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How did the UK FM Service Providers reacted to Covid19 and how to make your revenue in 2021 and beyond in the UK Facilities Services Market?

Baskar Sundaram

One of the challenges that many FM service providers are facing is how do you even begin to prepare for this pandemic. Revenue planning has never been as imperative for a company’s future as it is right now; and how they prepare will become a defining moment for an organisation’s future. For several months, we have been researching how market leaders in the FM services space have responded to the disruptive market conditions with the goal of driving revenue growth. 

The concept of VUCA – volatility, uncertainty, complexity, ambiguity – could not be a better description of the market environment than it is now.

So, when we look at how companies have responded, from March when the world entered recession until now as we enter the fourth quarter of the year, it has been really a tale of three cities: 

  • Survivors – playing defence. Their customers have been massively disrupted and (despite their growth capabilities) they need to cut costs to survive.
  • Observers – tactically reacting. Companies here are observing industry conditions and making adjustments periodically.
  • Accelerators – market leaders. These companies quickly adapt and execute strategies to grow faster than the industry trend.

We have spoken with 126 business services CXOs since the beginning of the recession. What we found was that a very small number of them have landed in the accelerator camp. This small group are the market leaders, those who have really developed a strategy or taken an execution approach to the market and been able to adapt quickly and accelerate well beyond their competition.

Six Months into Covid19 – UK Facilities and Workplace Services Landscape – Data driven Strategic Insights

 

Conversely, on the other end of the spectrum we have companies in survival mode. Simply put, they are playing defence; they have been massively disrupted and their industry has all but come to a standstill. They are waiting for things to go back to normal. And the ‘new normal’ may or may not work for their business.

Most of the industry put themselves into the observer category. They are reacting tactically. The decisions that they are facing in the last quarter were difficult trade-offs that have to be made. Many were in the midst of furloughing personnel or catching up with deals that had been delayed: the common trend was a sense of a shifting landscape. Many that we spoke with did not talk about losses that occurred; they talked about things being paralysed or stalled.

While the majority are in the Observer category, we have found that the Accelerators have adopted an agile revenue planning process, and this has helped them out-perform the industry. They are adjusting their ‘agile bets’ based on a monthly, quarterly, and a rolling four-quarter view tied to a three-year strategy aligned to their vision, typically.

So, understanding the final quarter of 2020 and then going into 2021, how much of the market will revive, how many of those companies will be able to accelerate is going to be key. As you think about your 2021 planning, and as you realign your sales teams to capture growth, think about what has changed and how will you adapt to it.

Market leaders are taking the following pragmatic approach:

  • Re-assess the revenue growth strategy – what changes must be made over what timeframe?
  • Re-imagine the growth engine – what is possible in the new landscape?
  • Re-allocate resources to drive execution – how do we implement quickly and flawlessly?

This approach has allowed market leaders to focus on strategies that widen the gap between them and their competitors. It has also proven a useful context for how to proactively communicate with their boards, which gives them the latitude to execute the strategies.

We have also seen the acceleration of several trends that were already in place:

  • Digital evolution– Research indicates that 70% to 95% of digital transformation efforts fail. In the B2B space, digital commerce accelerated more in 2020 than in 2010-2019. Market leaders are focused on agile digital go-to-market evolution that reduces friction in the customer journey. These pragmatic investments have a rapid impact on revenue. In our CEO interviews, we found that market leaders understand their capabilities, and then align their digital strategies to the revenue growth strategy.
  • Outdated buyer and customer experience– Buyers have more power than ever, and their preferences have changed more in the last five months than the previous five years. This has made retention the new growth as market leaders go back to the base for growth. Market leaders are collaborating cross-functionally to improve pricing and packaging, customer marketing, and improving the customer experience. Customer experience in a B2B context is defined as reducing friction throughout the buyer’s journey and being easy to buy from. While laggards are focused on incremental improvements to the customer journey, market leaders have taken a blank-page approach to designing processes that provide a differentiated experience.
  • Virtual sales –During the lockdown period, substantively all B2B sales have shifted to virtual. This is having a permanent impact on how buyers want to interact and will continue to shift how market leaders allocate resources. We are seeing that Accelerators are investing 12% or above of their revenue in marketing (vs 8% for those in the Observer camp and less than 5% for the Survivors.) We expect that this will help the accelerators extend their market share lead.

On top of the rapid change identified above, there is still significant uncertainty on the shape of the recovery. We are not yet able to predict if the recovery will be a V, U, or W. In any case, it is likely to vary widely by industry, resulting in continued changes to demand drivers. Market leaders are consistently evaluating these changes from the customer’s perspective and translating this into revised account potential. These insights are used to dynamically allocate sales and commercial resources and to refresh services and products to create compelling offers. By aligning services and products to changes in demand drivers, market leaders can more closely align with their customers.

The traditional annual planning process must adapt to become more dynamic and agile. Market leaders plan using scenarios that look four quarters ahead, with monthly targets that can determine if the team is on track, so that adjustments can be made rapidly.

