. When David and Blair point them out, it leads their clients to say, “you must have hidden cameras in my office!"
Hacking Heuristics
Blair leads a discussion on how clients tend to take mental shortcuts in making business decisions, and how we can nudge clients without manipulating them to make a decision that is in their best interest. Links Rory Sutherland Influence: The Psychology of Persuasion and Pre-Suasion: A Revolutionary Way to Influence and Persuade by Robert Cialdini Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard Thaler and Cass Sunstein "The Dark Arts of Leveraging Cognitive Biases" by Blair Enns Thinking, Fast and Slow by Daniel Kahneman Predictably Irrational by Dan Ariely Richard Feynman Dunning-Kruger effect Pricing Creativity: A Guide to Profit Beyond the Billable Hour by Blair Enns "Pricing Creativity" 2Bobs episode
Collaborating with Competitors
David and Blair compare each other's competitiveness, and then offer some specific ways principals can actually collaborate with their competitors as a part of building beneficial business relationships. TRANSCRIPT BLAIR: David, today we're going to talk about how to crush your competition, is that right? DAVID: Instantly I got very excited about the concept, that's really not what we're going to talk about, but I love that idea. Oh my God, I'm just too competitive, but that's actually the opposite of what we're going to talk about I think, unless you want to switch it at the last minute. BLAIR: No, I was with a bunch of guys the other night, and had this little men's night retreat thing, and maybe more than half of them were entrepreneurs. One guy was winding down a business, and he was saying, "I'm not sure if I'm competitive enough to be in business." I didn't say anything, but I thought, I suppose that's vital for you to be competitive in your nature to succeed in business, would you agree with that? DAVID: Yes, I would, but there's something wrapped around competitiveness that is just as important to me, and that's risk-taking. BLAIR: Yeah. DAVID: It does seem like the two of those are related, that's why I quit doing a few things outside of work, because I realized I was not as competitive as some of the young fools that were willing to sacrifice their body, and I wasn't. It's not that my body is so precious, it shouldn't be sacrificed, it was more I was allergic to the pain. Yeah, there's something about competitiveness and risk-taking yeah, for sure. I'm competitive, do you think of yourself as competitive? BLAIR: I've measured my competitiveness and your competitiveness, and you're more competitive than I am. I'm as competitive as the average person, but the makeup of that competitiveness is a little bit skewed. You can break down competitiveness into different forms, so I think of myself as average competitiveness. DAVID: Okay, this is more about how do we tame or tamp down some of our competitiveness for our advantage, and for the advantage of the world really. BLAIR: You really want to talk about this idea of collaborating with your competitors, is that correct? DAVID: Right, yeah, and it's something I've learned in my own business life, but I've also tried to coach my clients to do it as well. It's been really interesting, it's a concept that strikes us like, did he really just say you should be more collaborative with your competitors, or did I mishear him? No, that's really what I mean. BLAIR: Okay, so we think of being in business just like my friend said the other night, we think of it as business is highly competitive, and we need to be cutthroat, and we need to always have an eye on our competition. We're trying to best them, I'm fond of saying that positioning is an act of relativity. You position relative to your competition, and in endeavoring to position your firm against your competition, you're trying to kill them. BLAIR: Now that's an overstatement, but that's the prevailing view, right? The competitors are there, people that ... It's your job to beat, it's your job to win against them, and you want to fly in the face of that a little bit, so where did this idea come from? DAVID: Well it's been rooted really in 20 plus years. I did something a little crazy back in the late 90s. I wanted to start an event, and that was obvious to me, I wanted to start an event. Okay, so what kind of an event would it be? Well it needs to be an event that's going to attract a lot of people. How do we do that? Well, the content has to be fantastic, it's like okay, then I just stopped in my tracks, because I'm thinking, well if the content's going to be great, then I've got to invite a lot of my competitors there. DAVID: We don't see eye to eye on everything, but I need to have them there, because they're very smart. People are going to come and want to hear from them as well, like what kind of a stupid conference would it be where I'm the only one speaking? That's not a conference, that's like your own personal platform. I was faced with a decision, do I really want to give my competitors a platform? DAVID: I was nervous about it, other people were a lot more nervous about it than I was, they thought I was crazy to be doing that. I thought, this is a worthwhile experiment, and maybe there's some value in being the person who organizes the conference, and does the programming for it. There turned out to be that value, but it was a wonderful