Relying On the Network Is A High-Risk Consulting Growth Strategy
This article was last updated on 28 March 2023.
"Luk, growing our consultancy is all about the business networks of consultants and consulting leaders and the relationships.”
I’ve heard variations of this statement more times than I can count.
However, in my experience, heavily relying on the network and relationships as a business development strategy results in an unreliable pipeline and unpredictable future.
In an overcrowded consulting market, digital is how new business is won.
"The traditional marketing model in the professional services industry is in trouble. Client loyalty, satisfaction and referrals are in a slow downward spiral. The old strategies and techniques won't cut it anymore. A modern, digital-fueled content marketing approach, however, hits all the right notes." (Hinge Research Institute)
Recommended reading: 10 Consulting Trends: 2023 Edition
The 8 disadvantages of a relationship-first approach to business development
There is nothing wrong with nurturing and growing a business network and relationships. Hell, I’m a big network guy myself. Don’t get me wrong!
As a keynote speaker at 100+ conferences, I never missed the opportunity to meet prospects and add them to my network.
Back in my people analytics days, I used to have access to an incredible amount of CHRO’s and people analytics leaders in my markets and it had helped me tremendously growing my consulting business.
However, I was never reliant on my network ONLY to grow my consulting business. Building relationships was never my ultimate goal but rather the result of my expertise, my visibility and reputation on the market.
Consultancies that heavily skew their business development efforts towards relationship-building place numerous limitations on their business growth.
Figure 1: The consulting growth quadrant. Too much focus on Relationships is risky!
1. Consultancies have very low control over their networks
Activating a network is not easy. Sure, consulting leaders can try to keep their contacts warm, comment on their LinkedIn posts, engaging with them on- and offline, but when it comes to actually getting the business network to 'deliver', problems begin.
Turns out that there is a budgetary issue with one, a lack of expertise fit with another, a timing problem with the third one. And on and on it goes.
The 'call to arms' is weak, unpredictable, inconsistent and not scalable.
2. There is inherent churn risk
Consulting leaders may have solid relationships, but people switch jobs all the time.
Putting all eggs in the ‘building relationships’ basket means that when a contact moves out of a certain position, the consulting leader has to start all over again with the new person.
3. A consultancy's network's demographics can get out of sync
Research confirms there's a strong correlation between our demographics and the demographics of clients. As David Burkus in HBR (see below) states, people seem to connect with those similar to them.
This means, over time, a consultancy will get out of sync with the new/younger generation and with people not-so-similar to the consultancy's internal demographic.
The business network will grow old. Step by step, the consulting firm will get more disconnected without even knowing it.
"Most of us, when put into a situation where the only goal is to meet new people, default to staying inside of our comfort zones. That means talking to people we already know. Or at the very least people who are similar to us. That means most networking is doomed from the start, by its very design." (David Burkus in HBR)
4. Business networks tend to have too much noise
Just how many contacts in a consulting leader's network are the firm's ideal clients? 1%? 5%? 10% (at best)? Keeping a business network 100% relevant is impossible. The more it grows, the more noise slips in.
This results in outreach efforts delivering very poor ROIs. This time should instead be invested in strengthening the other components of the consulting growth quadrant.
Cutting through the noise takes time, and time is the one thing most consulting leaders do not have.
Recommended reading: The 5 Main Challenges Almost Every Consultancy Struggles With
5. Consulting firms waste too much time trying to impress their contacts
Oh the endless wining-and-dining sessions. So much time can get wasted schmoozing potential clients.
Too many consultants who I've met in the past, practice 'wining and dining' with sales as their end goal. Unfortunately, if selling is your goal during such network 'meetings', you’re going about it all wrong. If you quantify your network as sales targets, you'll be uncovered as sleazy sooner or later.
Every consulting leader gets the "I'd like to pick your brain" lunch invite that turns into a two-hour session of offering free advice with little to show for it.
I’m a big advocate of educating the target audience by sharing knowledge freely and generously. However, it should be done as part of a business development strategy, where the consulting firm can measure the reach, the impact, the number of leads generated, etc.
