Unbeatable advice

A few years ago, fellow PROFIT columnist Greig Clark and I went on a six-month mission to explore and promote the use of advisory boards by Canadian entrepreneurs. Our prior experience had taught us that establishing an advisory board is the simplest, most powerful way to bring greater intellectual firepower to bear in your business, achieve strategic clarity and generate stronger growth.

Through a four-column series in PROFIT called “Success Insurance," we outlined the benefits accruing to entrepreneurs who have the courage to embrace advisory boards, and we offered advice on how to build them.

But there’s another type of board you should consider that could be equally transformative for your firm: a customer advisory board (CAB). In lieu of the lawyer, accountant and study partner from first-year commerce you might put on an advisory board, your CAB consists of people who already care about the future of your business: your best clients. By bringing them together and opening up about your plans, you can deepen customer relationships and turn your biggest fans into strategic partners.

I tried to write a column about CABs several years ago. I knew that many PROFIT 200 growth firms had used CABs to solve logistics problems and create more forward-looking client relationships. But I couldn’t find any Canadian experts who knew how to put one together. Recently, I discovered Geehan Group, a Dayton, Ohio-based specialist in connecting firms to what it calls “strategic market groups.” Founder Sean Geehan was running a marketing firm when a client asked if he knew how to assemble a CAB. “No,” he replied, “but give me six months.” His research showed how powerful CABs can be — and how few were being done right. Rebuilding his business around CABs, he now serves clients in North America (such as Dell and OpenText), Europe and India.

The first thing to know is that CABs work best for business-to-business firms. If you sell to consumers, you can learn much from one-off focus groups or ongoing customer panels. But few consumers have the breadth of knowledge or sense of partnership that will help you grow over the long term. So while B2C firms should seek creative ways to collaborate with their customers, an advisory board won’t be the power tool it can be for a B2B supplier.

Geehan Group principal Rob Urbanowicz identifies four key benefits of CABs:

• They help you and key clients identify bottlenecks and find ways to work more closely together.
• They boost customer loyalty, because when you share your ideas, opportunities and strategies with a client, you create a new bond that can’t easily be broken if a competitor undercuts your prices by 10%.
• They’re a great way to deepen relationships and gain access to higher-level decision-makers.
• They create relationships that help you understand market changes sooner. “Your clients will direct you to where you need to go and tell you how to find more customers like them,” says Urbanowicz.

And that’s on top of the informal intelligence you’ll garner. Urbanowicz recalls a board meeting he facilitated for a client in which the CEO mentioned an acquisition he was considering. The CAB members urged him to change his mind; with their industry knowledge, they knew the target firm was in trouble. The client found another business to buy, and later told Urban­owicz the CAB had just paid for itself “for as long as we continue to run it.”

How do you set up a successful CAB? Start by setting your own objectives, says Urbanowicz. Make sure your key managers agree to participate and understand your goals — you don’t want your sales manager treating the meetings as a sales opportunity.

Decide on a schedule. Urbanowicz suggests your board meet no more than twice a year. If you’re preparing properly for meetings, presenting various initiatives and following up on decisions and suggestions from the board (and, ideally, managing employee/customer working groups), you’ll need six months to build on all the new ideas that come out of each meeting.

Now, reach out to clients. Urbanowicz recommends inviting a dozen to join your board. Use the 80/20 rule: invite the 20% of customers that account for the lion’s share of your business. Emphasize that you’re looking for ways to serve your clients better, plus strategic advice — that’s how to get buy-in from senior executives, not just procurement officers.

I suspect many business owners, especially those who sell to organizations far larger than their own, feel nervous about asking customers to join a board. But Geehan Group, which surveys participants after each CAB it runs, has found people have four selfish motivations for participating:

• They want to get to know key suppliers better, so they know whom to call when problems occur.
• They enjoy networking and talking shop with their peers.
• They’re seeking insights to help them do their own jobs better. “Attendees want to learn from their peers about best practices and how other companies are solving business problems,” says Urbanowicz.
• They like the opportunity to influence a company’s direction. “People generally want to help,” says Urbanowicz. “If they feel they can help you, they want to do it.”

Are you ready to form a CAB? Or do you have experience in putting one together? Tell me about it — because I’ll return to this topic next issue.