experience. It opened up my eyes entirely to the fact that I don't have to make somebody else lose in order for me to win. DAVID: That I can let my guard down, and it actually translated into the way I run events now. People come to an event for the first time, and they're surprised that within about an hour, an hour and a half of the start of the event, people are starting to share stuff that they would not have thought they'd see themselves sharing at the beginning. They're much more transparent about it, and it's just sort of that style that I like to have, it fits with this notion of competitors. DAVID: Recently what struck me, and then I'll shut up for a minute, because I know I'm taking a long time to answer your question. I was listening to the Dan Patrick daily talk radio sports show, and he was talking about interviewing Kobe Bryant one time. They were talking about how do you get yourself up for a game that doesn't really matter? In other words, maybe you're out of the playoffs already, or you know you're going to beat this team, because they're not good. DAVID: What Kobe Bryant said, was at the end of the game, I want my competitor to question why they even got into the sports game. I want them to question why they even became a basketball player, right? I thought, well that's kind of funny, but it's really not the kind of spirit I want as a collaborator. BLAIR: Even when he's playing in a game that they're almost certain to win in, he's still thinking about crushing the spirit of his competitors. DAVID: Right, yeah, what's the point of that? BLAIR: Do you still have a page on your website that lists your competitors? DAVID: I do, right? I do. BLAIR: Am I on there? DAVID: I don't know, I know you don't want to be, so let's just say you're not. BLAIR: Yeah, I think you had me on there, and I called you out, I said, get me off that list. DAVID: Right. BLAIR: I don't know why that is, okay, so you conceived of this idea, this event, and you had a partner in this event, can we name the event? DAVID: Yeah, it's MYOB, Mind Your Own Business. BLAIR: Yeah. DAVID: The how people, were the financial partners and the marketing partners, and I did the programming. BLAIR: That's where you and I first met in 2003. I reached out to you when I started my business somewhere in 2002, and you invited me to speak at this thing. DAVID: Yeah, and look at how much good has come from that, right? BLAIR: Yeah. DAVID: You and I have become friends, we do a podcast together, we share a lot of clients. Here's the biggest thing, I learned so much by having you there. I mean the very first time I heard you speak, I learned so much. It made me such a better advisor, and the same could be said of the other folks, not everybody, but most of the other folks that I invited. It's like, oh wow, it made me a much better advisor by listening to them in that kind of a setting. BLAIR: Let's walk through how somebody can, once they get their head around this idea, how they can put it into practice. First, I can imagine what the objections are, right? When you're talking to somebody about this idea of be more open to your competitors and collaborative with them, what's the first thing that comes up objection wise? DAVID: Well it comes up a lot too, and it's like, "Oh, that's a good idea, but I can't put that on my website, because what if my competitor's see it?" It may be something like our new focus, that's usually not as big an issue, but things like client criteria, or some unique way we have of going about solving problems for clients, or a case study, or something like that. They envision these competitors in the wee hours of the morning sneaking onto their website and furiously copping things down and grabbing screenshots, and then reinventing their own firm, as if they're really doing that. DAVID: That's the objection, I don't want my competitors to see that. I don't want them to copy me. Do you hear that, or do you see it in other ways? I'm curious if it's just my clients. BLAIR: I'm not sure if I hear it a lot, but I sense it a lot, and I've experienced it myself too. My own experience has been, if you're really carving out a path of leadership in something, it means you're constantly, by the reinventing your business, or coming up with new IP, with new ideas, and by the time somebody's adopted something that you've ... Let's call it stolen, stolen something that you've put on your website and made it their own, you should be somewhere else, right? You should be off into the distance. DAVID: Right, and that's part of your practice, part of my practice, part of what we urge clients to do is to reinvent themselves frequently every couple of years maybe. While this may work beautifully for you now, it's not going to be the thing that you're doing down the road, reinventing. Let's talk about the whole positioning thing, how many competitors does Win Without Pitching have? BLAIR: It really depends on how you frame the question. If you look at sales training for creative professionals, I don't actually know of any other organization that frames their value proposition, the discipline in the market, the combination of discipline in the market that way. That would be ridiculous for me to say there's no direct competitor, so that's at the very narrowest, who else says we just do sales training for creative professionals? DAVID: Right. BLAIR: Our