Digital is how new business is won.
6. Consultancies fail to create a systemic approach to nurturing their networks
Nurturing a business network requires structurally sharing new trends, learnings, and social proof to build trust in the specific area of expertise.
The most important goal of all: to bring the network 'into the system' and structurally nurture them.
For more than a decade, I've been sending regular updates to my network to keep them in the loop on the latest trends, new case studies (=social proof), my brand-new learnings, etc.
I've always done so in a structured way via mailings and newsletters sent out to my subscribers (read: to my 'in-the-system' network and relationships).
I strongly recommend that consultancies strive to move the network/relationships from a 70-80% non-systemized audience to a 70-80% systemized audience. A big shift, a new mindset.
Firms should utilize a DELIBERATE strategy to do so. That’s what I’ve done all those years: 90% of people in my network got ‘systemized’.
I've always been obsessed with 'getting them into the system' in order to be able to nurture them in a scalable way.
This is how every consultancy should treat networks and relationships!
Recommended reading: Building an Email List Is Consultancies' Ultimate Trust Weapon
7. Consultancies can't collect data and make data-driven decisions
“Data is king!” – an overused but 100% true saying.
A business network can’t be systematically assessed from a data point. What are the metrics to evaluate the effectiveness of a firm's or its leaders' business development within the relationships-only framework?
For example, when I share my content, I measure:
- how many people consume my content?
- where they come from (source, e.g. social media, organic, etc.)?
- what exactly they read (most important topics)?
- how long they stay engaged (longer page visits help me rank better in Google search results and assess the quality of my content)?
- which promotional channels attract which kind of audience(s)?
- how many people (and who) click on my CTA (call to action) button(s) (e.g. subscribe, book a call, etc.)?
- how many people convert to subscribers or to clients?
- ...and a dozen other metrics.
I do an in-depth weekly review to continuously improve my content and its distribution. Can a consultancy adopt the same rigorous data-driven approach in its relationships-first tactics? It's difficult. Close to impossible.
8. Consulting firms fail to build credentials and social proof in a methodical way
Last but not least is the challenge of setting up a methodized credential building and social proof process. If a consultancy's reputation is based on word-of-mouth only, it will be extremely difficult to grow the business.
When a big chunk of marketing time is spent on 'wining and dining' prospects, very little of it is left to create a scalable system of consistently adding project work, visibility credentials (e.g. speaking at events, getting interviewed, etc.) and social proof (e.g. case studies, problem-resolution referrals, recommendations for your expertise, etc.) to the portfolio.
Establishing and growing a reputational footprint through expertise-driven audience education, on the other hand, is a scalable, methodical business development model.
Relationships can become a liability
Last year I met with a highly successful consulting firm that relied heavily on the networks and relationships of its top executives. These executives had built up a vast network of contacts over the years and had a reputation for getting things done.
“That’s how we grew our business all those years, Luk”, the consulting leader told me. And indeed, the firm enjoyed tremendous growth and success for many years.
However, a few months before we met, two of the firm's key executives left to start a new consulting firm. They took many of their contacts and relationships with them, leaving the consulting firm with a significant hole in its network.
Suddenly, the firm found itself struggling to generate new business and struggling to keep up with its competitors. That was the starting point for our meeting.
The lesson here is clear: relying too heavily on networks and relationships can be a high-risk growth strategy for consulting firms. While it may work in the short term, it leaves the firm vulnerable to losing key executives and the erosion of its network over time.
A low-risk business growth approach that will give consultancies a more reliable pipeline
A relationships-only approach to business development in consulting is a losing game. It’s unreliable and comes with too many long-term risks.
What IS a winning growth strategy, on the other hand, is expanding the approach.
Figure 2: The consulting growth quadrant. Widen the green circle, an integrated approach.
1. Positioning should come first
First and foremost, consultancies need to find a way to differentiate from competitors.
I recommend narrowing the focus and establishing expertise in a highly specialized area. A consultancy should be the go-to firm for a narrow group of people. Yes, this shrinks the pool of potential clients, but it also drastically increases the appeal of the firm to the right audience.
