Problem Tiers

Today we’re talking about the types of challenges you solve for clients – the value you deliver.

According to our survey work, about half of the digital shops out there specialize in an industry or service mix (or both).

I’ve found that the narrower a shop specializes (within reason), the easier it becomes to identify and solve strategic questions for clients.

That’s a big statement, so let’s look at the types of things clients ask agencies to solve.

Prospects will often reach out and say something like:

We call those Tier-2 problems; tactical issues faced by companies.

Tier-2 problems are things people will type into a search box. They’ve already diagnosed their issue and need a vendor to implement it. Although “vendor” comes with a negative connotation in this industry, you can build a respectable business this way – many have. This is also typically where agencies need to start, even if their goals are to become more consultative.

By tackling a bunch of Tier-2 problems within a specific space, you and your team get good at solving them. You build systems to solve these problems quickly. You dial in your pricing to earn a decent return while still providing solid value. You hire narrow specialists like “additive manufacturing technical whitepaper editors.” You tune your whole shop to deliver that specific value that the prospect typed into the search box.

Unfortunately, repeatedly solving the same challenge can become tiresome. When we get bored, most of us start looking at other stuff to work on. Other industries. Other services. Sometimes, other businesses.

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Solving Strategic Challenges

Tier 1 problems deal with core strategic questions leaders have about their companies. Clients don’t search Google for answers to Tier-1 problems.

These are answered on strategy retreats at the C and VP levels with significant research and planning. These are challenges that require deep insight into a space to solve. Things like:

Or a completely general:

We can crudely call these “business decisions.” Being able to have discussions at the highest levels regarding corporate strategy through the lens of cutting-edge tech or marketing means the difference between being seen as another vendor or a strategic partner. A lot of this thinking is paralleled in the book “The Trusted Advisor” by David Maister

Once you enter this discussion of core business challenges, you have the opportunity to advise clients through your unique point of view. When you get comfortable solving Tier-1 challenges, this is where your real value lives.

If you had a chance to read last month’s newsletter, you’ll notice that Factory-style shops are more suited to solve Tier-2 challenges, while Tier-1 challenges are a better fit for Consultancy-style shops.

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A Path to Tier-1

Focus – By focusing on a narrow space, your team will gain expertise in solving all the Tier-2 challenges. This happens fast. By keeping your focus on this space, you’ll let them begin to identify and solve the Tier-1 challenges. This kind of firm-wide capability is the most valuable part of an agency.

Research – Do some digging into your target client’s industry. Most general industry reports you’ll find are trash. For tech, I like Forrester, IDC, and Gartner. If I’m looking into other industries, I’ll start with industry associations. They’ll often publish their own trend reports, but sometimes they partner with a specific niche research outfit. Once identified, reach out to that specialist researcher for access.

Strategy chats– Raise the level of conversation. Once you’ve learned enough about their industry, start hosting regular strategy chats with clients. These should be discussions with their leadership (and yours) about trends in their industry and the key challenges they’re facing.

Hire from that industry – This is a bonus one for the larger shops. Expand your business development or sales teams by hiring executives from your target industry. Ex-sales executives tend to make particularly good fits here. This gives your revgen team an instant boost.

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Don’t sleep on Tier-2

As I said, you can build a solid business by solving Tier-2 challenges. Customer acquisition is easier, productized services work, and fairly rigid systems can be built to keep everything in line. This becomes the classic “we’ll make it up in volume” play. Just make sure your unit economics are solid.

We spent a lot of time on Tier 1 because I see many Consultancy-style shops fail to make the jump. They get distracted by easier work, which snowballs into a mess of tension within the agency.

The secret is building a firm that reflects the style of challenges you’re trying to solve.

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Agency Strategy Review

Chart a path to sustainable profit with an expert review of your agency’s strategy.

We review everything from interviews with management to employee surveys to strategy docs. This lets us give you an outside perspective on your positioning, risks, leadership team, strategic alignment, and more.

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