real competition is any new business consultant to the creative professions. DAVID: Right. BLAIR: Anybody who's selling sales training. Most sales trainers aren't specific to a market, so anybody in the sales training business, any new business consultant. DAVID: If somebody popped up, let's say you just heard through a client of yours or something, and they said, "Hey, have you seen [inaudible 00:09:14], it looks a lot like yours?" Pretend that you have this conversation with them, and you look at the website. It is the same positioning, sales training for creative professionals, or creative entrepreneurs, what would your reaction be? BLAIR: My reaction would be, I would gird myself for a fight in the most positive sort of way. I love a challenge, if somebody was using that same language, I would just steel myself and whip my team into a frenzy, and run out into the battlefield. DAVID: I'm picturing this movie scene, yelling to this guy. BLAIR: Yeah, Braveheart. DAVID: Right. BLAIR: Somebody would have to be using very specific language, very specific to me. One of the things that I've seen over the last few years, is when I started my business back in 2002, when I was a new business consultant, there were very few new business consultants. Whoever was out there, the Internet was still a relatively new thing, right? Web browsers were about seven or eight years old in 2002. BLAIR: If there was a lot of competitors out there, I wasn't aware of them, I was really aware of two or three. Nowadays there's rarely a week or a two week period that goes by where I'm not made aware of a new business consultant. I made this conscious decision a couple of years ago to just quit thinking about them as competitors, and just to think about them as my future distribution network. BLAIR: I recently put out a call on LinkedIn saying I want to forge a closer relationship with the world's best new business consultants. I know I met a lot of consultants out there who say, "I give your book, the Win Without Pitching Manifesto to all of my clients." What I said in this post on LinkedIn, I had about 30 inquiries from it, is if you're already preaching the principles, and if you're already teaching the Win Without Pitching way, and you're interested in formalizing the relationship, then reach out to me. BLAIR: I had to see somebody else doing that, and somebody else talk about the benefit of it just the way that you're doing it now. DAVID: Yeah. BLAIR: For me to just have this switch in my mind. You've been very good at this, and you've been a very good role model for me in this, in being a generous competitor, and it hasn't been in my nature. I'm the person who loves a fight, so something has shifted in me in the last couple of years, and I look around at the people I know in business, and some people that you and I both compete with. They are such open, generous, sharing people, even though we are fairly direct competitors. DAVID: Right. BLAIR: I've just decided that these are going to be my role models in that front too. Now, I'm mellowing in my old age or something, because something's definitely changed. DAVID: Yeah, it is really interesting to see. I'm doing an event shortly, and I've invited ... You'll be speaking there, it's really important to me that you speak there to address the whole sales training process. I'm just unqualified to even speak to it, but I feel like the people coming need to hear that. Then, I think four of my competitors will be there. They won't have a platform, but I will introduce them, they're coming for free. DAVID: I invited them, and I plan to put in the work. We're going to split up into groups, and we're going to try to apply these positioning principles to the individual firms. These competitors know what they're doing, and so the evil side of somebody might hear that and say, "Well, wouldn't someone just hire one of these." It's like, well that's fine, because in my mind feeling like you have all these competitors is really misunderstanding the fact that it's not just about what you do, but it's about how you do it. DAVID: I have a very specific style, and whenever I try to cross the line and be somebody that I'm not to a client, like more of a coach or something like that, I am doing a disservice to them, and I'm doing a disservice to me. I find it really wonderful to have these other folks who are very good at what they do, who have a more appropriate style for a certain client. When I think about living in a world where I couldn't recommend other options for my clients, it's a little bit sadder to me, because I do want my clients to get help, even if it's not with me. DAVID: Now what's interesting though, is we have different approaches to this when we're not as busy. BLAIR: Yeah. DAVID: We tend to be a little bit less generous when our businesses aren't run well, when we don't have a steady stream of opportunity. That's just another argument of 100 arguments to run your firm well, so that you're not paralyzed by not enough work, or thinner margins, or something like that. BLAIR: I was going to play devils advocate here a little bit, and push back and say, well it's easy for you to be magnanimous this way, you're the worldwide leader in your field. You've got all the work you want, I think most people from the outside looking in would see that, so it's easy for you to just say, "Well there's plenty