Poorly positioned consultancies will always struggle with a multitude of business development goals. They often get under mental pressure to start selling downstream availability (order takers instead of transformational experts) and usually start overservicing the clients at too low a price.
Poor positioning is a losing battle in both visibility and trust-building with prospects.
Stop going there. There’s too much saturation in the crowded, competitive consulting market, too many competitors doing the same thing.
The more specialized a consultancy is, the fewer competitors it has. The deeper the firm's expertise on a subject, the more prospects will be reaching out (as opposed to having to chase after prospects).
Recommended reading: A Consultancy's Positioning Has the Single Biggest Impact on the Buying Decision
2. Growing the reputational footprint through expertise-led audience education come second
Once a consulting firm has clearly defined its positioning on the market, it can start building and growing its reputational footprint as the ultimate expert on a subject matter.
This is the time to create, create, create – blog articles, trainings, case studies, conference presentations, guest posts, etc. All the efforts should be driven by the relentless desire to educate the target audience. This content should address the most pressing issues the target audience faces, provide answers to questions that keep the prospects up at night.
"Are you generous with your content? If you are not, you are losing! Generosity is an engine for going viral. The more you share, the more you will grow. Selfishness doesn’t spread”. (Josh Spector, social media expert)
And, of course, this content should be promoted over and over again.
3. Social proof comes third
The claims that a consultancy makes about its expertise should always be backed up. The most efficient way to do so is via case studies and transformational recommendations.
As soon as a consultancy completes a project, the consultant in charge should always do two things:
- Case Study: Write up a case study, focusing on a specific pain that the consultancy resolved for its client (getting the proper permissions from the client, of course, or anonymizing the client)
- Recommendation: Consultants should ask for a recommendation that describes the client transformation (instead of 'being a nice person to work with') achieved during the project journey
Once the firm has its case studies and transformational recommendations, it must put a spotlight on them. Add them to the content, to the website, and LinkedIn profiles. Share, share, share.
The buzz generated around the expertise-driven educational content will convert into leads and clients much more efficiently when backed up by solid social proof.
4. Relationships- and network-building comes last
Yes, this business growth strategy should come last. It should not be consultancies' ultimate goal but a natural result of a clearly defined (narrow) positioning, growing the reputational footprint and gathering transformational social proof.
And here's the thing. If a consultancy does the first three things right, it will barely have to spend any time on this because clients will be coming to the firm.
That’s exactly what happened in my case. There was no need for wining and dining (was an exception!), free brain-picking, sleazy outbound communication, but rather screening and qualifying organically incoming leads. Consistently.
Conclusion: 8 Reasons why relationships-first is a high-risk business development strategy for consultancies
- Consultancies have very low control over your network
- There is inherent churn risk
- A consultancy's network’s demographics can get out of sync
- Business network tend to have too much noise
- Consulting firms waste too much time trying to impress contacts
- Consultancies fail to create a systemic approach to nurturing their networks
- Consultancies can’t collect data and make data-driven decisions
- Consulting firms fail to build credentials and social proof in a methodical way
Consultancies that rely on relationships and networks as a business development tool face a high-risk future in a world dominated by online marketing. Competitors are only one click away!
Widening the green circle (see figure 2), gives consultancies pillars that they can comfortably rely on, which will reinforce each other, provide with a more constant stream of work and business growth opportunities, and will automatically strengthen business networks and relationships.
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Hello, I’m Luk Smeyers, and I’m helping mid-sized consultancies become high-performing consulting firms. I have been in the consulting businesses for more than 20 years, in very different roles: as European CHRO in a global consultancy, as a founder of a mid-sized analytics consultancy, and as a leader in a 'Big 4' consultancy, post-acquisition of my consultancy. I had the privilege of achieving global visibility as a consulting leader, and I never had to sell, persuade, or negotiate as a result. I have now bundled all those experiences, expertise, know-how, research, reading, successes, struggles, and failures from managing and advising consultancies in the past years.