Transcript:

Shane Anastasi – Risk

Doug D’Argenio:          Welcome to the PS Insights podcast series sponsored by Kimble Applications. Professional services organizations strive for efficiency, success, and growth. This series is intended to provide key insights on how to achieve this from industry leaders.

Steve Brooks:               Hello., my name is Steve Brooks, and today I’m talking to Shane Anastasi, about how managing re-strategically can give your professional services business a competitive advantage. Shane has 20 years experience in the delivery of enterprise professional services. He has worked for several major corporations, including IBM, Singtel, and Salesforce.

He’s also successfully turned around professional services organizations within mid-sized and the early stage software companies, including Vignette Corp, purchased by Open Text, and BigMachines purchased by Oracle.

He is the author of The Seven Principles for Professional Services, and applied his theories at CirrusOne, a company he founded, and lead as CEO, before its sale to Simplus, earlier this year. He’s now the founder and owner of PSPrinciples, which specializes in transforming the way professional services teams see their customer facing role. Shane, hi?

Shane Anastasi:           Hey, how are you Steve?

Steve Brooks:               Lee Iacocca once said, “Every business and every product has risks. You can’t get around it.” What is risk, and how does it apply to professional services firms?

Shane Anastasi:           It’s a good question, Steve. Obviously, risk is ever present and is around us all the time. And I think that what’s important for us, as professional services owners and project delivery people, is to think of risk from a perspective of, what is it about the unknown that could potentially cause us an issue in our business? I like to think of these different kinds of risks from a view of how easily I can get at them. What I mean by that is, some risks are localized, they’re right in front of us, they are a part of the project. A risk like, “Will the requirements that the customer give me, will they be adequate for what it is that they truly want?” That’s a very local risk that’s involved with each project that we might implement.

Then you can step back from that and say, “Well, what about micro environmental risks? The risks that are just inherent in the business of professional services. Do I have enough people? Do I have enough business to use those people?” The kind of risks that are just generating around us because we’re in the business of professional services, we should know what they are. There’s not always an answer to fix every one of those risks, but we know of them because it’s just a part of the business.

And then, if you have a broader view of risk, you could look at what we would call, I guess, macro environmental risks. Which should be the risks that come inbound towards us, that we don’t really know about. Some of them are predictable, they’re impending risks, because we know all of them. A good risk that recently we all had to deal with was GDRP. We knew that that was coming in, but it’s not something that before, a year or two ago, we were contemplating having to look at. There are other kinds of risks that we know nothing about, that we have to work with on the fly and just sort them out.

First of all, in order to find out how, as professional services, we deal with risk, we have to have a framework or a categorization of how we look at them and how we pick them apart. And then, within each one of those risks, the questions become, are there opportunities inside that risk that could help me create either competitive advantage, which is one of the reasons why we would want to turn that risk into an opportunity? Or, is there an opportunity to just improve the lives of the people that work for us, or the business itself?

And I think that, finding that opportunity in each of the risks is something that most firms struggle with because of a lack of understanding of how to address risk, and how to make that addressing of risk a part of the company culture.

Steve Brooks:               That’s interesting, in terms that you’ve got that … taken a holistic view down to the micro view. But at what point does a risk becoming a strategic risk? And can a localized risk be a strategic risk?

Shane Anastasi:           Yeah, that’s a really good question. And I think the answer to that is yes, because if a localized risk is happening all the time on every project, that’s going to show up on your P&L. And your P&L result is a part of your strategy. Your strategy is not to keep losing money, your strategy is not to keep running projects that don’t end up with a profitable outcome. One of the things that I’ve learned over time is that, every project matters, and every project should make money. And to really have a view of not allowing the bleeders. Sometimes, when you take over a portfolio you have lots of these bleeders in the portfolio, and that’s really what the turnaround experience is truly like.

You have a portfolio that’s pretty much bleeding the company dry. Whether that be a software company or a consulting firm. And what you have to do is find a way to begin to remove those localized risks so that you can buy more time to start looking at those other environmental risks that I talked about before. To answer your question, yes. And in some instances they’re more important than the environmental risk, because until you solve those, you don’t get time to look at the environment. And that’s actually been the key strategy I’ve deployed for most of the turnarounds that I’ve done. Which is, get into the fray.  Walk into the fire with the consultants and with the project teams, and understand what parts of the project we’re going to try and save, and what parts of the project we’re just going to let burn.