for everyone." If you're running an independent creative firm, you've got a dozen people, you're not seen as meaningfully different, do you think the principle still applies? DAVID: No, I don't, and I think the solution there is to have a positioning where it's so much clearer to you and to your prospects where you're a perfect fit. If you haven't nailed that positioning equation yet for your firm, then I think this is a very dangerous thing to do, right? Now you could still be generous in some other ways, like you could be generous in sharing contractors with other agencies, or even some employees. In terms of clients, I think that would be a dangerous thing to do, if you haven't ... DAVID: Well, a couple of things, not just positioning, but also having this lead generation process in place. You and I have talked quite a bit about this, how we have a simplified plan that's driven by discipline, so if you don't have the positioning and lead generation in place, then it's a pretty dangerous thing to be this magnanimous. The way to fix that is not to be selfish, the way to fix this is to fix your positioning and lead generation. BLAIR: Do you find that your generosity towards your competitors is returned? Are you referred business or other similar invitations from these competitors? DAVID: In some cases I am for sure. I think about Tim Williams for instance who I think does really good work. I've sent work his way, he's sent work my way for sure. I think about Carl Sachs, I think about the folks at Newfangled. I think about Philip at the Consulting Pipeline podcast. I think about Drew McClellan, I hate mentioning names, because there's going to be a bunch of names I've left off, but in general yes, absolutely. DAVID: Even at the beginning where they're taken aback by the generosity, they'll soften up over a few years, and discover that it's real. I'm really trying to help them, I'm not trying to hurt them. That started years ago, like you write a new book, or you have a new program, tell all your competitors about it in a gracious, respectful way. Hey, this is where I'm headed, just want to let you know, and oh by the way, here's a copy of the book, hope you're doing well. DAVID: You see an article that's really helpful that would benefit them, you send it to them. I tell you, a big one is speaking engagements. BLAIR: Yeah. DAVID: If I've been on the platform somewhere, and I talk with the program person, I say, "Listen, this was fantastic, I loved this event. I appreciate you inviting me, do you want a couple of suggestions for people who are also would be a really good fit for this?" That's a perfect opportunity to extend that graciousness to one of your competitors. I find that you're not hurting yourself in any way, you're simply helping everybody in the process. DAVID: I've found that to be very effective, and I've had a lot of my competitors do the same for me, where they've introduced me to a speaking opportunity, and it's been very, very much appreciated. BLAIR: A guy I know who does over a million dollars a year in speaking fees said to me, the number one lead source for speaking engagements is other speakers, right? They get approached and say, "Well, I can't do it, but you might want to think of this other person." He said it's important for you to cultivate relationships with these other speakers, and that means you start referring speaking opportunities to them. DAVID: That's interesting. BLAIR: Two weeks later I was invited to speak in Dubai when I was in another part of the world, and I referred to my new friend. DAVID: Yeah, because you didn't want that long travel, yeah, absolutely. BLAIR: Let's talk about some specific ways agency principals can collaborate with their competitors. I think I've got a list here of some things that you've identified. At the top of the list you've got learn how to run your firm from each other. Do you want to unpack ... Oh, I just said the word unpack, do you want to peal that apart? DAVID: That even sounds more pretentious than unpack. BLAIR: Like an orange. DAVID: Let's just say unpack, okay? BLAIR: Yeah. DAVID: Yeah, what's the possible benefit in not helping another principal run their firm well? Hoping that they'll fail? Well, that seems pretty evil, right? The one area where it seems like there's the most benefit for everybody, is to learn how to run your business well. You've learned some principles about key metrics you want to look at, or how to hire the right person, or how to run a meeting better, or how to have the best relationship with your bank, or there's 100 things we could list there. DAVID: Those are the kinds of things that I would put at the top the list, because nobody enters this field with the business management training that would really benefit them. They're all starting from some other skill path, not a role path, and so they come into the business, and they have to learn everything either from somebody that they worked for, and often that's the best place to learn it. DAVID: A great example of a principal that you worked for before you started off on your own, or they learn it from maybe an advisor, like a paid advisor, or maybe they learn it from another principal. That would be the first area I would suggest collaboration, it could be informal or formal. I find that most principals have three or four people that they're friendly with, they