Chapter 9 Building Client Connections – How Successful Engineers Become Great Business Leaders

CHAPTER 9

Building Client Connections

How can you build connections to increase your customer base and achieve your growth goals in the easiest way possible?

Why Client Connections Matter

No single big goal has ever been achieved in isolation. Warren Buffett, the preeminent investor, has Charlie Munger as his sidekick. Albert Einstein surrounded himself with the smartest mathematicians he could find. Steve Jobs worked closely not only with Steve Wozniak, but also with the third founder of Apple, Ronald Wayne. It’s apparent that achieving big goals and crossing the Valley of Death is a team effort. That’s why building and maintaining relationships drives leadership success. These relationships include your business stakeholders, such as employees, vendors, and clients. We do business and work closely with people, not organizations. Since leaders with engineering backgrounds are process thinkers, why not use these strengths to design a method to actively attract the right people? These can be employees, customers, vendors, or peers.

If you don’t have a process for attracting people, you will be at the mercy of other people’s processes to be attracted to you. Building business relationship should not be based on chance, but should be based on careful marketing processes. Marketing includes activities that help you to attract the right people to achieve your goals.

Every organization needs to grow. If you don’t grow, you will wither and fade away. This means that every single high-paid executive in your organization must bring in new business. This includes great business leaders. In previous chapters, you have seen strategies to influence and persuade others such as your employees. In this chapter, you will discover how to build external relationships that support growth goals, which involves getting and keeping customers. After all, nothing happens until a sale is made. An effective way to strengthen client connections and attract new customers is with referrals.

How Referrals Grow Business

A referral is a recommendation of your product or service, usually from an existing client to a new prospect. There are several reasons why a referral from a trusted source is the most efficient way to achieve your growth goals as a leader as quickly, dramatically, and smoothly as possible.

First, committing to something is scary. Everyone has been burned by buying something that became a source of frustration soon afterward. The overall concern is risk. In every business transaction, risk is transferred from one party to the other and you don’t want to hold the risky bag. For example, if I buy apples at the grocery store, risk is transferred from the grocery store owner to me: The grocery store owner now owns risk-free money, while I have exchanged this money for apples, which may be acid, rotten, or full of worms. This concern makes referrals powerful. Shakespeare wrote that the fragrance of the rose lingers on the hand that casts it. In other words, a referral from a trusted person automatically carries trust. And trust is the best antidote for risk. The bigger the buying decision, the more the need for trust. No one has ever chosen a brain surgeon from the Yellow Pages.

Next, with trust, the price of your product or service all of a sudden becomes much less important. If you know your babysitter will do a great job caring for your children, you’re much less likely to haggle over price.

Customers referred to you not only buy easier, but buy more products and services more frequently. The conversation and mindset shift from if I will use your product or service to how shall I use your product or service.

Referred customers understand the process of referrals and will therefore be much more inclined to refer you to others. How you handle your first business transaction brings the expectation that you will always do transactions that way. Therefore, take very good care of your referral sources.

How to Build Trust

It’s clear that trust is the most important component for any referral strategy to be successful. Trust means the absolute conviction that you have the best interest of the other person in mind. Building trust in a referral environment is driven by six elements:

  • Reciprocation
  • Consistency
  • Social proof
  • Liking
  • Authority
  • Scarcity

A core activity for business leaders with an engineering background is therefore to apply their strengths—in this case process design—to design a systematic referral process that will help them get customers to achieve their most important growth goals. These six elements are the building blocks of this process.

How to Use Reciprocation

In human relationships, we tend to mentally keep score with an emotional bank account. Whenever we receive something, we automatically have the urge to give something back to balance the checkbook. An effective way to use reciprocation in a referral environment is therefore to give massive value first before asking for referrals. Therefore, it’s important to do what you do so well, so people can’t resist telling about you. If you can turn your customers into raving fans, it’s easy to turn them into raving referral fans. Two strategies will put reciprocation immediately into practice.