But in letting them burn, we have to make sure that we find a strategy or the opportunity to not have them ever happen again. To me, you have to be doing that level of work to begin with, before you’ll ever really be able to step back and say, “Okay, well, now, how do I put a good hiring strategy in place? How do I build a project management methodology that people will follow?” And so on. The first thing has to be solving those epidemic occurrences of localized risks that just keep turning out badly for the projects.

Steve Brooks:               It sounds like you’ve walked in some pretty noisy environments. Is there a good way of cataloging all those risks that are out there? There’s a lot of tools out there. What do you think resonates well, and how do people actually assess those risks?

Shane Anastasi:           It’s interesting, I’ve got to be honest in that for a long time in my career I kept doing what everybody else seems to be doing. Which is, walking in and noticing these symptoms and just fixing the symptom. “We need a methodology, that’s an easy fix.” “We need to write better SoWs, and better estimates, that’s an easy fix.” “We need people who are trained better, that’s an easy fix.” And over time, what I learned, and I think what I got frustrated by, by some degree, was that those kind of instant fixes for the symptom weren’t really helping us address the general risk.

What I started to do at a certain point in my career is say, “I’m not going to just repeat what I was taught to repeat by many different bodies of knowledge within the industry, and many of my previous employers even.” I started to say, “We’ve got to be better at this.” It was at that point where I started to stand back and say, “What is the true opportunity here?” And I t was at that point where I started to say, “Let’s try something different. Let’s try to completely avoid this risk rather than keep walking into it and finding that we find it difficult to manage in the moment. Let’s think about things beforehand.”

An example of that might be around the whole idea or notion that a project is more successful when the project stakeholders are truly engaged. Something that we’ve never done before and something that I’ve never been taught to do was to actually write into the SoW, the accountability for the customer and yourselves as project stakeholders. I found that after starting a process of writing very clear responsibilities for stakeholders into the SoW, and being very clear about this during the Sales cycle, that we got far better attention from the customer once a project started.

Then by implementing other tools that reminded each of our internal teams that their job was to engage the customers’ project stakeholder, we found that our projects tended to be far more successful than they’d ever been before. What’s interesting about what I did at CirrusOne, where that was a consulting firm, implementing at the beginning just Oracle CPQ. We extended that to Salesforce CPQ after a little bit, as well. Two or three jobs prior, I’d actually ran the professional services organization for BigMachines. So, at that point, I was running exactly the same group. I was implementing Oracle CPQ again.

What I really noticed about the two different experiences was, at BigMachines, I really was learning a lot of this stuff. That all I was doing was repeating the same things that everybody else was doing. And while we were being successful, we were being successful as part of pretty much any professional services group. Maybe it was 60, 70%, 80% project success rate. What we found at CirrusOne was that we could execute into the 90s when it came to project success rates.

And that, to me, is the thing that blew me away. That is, to me, the proof that I needed to keep saying, “Yes, this idea of doing things differently is truly paying off, and that inside each of these risks that we tend to take as par for the course for running professional services teams, there’s actually an opportunity to do something different and to change the way that we generate success. Not just for ourselves, but for our customers as well.”

Steve Brooks:               You alluded to turning risks into opportunities, but not every risk is an opportunity, surely. How do you identify which risks, and what you do with those risks?

Shane Anastasi:           The bit that you’ve got to look at is, does a risk present an opportunity for us to proactively chase, or is it something that I need to take a textbook approach to and do what everybody else is doing? There’s a way to look at that from a perspective of saying, “I’ve got a risk in front of me, and I’ve got something that I need to either avoid, or lessen, or completely get around.” The first approach, which is the easiest approach, which is just to hedge against it. Get somebody else to ensure the fact that if that does happen, they’ll cover it. That doesn’t always mean buying insurance, you could hedge against something by making it the customer’s responsibility.