Re-assess the growth strategy

In addition to the market trends highlighted above, market leaders start this process from the outside in, via market listening, to address these three key questions:

  • What are the demand drivers? This must be considered in the short (month), medium (quarter) and longer-term (four quarters). While it may be difficult to predict these drivers, it is still necessary to prepare. The revenue plan must consider the shift in demand and how the company will detect the change, so that an agile bet can be constructed to respond.
  • How are competitors responding to changes in demand? In our conversations with CXOs we are seeing that market leaders are taking actions to protect their customer base, and this has resulted in barriers to entry. This change means increased competition for every deal and more scrutiny on new service providers, cross-selling and renewals. Enabling teams to succeed in the more competitive environment will increase win rates.
  • How do buyers want to be served? Facilities and workplace services buying has been moving towards the ‘digital first’ direction for some time. As nearly all commercial activity became virtual, several CEOs indicated they have prioritised digital investments that address key points of friction in their customer journey.

Revenue planning can no longer be an annual exercise, and market listening must accelerate. Given uncertainty and the pace of change, all these data points must be constantly and consistently monitored. Market leaders use a quarterly cadence to review new insights and adjust the strategy. The best strategies start from the outside in and reflect the capabilities of the team.

Six Months into Covid19 – UK Facilities and Workplace Services Landscape – Data driven Strategic Insights

 

Re-imagine the growth engine

While it is tempting to focus on the short-term during a recession, successful strategies are multi-quarter and multi-year in nature. Market-leading strategies require ongoing support to execute. To increase the chances of success, all the key commercial functions must be represented. This includes Sales, Marketing, Customer Services, Product, Finance, ICT and Human Resources. To execute the strategy, market leaders deploy a ‘growth engine’ – a cross-functional, dedicated team that drives progress towards the key objectives, holds teams accountable and resolves escalated issues that cross several workstreams.

Market leaders are close to the market and have a grasp on what is happening in the field. They consider the frontline team’s growth capability when executing the strategy.

Re-allocate resources to execute the strategy

The best strategy is meaningless if not successfully executed. The role of the ‘chief growth officer’ is to allocate resources towards the market.

The cross-functional growth engine drives execution of the strategy. With its unified and dynamic view of customer segmentation, growth engines quickly identify, execute and iterate the right strategy. Some example scenarios from our research illustrate this:

  • Expand solution footprint within existing customers. Prioritise retention of not only the highest revenue accounts, but also the ones with highest potential to expand the solution footprint. This customer segmentation needs to consider the additional solution as part of account potential and results in a ROAD model (shown below) which drives the coverage model.

Within this model companies deploy customised ‘tiger teams’ (including account executives, and customer success managers) to the largest Retain accounts. For the Develop and Acquire accounts, the customer success managers identify opportunities and product specialists are assigned to educate the customers on the new solution. For the Opportunistic accounts, customer success partners with marketing to monitor the ‘digital body language’ and launch campaigns to capture demand (whether via digital self-service or creating new opportunities for sales).

  • Standardise commercial processes:Many facilities services companies deploy a ‘general manager’ approach and do not have a strong sales culture. As a result, those companies have widely varied processes, which provide a sub-optimal customer experience.

A leading FM services company opted for a ‘buyer preference assessment’ completed externally to provide a view of how customers want to be served in different phases of their journey. This identified points of friction in the customer experience. The executive team prioritised the largest changes and digitised the largest pain points.  This led to a 20+ point improvement in Net Promoter Score.  With the better understanding of customer and buyer journeys, they deployed a customised buyer-driven sales process to all their regions. As a result, multi-million pound opportunities were identified.

  • Enter adjacent markets:Complete market segmentation to identify the best areas to pursue. Evaluate services, products, pricing and packaging and develop industry-specific packages which are compelling to the identified industries.

Develop buyer intelligence by interviewing prospective buyers. This will help build personas which are used to develop marketing campaigns and enable the sales team. Then execute a brand awareness campaign and develop a demand generation strategy to target the specific industries. Finally, optimise the coverage model to enter this new market, determined the right type of sales model that will suit the market. Deploy virtual sales regardless as it is the most effective and efficient approach in Covid-19 times.

Many companies make incremental or reactive adjustments to these approaches, but market leaders ensure that the important levers are aligned to their strategy and take a disciplined approach to reinforce the strategy and its goals.

Creating the 2021 plan

There has been much written on what FM service leaders did during the 2008 financial crisis and the dotcom bust. During times of uncertainty, the pressure to do nothing can be overwhelming. In the context of revenue growth strategy for our current situation, your peers have clearly moved into three camps.

The simplification of those three types should allow you to have a very pragmatic approach to prepare for revenue growth in 2021 and beyond.

Six Months into Covid19 – UK Facilities and Workplace Services Landscape – Data driven Strategic Insights

  • Survivors – 100% defence: things have largely overcome them, both from an industry perspective and how they’re running their go-to-market strategy.
  • Observers – Tactically reacting companies who are faced with uncertainty; trying to figure out what to do.
  • Accelerators – The camp that you want to be in as a market leader. What these companies have done is review key demand drivers and their growth engine, and they are now making agile bets on how they mobilise the organisation.

So as an Accelerator, how might you know you are different than those that are observing or surviving? You jump on your demand drivers and you are making key bets on those market winds that can stimulate your organic rate of growth. Survivors, in contrast, had gravity issues they could not control.  But Observers have a hidden pocket of opportunity: they can leverage the moment and fast-follow the market-leading Accelerators who have already moved with clarity and certainty.

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