Practical Application

  • Simply refer others first. The quickest way to get something is to give it first to others. For instance, if you want your clients to send you referrals, refer your clients to others first.
  • Heap praise and recognition on your clients who have referred others to you. Make a huge deal out of the first referral. This can be mundane things, like thank you notes, or more advanced strategies, such as inviting your client to codevelop your new strategy.

How to Use Consistency

Consistent behavior enforces predictability and predictability increases the feeling of control, thus building trust. There are several ways to use consistency to improve referral rates:

Practical Application

  • Educate your clients by making sure to explain your referral process in detail before asking for referrals. It will make the referral process predictable.
  • Education must focus on:
    • A picture of what the ideal referral client looks like.
    • A detailed description of the process of what happens when a new referral client is introduced to you. This process includes the timing and nature of the first contact, what happens when a referral turns into a business relationship, and what happens when referrals don’t turn into business relationships.
  • Start with the referral in mind by creating referral expectations in the mind of a prospect before accepting the prospect as a new client. Some think the client has to experience results before referring, but this is contrary to known psychology. Instead, the new client is most enthusiastic when everything is new and when the decision to choose you is still fresh in his or her mind. Therefore, use the moment of the first sale to set the expectation that you will be asking for referrals.

How to Use Social Proof

People tend to do what their peer group is doing. Once you start gaining the trust of members in a group of peers, other members will automatically trust you more as well. Bernie Madoff could continue with his Ponzi scheme for many years, because his clients acted as referral sources to their peers.

Practical Application

You can harness the power of social proof in several ways by extending your business horizon and start to do pro bono and/or community work. This strategic approach is a form of working on your business. Often you will build relations with people who can direct you to trusted peers. These peers may turn into clients.

How to Use Liking

We do business with people we like. Your clients like you, or otherwise they wouldn’t do business with you. However, they often don’t refer you to others simply because doing so isn’t on their radar. After all, when was the last time you spontaneously referred a trusted vendor to one of your industry peers?

Practical Application

Define the top 20 percent of your trusted vendor and customer list. Then, proactively engage these trusted partners and simply ask for referrals. You will actually do them a favor by giving them the opportunity to introduce the value of your business to valued others as well.

How to Use Authority

Authority is a powerful trigger for trust. You wouldn’t necessarily follow the financial investment advice of your gardener, but when your banker talks about investment opportunities, you listen up.

Practical Application

Set up buying criteria for your type of product or business to educate your marketplace. A recent dog food commercial depicts a veterinarian in a white coat explaining why a certain mixture of vitamins is essential to keeping Bailey in top condition. This dog food, of course, is the only one that contains these essential ingredients. This trust-building advertisement was designed to educate customers, boosting the dog food rapidly to the top of dog food brands. Educating the marketplace works if you are the first one to do it and you become the benchmark in the mind of potential clients. Think of how BMW has promoted the 50-50 weight distribution as an essential criterion for a vehicle to become an “ultimate driving machine.” Naturally, no car maker other than BMW has mastered the fine and elusive art of the 50-50 distribution.

How to Use Scarcity

Fashionable nightclubs use a velvet rope to manage entrance, and only the chosen can come in. The more fastidious the bouncers, the longer the line of people wanting to get in. A long line of people trying to get in builds additional trust in the quality of the nightclub. This is called the wisdom of the crowd: after all, when something is popular, it must be good. Furthermore, people want what they can’t get. Think of the popularity of limited editions. Nothing becomes more attractive than limited supply. The coveted Amex Black Card is an example of how this idea is done well. You can use the awesome power of the velvet rope to your advantage in your referral strategy design.

Practical Application 1

The first variation to increase referrals by building scarcity is with mutual selection. Using this approach, first make a list of criteria that potential clients have to pass in order to do business with you. Share these criteria with new potential clients and together determine if they satisfy all criteria. Accept them as new clients only if they comply. If they don’t, refer them to your competitors. In this way, you let potential clients jump through hoops to become new clients. This selectivity will make you exclusive, and exclusivity creates desire. An additional benefit is that price resistance disappears. New clients are so happy they are accepted that cost is no longer an issue. The strategy to build exclusivity as part of your business is a very effective way to offer your products and services at the highest price points.