But the problem with that is that you still have to suffer the event, and then you still have to transfer the risk. And then that person still has to either pay you back or give you some kind of compensation for it. It’s not a great way to do it, but sometimes that’s all that we can do. And there’s not a lot of opportunity there, unless you want to create an environment that does nothing but hedge against those kinds of risks, and that’s what insurance companies do. Unless you wanted to be an insurance company, that’s where the opportunity is.

The other option then becomes, “Well, are there existing strategies that I can reuse?” I always look in those circumstances at the strategies that are in place, and I always think, “Can we do better?” Sometimes, we can’t. Sometimes, we’re doing as best as we can to mitigate those kinds of risks. Sometimes, though, you see an opportunity that says, “You know what? I could probably push up the spectrum of safety here.” What I mean by that is, you have an option to either mitigate, nullify, or completely avoid a risk.

Sometimes, the strategies that we have in place are only good for mitigating them, just lessening the severity. Sometimes, though, there’s an opportunity maybe to completely nullify a risk. And other opportunities might show later, that you can totally avoid a risk. I think that’s where the opportunity is. Is that something that the industry suffers from? Is it something that my team suffers from? Is there a benefit in going to increasing our protection against that risk, moving forward?

Steve Brooks:               Can you give an example of avoidance?

Shane Anastasi:           When we talk about risk avoidance, what we mean is trying to remove or change operating procedures so that you can remove the occurrence of that risk entirely. Something that we did at Cirrus, was that we knew, especially in the complex delivery of CPQ solutions, using offshore teams to deliver that solution presented the risk of communication difficulties. And it’s not that offshore can’t communicate, it’s the fact that a CPQ solution is so interdependent on so many moving parts. That having to convey those moving parts over a telephone, or even over a web conference typically ended up with some kind of an issue.

So, we started the organization not doing any offshoring. What we were doing there was completely avoiding that risk. We made sure that every project team went out to the customer to get detailed requirements. And while that was a little bit onerous, that was completely avoiding that complexity risk when it came down to the developers not understanding what it was that the customer wanted. Later on, we decided to move into offshoring and actually start some offshoring work. But when we did that, we went and we hired people that we knew had had five to ten years experience in working with CPQ.

And by doing that, again, kind of avoiding that risk of people who are not aware of the CPQ complexity creeping into our projects. We actually found, over the course of CirrusOne, that doing it that way really helped us avoid that risk of a project going south, simply because the offshore team couldn’t, or weren’t able to communicate clearly with the customer.

Steve Brooks:               Neither of those kind of examples really turn a risk into an opportunity though.

Shane Anastasi:           No, that’s right. That’s really just total avoidance. To turn a risk into an opportunity would then be saying, “Well, how do I now take the fact that I’m able to avoid it and turn it into a competitive advantage?” There actually is a silver lining in that. Which is, if we’re able to sell our service to the customer, the fact that we don’t use offshore teams because of the complexity in communication, that then can become a competitive advantage for a company who walks in and says, “All I’m doing is I’m reducing your price by moving a lot of the work offshore.” We won several engagements with customers because we said we wouldn’t work offshore.

One particular one that I can remember, and I should be careful with names. But we won a $700,000 project because our bid was more expensive. And in the answer to the customer as to why it was more expensive, we said to them, “Look, you’re dealing with a very large organization that’s our competitor. They’re going to move as much of that work as they can offshore. I need you to think about all the things you’re doing, across all the models that you’re trying to configure, across all the business units that we’re trying to bring live. Do you think it’s a good idea to be transferring that knowledge back and forth, via emails and telephone calls, and web conferences, for the next seven months? We’re going to put people in your office to talk to you, to map stuff out on white boards, to make sure that we’re clear. Which approach do you want to take?”

If you can get that challenge across to the customer, then something like that does become a competitive advantage. And that was something that we had to decide to do as CirrusOne. Which was, if we were going to put all of these ideas to the test, if we were going to try and run this thing differently, then we also had to sell differently to make sure that we sold to the strengths and advantages that those things created. Because, like you were just saying, in some instances, it doesn’t sound like there’s a huge advantage there. It just sounds like we’re being picky, or we’re being stubborn with how we’re going to do stuff. But what we had to learn to do was to turn that into a competitive advantage.