can just shoot them an email, or get on the phone and say, "Hey, I'm facing this noncompete situation, what have you learned? Can you introduce me to a lawyer?" Something like that. BLAIR: Oh, that's great, including on here help find good employees. I was thinking about there's an agency principal in Australia you and I both know him. I've done a bunch of work with him. He's told me some stories of when he's had to fire people, they don't say fire in Australia or UK, they sack them, which always sounds extra harsh to us in North America. He's told me stories of he'd bring somebody in who isn't working out, and says, "You're not working out, I'm letting you go, but I think you've got great skills in these other areas, so I've lined up two interviews for you today." DAVID: Wow. BLAIR: Yeah, so he's ruthless when it comes to correcting hiring decisions, but he's very kind in how he goes about it, and he recognizes that everybody's got strengths, and he's got good relationships with his competitors. He's very clear about why he's letting that person go, and why he thinks his competitors should think about bringing that person on, and usually in a different role. DAVID: Right, yeah I think that's great, like if it's for the right reasons, there could be something about the style of this firm that wouldn't be true of another firm. It's not like they're a bad person, they're just not a good fit for this particular role. BLAIR: Is there a line that there's the danger of crossing? The first word I wrote down when you sent me notes on this was collusion. DAVID: Yeah. BLAIR: At some point can you get too close to your competitors? Does it cause some sort of problem, or the perception of problems maybe among clients, or maybe even regulators? DAVID: Yeah, well in the US that would fall under the jurisdiction of the FTC, Federal Trade Commission. Where collusion is very clear, and you can get your hand slapped pretty quickly would be around pricing. BLAIR: Yeah. DAVID: Not so much which opportunities to pursue, although you could get in trouble there, like hey, if I don't pursue this one, can you not pursue that one, that would be collusion. The main area would be on pricing, like how about what's your price on this? There have been some specific lawsuits, the handbook of pricing and ethical guidelines was one example that had to get rewritten, because of a lawsuit as I understand it. DAVID: That strikes me as evil, and I don't think we're talking about that so much. It's more like here's an example, so let's say you're going to respond to an RFP, okay? I know, don't shriek on me here Blair. You're going to respond to an RFP, and you know that another agency has been through an RFP process with them. You might just call them up and say, "Hey, what was that like? Is this even worth it?" Most of the time it's not going to be worth it, but that would not be collusion, that would just be simply sharing public information. BLAIR: I hadn't heard the story around pricing, I was doing a talk on pricing about 18 months ago to an industry group slightly tangential to the creative professions. There was a lawyer in the room, and he kept warning about collusion, he did not like the idea that the competitors were in the same room talking about pricing. I thought he was being ridiculous. DAVID: I think he was being ridiculous, where it can be collusion, is if we're talking about a specific instance. It's not about for instance, the labor law allows you to band together against a common enemy so to speak, that's not collusion. Collusion would be a specific instance related to pricing usually. BLAIR: Gotcha, all right, so let's say somebody's listening to this, and they're warming up to the idea of being more collaborative with their competitors, but they don't currently have relationships with those competitors. How do they go about it? Where do they find these people? Maybe they're so highly specialized, or poorly specialized, they're just not sure who their competitors are, how do you go about it? DAVID: Yeah, if you're poorly positioned, most of your competitors are the ones in your locale geographically. You know those, because they're there, and you share employees, and so on. If you're well-positioned, your competitors are more known to you, even though they're not close to you geographically. These are the names that keep coming up when you are competing for work and so on. DAVID: That would be one way to identify them, obviously Google's our friend here. Another way to identify them, is going to trade conferences. Trade conferences are almost always vertical, or they could be more demographic oriented conferences, horizontal conferences, where you keep seeing the same people there, not so much exhibiting, but you just see them there, they're speaking and so on. DAVID: You notice that these are the folks whose articles are appearing in the same places that yours are, so just connecting with them through your contacts, within a particular focus would be a good way to connect with them. Another might be a common mentor, I get this question a lot, like do you know of somebody that's doing this that I could talk with and so on? I don't connect people who aren't clients of mine, but if they are clients of mine, then I'll try to find somebody to connect them with. DAVID: I actually put round tables together, which are specific attempts