Monday, May 7, 2012

The Difference Between a Pipeline and Lifeline

When I consult with new clients, the one question that always comes up is, “Do you want to see our pipeline?” I don’t want to see the pipeline until I know how the projects were entered into the pipeline as well as historic trends.  The project pipeline is part of a process.

Whatever you call the business you are expecting to come forward in 6 months to two years, the process for arriving at the number is integral to your success.  I have used both the pipeline and funnel analogies in my training programs.  The pipeline is a process where known projects and their high probability for success are entered into the flow of firm projects.  Most of these projects are existing contracts where additional services are expected or contracts with multiple phases.  The pipeline also includes new projects that have been won but contracts have not been completed or start dates are in the future. The pipeline can also include potential projects with a multiplier for potential success.  Most firms are able to make an accurate projection of the revenue that will be generated in the current year from these projects.

The funnel is more about new clients or existing clients with new projects as opposed to existing
projects. At the top of the funnel is the universe of projects.  Since your firm is not qualified to compete or deliver on all of the projects, a percentage of the project universe can never enter your funnel.  Marketing and business development work together to qualify which projects can enter the funnel. 

The projects that enter the top of the funnel are then researched to determine how they fit with the mission of the firm, competition, budget, schedule, resources needed, decision makers and profit potential.  Projects are then filtered further into the funnel.  Business development then gets aggressive with the projects at this stage of the process.  Meetings are scheduled and more research conducted.

The end result is what I call “The best of the few.”  These are projects where you are now connected to the decision makers, they fit your mission and expertise, and your chances for success are high.  Competition has been identified and you can leverage your strengths and weaknesses accordingly.

Every professional services firm should recognize the difference between a pipeline and lifeline.  Some would say that a pipeline/funnel is a lifeline.  I would disagree.  Here is the definition of lifeline:  An anchored line thrown as a support to someone falling or drowning.
 
Firms don’t start a pipeline  or funnel process because they are failing.  Companies that have cut marketing and business development resources, and now see their fortunes declining might need a lifeline.  However, there isn’t a magic wand in the process for acquiring new business.  Even with solid processes in place of both a pipeline and funnel, signing new business today is more difficult today when you consider increased competition, the economy and business challenges being created by the federal government.

What about the firms that have pipelines but now need a lifeline?  Sometimes it goes back to the research and due diligence of client acquisition.  Sometimes we track the wrong projects, include projects that are never going to proceed or miss the changing tides of client politics. Bad math and coming out on the losing end of 50/50 projects also contributes. Responding to RFPs without understanding the project or client is a recipe for failure.  If you don’t believe this, consider the fact that a competitor who has completed due diligence probably wrote the RFP for the client.

Last October, McGraw Hill predicted the level of construction starts in 2012 was expected to be $412 billion.  New construction starts in March jumped 23% to a seasonally adjusted annual rate of $482.4 billion, according to McGraw-Hill Construction.

The Architecture Billings Index expanded for the fourth month in a row in February with the highest number since 2007. This data is good news to large firms, medium firms and small firms. There is a lot of work out there and it is getting better.

On the competition side increased construction activity might get large firms out of the medium and small projects market they have slid into because of the economic downturn.  In addition, more medium and small projects might come off the back burner as the economy continues to improve.

Therefore, industry firms need to reassess their process for acquiring new business and take an honest look at where their expertise can be put to best use in solving client issues. When was the last time that you looked at your unique value proposition? In addition, the marketing and business acquisition process might need to be revised.  Resource allocation should be a primary element of any review.  Maybe this is a wakeup call, but it is certainly better than waiting for a lifeline in the murky waters of business development.

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