Steve Brooks:               How do you determine which risks can become opportunities, and then take action on those?

Shane Anastasi:           We’ve talked about looking at each of the different ways that you can handle the risk, through either hedging, or through moving up the protection spectrum against the risk, and finding ways, eventually, maybe to avoid it. I think what you’ve got to look at is some way of building, what we would term in our ROI, for risk opportunity. What I mean by that is. What’s to be gained by moving our protection against this risk up the spectrum? What’s to be gained by turning something that, at the moment, can only be mitigated into something that can be avoided?

Then, knowing that benefit, the question becomes. “Well, how much is it going to cost to actually make that a reality? Will it involve a change in operating procedure? Does it involve a change in cultural behavior? How likely am I to get that result, given the cost?” One of the things that we know inside of professional services, a lot of the risks that we suffer are actually behavioral in nature. We’re trying to deal with how people work with other people, and whether or not they will declare that risk as being important enough to act upon. You have to make that determination about how much we think it’s going to cost. And then when you weigh the benefit and the cost, does it weigh out? Is it worth doing? And then you have to ask yourself, even if it is worth doing, does anybody care?

One of the things that I say a lot within my business planning, is a question that I keep asking myself. Which is the question of. “So what?” Because I can think that something is a great idea, I can think that this is the greatest idea that I’ve ever had, but if nobody else cares, if my customer doesn’t care, if my team doesn’t care, then it just doesn’t happen. “So, what?” is the final question that you have to ask yourself here. Which is, “Do I care? Does my team care? Does the industry care? Do my customers care?” And if the answer to that is yes, then maybe that’s the opportunity. That’s the one that you follow.

You move into a mode, now, of saying, “How can I change the way that we address this risk in order to open up the opportunity of either increase customer engagement, higher project success, whatever it might be, is it worth following that risk?”

Steve Brooks:               What you’re talking about is some local risk sometimes that happen frequently. They’re mitigated frequently and that obviously takes time. The problem then is, that you’ve now got this opportunity that you need to deliver, but that’s well beyond the cost structure within each individual project to bear. How do you create the bandwidth to actually to deliver that opportunity?

Shane Anastasi:           I do think that, that’s the critical question for us as professional services operators. We don’t have, usually, especially not in startups, though sometimes we can build it in a little bit later, we don’t have a lot of overhead. We don’t have a lot of people in the organization focused on, “How do I go out and change the risk profile of the project?” And we do put in people like a PMO, who we think that we’re giving them the goal of guarding project risk on our behalf. It’s something that I personally don’t believe in. In fact, don’t believe that PMOs reduce project risk, unless they’re doing proactive actions on projects, as opposed to reactive actions?

But the question still remains, how do I find the bandwidth to make this happen? There’s a couple of things. One is that, if you care enough about something, then you will find the time to do it. One of the things we do with the PSPrinciples trainings, and with the program that we run for our customers, is this idea of rapid alignment to the idea of the Seven Principles of Professional Services as an operating structure. And essentially, what we’re trying to do is to get other professional services firms to implement some of the critical things that we implemented at CirrusOne, probably for the first time in the industry, but that they’re not doing already.

And in doing that, we set the guideline of no new software, no new hardware, and no new consulting from me or anybody else. And it’s amazing what these companies are able to achieve in a 30 to 60-day period if we make it a priority. And I think that’s where the first question sits, is, do we care enough as a company to make this a priority? Because something that I’ve always found at work, is that if you care an awful lot about something, you will find the time to do it. You will find the time either inside the eight hours that I have every day, or like we all know, we work outside of those hours. We will find a time to make it happen.

And we set these initiatives, no more than four to six for every team that we work with. And in a 30 to 60-day period, they’re able to complete these initiatives with no new funding. But they just have to make it a priority. Now, that doesn’t fit for all opportunities. To take some opportunities, you need to buy something, you need to get somebody in, or you need to do something. For those opportunities, then you have to look at them strategically, and you have to be doing them outside of the project fray.