to do this, that's not really the subject of this podcast, but that's an example of what a paid advisor might do. Sometimes a common mentor, so like if you're getting advice from an older woman or gentleman in your town who's coaching you on running a good creative business, because they've been in that field, and they've slowed down a little bit, they usually are going to know somebody else that would be a good fit for you. DAVID: I am talking about cooperating with folks who are definitely otherwise competitors of yours. I'm not talking about people that you might meet in a YEO, or YO kind of a context, I'm talking about people that you'd compete with normally. BLAIR: Okay, are there instances where this can go wrong? Obviously, I wouldn't ask you to name names, but I'm sure there has to be situations where you started being magnanimous towards a competitor, and then at some point realized this is a one-way relationship where this person is taking and not giving, and your idea about them ended up changing. DAVID: For sure, yeah, I can think of an attorney actually in New York that I was referring lots of work too, and it turned out that not only did they never share generously, but they kept asking, kept asking, and it became annoying. I just basically shut them down, they still do good work, so I haven't done anything to hurt them at all. If somebody is actually out to hurt me, then we come into the Kobe Bryant crush them phase, which is actually the evil side of this, and it's kind of fun. DAVID: You have to do that once or twice a year, right? Otherwise, I was just wondering if people are still listening at this point. Otherwise, it just doesn't happen, because who are the people that are going to hear the worst things about me as an advisor? It's going to be my competitors, right? If my competitors hear about me, but their experience in working with me is not at all matching, they're going to pause the conversation and say, even just to themselves, you must not be a good client, because that's not how I've experienced him. There's so many advantages here to make this work well. BLAIR: Yeah, it strikes me as this is going sound a bit corny, it's a bit like love though, right? The more you give, the more you get, and the more open you are, and more gracious you are with your competitors, the more likely you are to get back. Even if it's not a full reciprocation, there's still that feeling of you helping others, of yourself worth, etc., it's got to escalate. DAVID: Yeah, for sure, and there are many times when somebody does great work, and you've sent them lots of work, but they're not sending you work. That's okay, because they might be at a different place on the referral chain. In other words, by the time they hear of a client, they're past their need for you, whatever you happen to do along that chain. DAVID: It can't be a tit-for-tat thing, it's really just about surrounding yourself with people who are generous in life in many ways. I find that, that's a very satisfying experience, almost regardless of the outcome. BLAIR: Well, you've convinced me, I'm going to start thinking about maybe referring a piece of business to you. DAVID: Yeah, it's about damn time honestly. BLAIR: Thanks David, this has been great. DAVID: Bye Blair.
Four Segments of New Business
Blair and David come up with descriptive words that help clarify each of the four parts of what David calls the "pantheon" for new business: positioning, lead generation, sales, and pricing. Pricing Creativity: A Guide to Profit Beyond the Billable Hour Mastering the Value Conversation podcast episode
Using Assessment Instruments in Your Firm
David and Blair explore the big topic of personality assessment tools that can help firms “get the right people on the bus.” Not Your Typical Personality Types →
Thoughts on Partnership
Blair and David dive into a discussion on ownership structures, looking at the results of a survey that David did recently about partnerships.
What Good Clients Are Really Looking For
Listeners on Twitter wanted to know what clients actually want from creative firms, so David makes a list based on his experience of what good clients want, while Blair's reaction is "who cares what clients want... all they wanted was a 'faster horse.'"
Mastering the Value Conversation
David gets Blair to expound on his statement that “the value conversation is where value pricing theory goes to die,” and how crucial that conversation is within the sales framework he lays out in his new book, "Pricing Creativity: A Guide to Profit Beyond the Billable Hour."
Defining Success for Creatives
David and Blair take a stab at answering the complicated question of what success looks like for each of them personally, as well as what it means for their clients.
Words That Make Us Wince
Blair and David try to wind each other up by going through a list of phrases they hear from their clients way too often.
Positioning Cheats
David is bothered by the notion of helping people cheat, especially at positioning. So Blair discusses 10 ways firms could succeed even if they either aren't ready or don't believe in the idea of tight positioning. You’ll feel dirty.
Words We Try to Define
Expertise, selling, marketing, entrepreneurship, branding, positioning, and consultant. Blair and David do their best to come up with definitions for terms that they use regularly with clients.