How The Highest-Growing Tech Firms Address Marketplace Threats
By Elizabeth Harr
Every day, technology firms must respond to changing client needs and market conditions, attract new business, and react to other evolving challenges. Given this constant state of churn, it can be all too easy to lose sight of a broader strategy.
To understand the go to market strategies of the fastest growing firms — and to help their low growth peers determine what might work for them, the Hinge Research Institute recently conducted a survey of more than 1000 professional services firms about how they perceive their market and strategize for the future. Of that sample, 170 firms were in the technology sector, with $39 billion in combined revenue. As shown in Figure 1, there were roughly equal numbers of firms in each size category, ranging from micro firms (with less than $1 million in revenue), to larger firms grossing more than $50 million per year.
Figure 1. Breakdown of Survey Respondents, by Revenue
To provide more specific insight, we have created a report specifically about the threats — and the strategies used to counter them — in the technology sector (you can download a free copy of the executive summary here). By comparing your organization’s strategies to those firms with the highest growth records, you can find insights to help you position your organization for continued success.
The Big Picture Of The Tech Market
One of the noteworthy findings of our study is that firms in the technology sector, in general, have grown faster over the last several years than any other professional services sector. In fact, as shown in Figure 2, the median growth rate for technology firms surpassed the nearest competitor by more than 2 percentage points.
Figure 2. 2017 Median Growth Rate by Professional Services Industry
A major focus of our study was on how technology organizations perceive challenges to their enterprises. We asked respondents to look ahead 3 to 5 years, and identify what they expected to be the most significant threats to their organizations. As Figure 3 shows, one of the most commonly-mentioned threats was increased competition and its impact on driving down fees and making it more difficult to differentiate services. Two separate but also significant challenges were a shortage of top talent and the need for new skills.
Figure 3. Top 5 Threats to the Technology Services Industry
Learning From High-Growth Firms
We also wanted to understand how the highest-growing technology firms — that is, firms with compound annual growth rate in revenue of 20 percent or more over the last three years — approach business differently than their No-Growth peers.
As our full report explains, High-Growth firms see competition from new firms as their largest threat. Figure 4 compares how High-Growth and No-Growth technology firms perceive the threats they will face in the next few years.
Figure 4. How High-Growth and No-Growth Firms See Future Threats
We also wanted to determine which strategies firms were planning to implement to address their challenges. As shown in Figure 5, one of the notable findings was that there was a distinct difference between High-Growth and No-Growth firms. For example, High-Growth firms are three times more likely to productize their services. Additional differences between the two groups were in their emphasis on making their expertise more visible in the marketplace, developing new services, and doing more research on clients’ needs.
Figure 5. Top 5 Strategies of High-Growth Technology Firms to Address Industry Threats
The Specialist Advantage
Another difference is in the way firms go to market. High-Growth technology firms are much more likely to be highly specialized. As Figure 6 shows, in response to a question asking firms to rate their level of specialization in five different dimensions, High-Growth firms were significantly more likely to specialize in solving specific types of problems, their use of technology, and serving a specific role or organizational function.
Figure 6. Technology Firm Specialization, by Growth Category
When comparing digital marketing techniques, again, we found interesting differences between High-Growth and No-Growth firms. As Figure 7 shows, responses from both cohorts demonstrate a belief in the value of being active in social media – LinkedIn in particular is a highly networked venue for professional services leadership and their buyers. That’s the only area of relative alignment. High-Growth firms are four and half times more likely to employ in person or digital demos as a way to reach their audiences — a technique that often falls flat unless specialization is part of the game.
Educating audiences through thought leadership (blogs, downloadable content, and guest blogs), and ensuring visibility for that thought leadership through keyword research are the other two areas that High-Growth firms emphasize relatively more than their No-Growth counterparts.
Figure 7. Digital & Content Marketing Technique Adoption by Growth Category
Which marketing techniques provide the highest return on effort? Figure 8 shows that leading the list was publishing blogs on external publications, followed by speaking at targeted conferences or events, marketing partnerships, and providing assessments and consultations. It’s no surprise. In a separate body of research we conducted on building marketplace visibility, speaking and publishing — in other words, proving you’re the expert you say you are — are the top most effective pathways to visibility and growth.
Figure 8. Top 5 Marketing Techniques with the Highest Return on Effort for Technology Firms
The Big Takeaway
To optimize their chances of success in a turbulent market, it’s helpful for technology firms to be aware of the strategies and techniques used by their most successful competitors. As our study demonstrates, there are significant difference in how High-Growth firms see their market, view the various threats they face, and respond with strategic marketing programs. The more you understand how and why High-Growth firms do what they do, the better positioned your organization will be for success.
About The Author
Elizabeth Harr is an accomplished entrepreneur and experienced executive with a background in strategic planning, management, communications, and alliance development. Elizabeth co-founded a Microsoft solutions provider company and grew it into a thriving organization that became known for its expertise in Microsoft customer relationship management.