And I think that’s where the difficulty comes for almost all services executives, is that they just don’t have that innovation center to just say, “Hey, you go off and look at that for the next three months, and come back and tell me what we’re going to do.” Some do, I’ve worked with a couple of companies where they have a body or two, who do nothing but focus in on these things, and generate new ways to handle existing risks. But for the most part, most companies don’t have it. So, it can be difficult. But, I would emphasize that there is so much that we can accomplish simply by making the view of having to turn risk into opportunity as a critical part of the professional services environment.

Steve Brooks:               Coming back to stakeholders, there are different definitions of stakeholders. Do you talk about stakeholders within the customers, stakeholders within the professional services firm, and other stakeholders, like the customer’s customer? So, who do you actually involve?

Shane Anastasi:           That’s an interesting question, because stakeholders is a term that gets thrown around. I think, particularly, what I’m worried about, when looking at a professional services firm is stakeholder management, just the idea of stakeholder management, and bringing that in as a cultural element into the organization. And then using this idea of stakeholder management to go through a process of defining the stakeholders for a project. We teach, in the trainings that we do, that every organization that we work for, every customer has a hierarchy. And that hierarchy goes all the way to the board of directors.

But the fact is, that if a project ends up in front of the board of directors, then something has gone horribly wrong, the objective is for us not to end up in front of the board of directors. But it’s good for us to know that they exist. it’s interesting to remember that the stakeholders that we talk to on a project all report into those stakeholders. And that those stakeholders want their pound of flesh, just like the customer wants their pound of flesh from us. But with respect to stakeholder management on a project, the way that we identify stakeholders is who has the most to lose.

When you’re talking about any project that you deliver to a customer, it’s really about understanding whose butt is on the line for this project, who committed to the business that the expenditure of this project funding would end up in a business result? If you can’t identify that person within the project team, then you don’t have the project stakeholder. Once you do identify that person, and sometimes it’s a couple people, but once you identify those people, they’re the people that need to be involved with the project on a day to day basis. And a lot of them are too busy to be involved with the project on a day to day basis. And that’s something that we have to constantly battle.

That, again, is another risk that we suffer on projects, that I see as a huge opportunity. Because, those people, if you can make them happy, if you can teach them that they should be more engaged with the project that you’re doing, you then create a better relationship with them that pays back better next time they want more professional services. And one of the things we did at CirrusOne, was we insisted on stakeholder engagement on every project. And we would identify that person, we would write the responsibilities of that person into the SoW.

And Then we would make sure at kick off we were very, very clear about stakeholder to stakeholder meeting, that somebody was there to shake that stakeholders’ hand, to say, “Hi, I’m Shane. I am the person from CirrusOne that will take care of you. We’re going to work together on this project.” By doing that, we draw them into the project, and now we have a better relationship with them. I think that’s a good description of where a risk becomes an opportunity.

Steve Brooks:               But customers never turn up to their meetings, they’re meant to do they?

Shane Anastasi:           That’s a really good question. They tend to have a common behavior, especially busy stakeholders, of engaging in a project and then wanting to dissipate and leave it to the project team. And there’s a big risk in that. And the risk in that is that the only person up until the close of the sale, that truly understands what the company is trying to achieve is the stakeholder. Because the project team doesn’t exist. One of the, “Ahas,” that I had, when I started writing all this stuff out for other people to teach it to them, was that our project team and the customer’s project team did not exist during the sales cycle.

That means that the only person who truly has a vision for what it is we’re trying to do is the stakeholder. The person who committed to the company, that for this amount of funding, I will generate this improvement to our business. We have to learn to explain that to our customers, to engage that stakeholder. And when they tend to not turn up to a meeting, to take decisive action that says to them, “I’m not going to let this risk grow.” One of the things we did at CirrusOne was, we held ourselves accountable as a partnership to hold every stakeholder accountable who didn’t attend their meetings.

What that meant was, if our team reported that on the last stakeholder meeting, the customers, project stakeholder did not attend, that one of the three partners had to send an email to that stakeholder explaining nicely, but firmly, why they must attend those meetings. We found that it was a cornerstone of what made CirrusOne successful. Not just from our perspective, but what made us a great service provider to our customers. The fact that we cared enough to say, “Hey, that’s not good enough Mr. Customer. I need you at these meetings for these reasons, and when you don’t turn up, we are moving without true guidance. Please, turn up to the meetings.” And the response we got from those emails was just incredible.

Steve Brooks:               What is the first steps a business leader should take in professional services, to improve their situation regarding strategic risk?

Shane Anastasi:           I think the first one is to look at what’s killing your projects. Because, before you really get to look at strategic risk … And I actually wrote this in the Seven Principles book, is that you tend to find that people in professional services are not able to find the time for strategy, because the fire fighting is dominating their world. Until you find a way to stop the fires, the time for strategy is just gone. The first thing is to look at what’s killing your projects, and what’s killing your project P&L. Inside there, for all of us, there’s always a risk that we could look at. For some of us, there’s tons of risk and we need to take action on that now.

I find that if you do that, that usually takes a good six months before you’re able to really get on top of those risks that are playing out. But that’s where your first opportunity is. First opportunity is to look at your product portfolio, work out what’s killing it, and understand what I need to avoid, nullify, mitigate in order to get smoother projects running. And what do I need from my consultants, in a behavioral sense, to get better results. Once you have that breathing space, once you have that ability to stand back and say, “Now, how do I keep it going into the future?” The areas to focus are on, how do I keep competitive advantage? How do I take the outcomes of my projects, my successful ones, and turn them into a competitive advantages, that I can use against my competitors to help sell?

My number one strategic area of focus inside of every organization that I’ve worked for has always been, how do I help sell? How do I take what we do and use that against other firms who do it differently, and make that my competitive advantage that convinces customers to work with us? Sometimes, that’s working with the sales team. Because, I don’t own the sales team in some circumstances, sometimes I do. So, we bring in a strategy for selling.

Professional services is a very interesting space, because marketing in professional services is very difficult. We’re just people implementing stuff. No matter which way you slice and dice it, almost all professional services marketing sounds the same. What you have to do in PS is find the assets that you use in helping customers achieve their journeys, and find ways to bring those assets into the sales cycle, so that you can literally show them the customers and say, “Does my competitor have something like this? And if they don’t, then that’s why you should work with me.” That’s where I would look for the most opportunity if I was an existing services executive.

Steve Brooks:               You’re talking about the IP, in terms of processes, aren’t you?

Shane Anastasi:           Absolutely. How can I generate IP assets? Then, of course, what happens in that process is, you take something that’s confidential to the project portfolio and you expose it to pre-sales. And by doing that, you have to understand that you’re going to lose it. Here’s the way that I see that, and not all people agree with me on this. If I take that IP and I use it as a part of pre-sales, and I’m able to dominate the pre-sales environment with that IP, that’s a cost that I’m willing to suffer. Now, there’s ways to protect it, there’s ways to only show certain amount information so that people can’t reverse engineer what you’re doing. But I believe that that then sets the tone for the industry.

Now, while my competitor is worried about that piece of IP that I’m showing to all my customers, I’m able to now generate the next bit of IP. The next step that makes me look different to my customers. And sometimes, you can even think of it as the IP that you’re showing today is just a diversion for your competitors so that they’re focused on that while you actually build something completely different. We’ve actually used that. At BigMachines, we had a very clear goal of leading the industry with the thinking around a CPQ based project methodology. And we did that to create a differentiator between us and all of the other CPQ software providers.

Now we knew that they would all try and emulate the one slide that we were using to show customers we had a CPQ purposed project methodology. So, behind that, we had to build the next layer. When everybody caught up, that was the time for us now to introduce the new IP that we created. I truly believe that every services firm is in a competitive race around IP. And if you can find a way to use that as a part of your selling process, then that’s how you dominate, that’s how you win.

Steve Brooks:               Thank you very much, Shane.

Shane Anastasi:           My pleasure. It was an absolute pleasure to be here, thank you.

Steve Brooks:               If you are listening to this podcast on iTunes? Please could you take the time to leave a rating and any feedback you may have. Thank you.

You’ve been listening to one of a series of podcasts dedicated to sharing best practices for professional services organizations. These can be found on www.kimbleapps.com.