Practical Application 2

The second variation to increase referrals by building scarcity is takeaway selling. Soup Nazi was an episode of the comedy series Seinfeld, which showed a long line of people anxiously awaiting their turn in a line leading to a soup restaurant. Surprisingly, the store owner was unpleasant and egregiously rude, even refusing to serve one of the Seinfeld cast. Ironically, this refusal made the soup even more attractive. In other words, human nature is somewhat perverse. We want what we can’t have. Here’s a practical application of takeaway selling. At some point, add a step to make it more difficult for prospects to become your clients. For instance, introduce a formal application review step to determine the final go or no go. When you do so, people will become more eager to do business with you.

Summary and What’s Next

To achieve big growth goals, a business leader needs to make smart choices and build a process to maximize the impact of existing relationships and thus get new clients with the least amount of effort. This mechanism is called a referral engine and its main component is trust. With a few simple yet effective activities, a great business leader can quickly build trust and attract more customers to grow their business.

If you think you’re in control, you’re probably not going fast enough. In Part IV of the book, you have seen that smooth execution is not about control, but about using your strengths—reality-based thinking, process design, and accelerated learning—to anticipate and quickly overcome roadblocks and react to changes. Doing so involves strategic quitting, executive judgment, overcoming kryptonite habits and finally, building new client connections using a referral process.

In Part V, the final part of this book, we will bring the three building blocks of achieving big goals—clarity, focus, execution—together, and present an actionable blueprint to get going.

External Perspective

Interview of Paresh Bhakta, COO DSM, Engineering Plastics

What Has Been the Most Fascinating Aspect of Business Leadership for You?

The most fascinating aspect of business leadership is how much less content you use for decision making. Since the speed of business is increasing, it’s no longer possible to rely on my own deep content knowledge. Therefore, I make a concerted effort on building a relationship and connection with my team. Due to the speed of change today, I need to trust my people and rely on their content knowledge to get results. The ability to judge and develop talent is greater for me today than how it was 10 years ago. Though not always a favorite thing to do, the ability to change talent quicker is important for both my team and also the individual.

The biggest transformation I have had to make going from an engineer to manager is the realization that you have less control of things than you think. As an example, when I was an engineer, I could control the outcome by controlling, or just removing, the variability of the inputs. With an understanding of our physical world, this would allow me to control by output. On the other hand, as a leader, you are a lot less in control. For example, as a COO, I’m currently leading over 1,500 people. I must judge human resource (not as predictable and controlled as laws of physics) to deliver results. Therefore, with the increase in speed and technology in our world today, I have had to develop a sense for talent and how to drive them toward the vision I have.

Good engineers may not always become great business leaders. They understand content, yet they must be able to judge the skillset of their people as well. They will fail as a leader when they dive into content and forget about making strong connections with their people. Therefore, when I begin a new job, I always start with understanding my team.

Furthermore, when I’m hiring new leaders, I am looking for two things. First, do they understand the content: This is very important to build their credibility. Second, do they have the ability to get results: not by relying on their content knowledge, but by relying on their people with content knowledge. My goal is to develop a team that works for purpose and not for a paycheck.

What Are Some of the Most Important Skills and Behaviors for Business Leaders with an Engineering Background to Improve their Effectiveness?

First, you need to have high integrity. This builds trust, which is an enabler in everything we do. Next, it’s important to have a transparent method to communicate. It’s also important to be direct. Finally, you must be able to condense your objectives and the objectives of your people to a maximum of three. And then lower your role to a cheerleader. If they fail, I give them support. If they succeed, I’m clapping. In this way, you’re able to engage with your team through the journey. This automatically leads to respect and credibility as a leader. It also allows you to have insight into the talent that is executing your vision.

What Is Your Approach to Learning and Improving as a Business Leader Yourself?

By reading about the world around my business. As a leader in chemical industry, I read, listen, study a lot about the economics of the chemical value chain and how it integrates with new customer trends. My goal is to stay current with technology developments that can have significant impact on the future of DSM. This allows me to shape and develop a roadmap for economic success for DSM in a sustainable and meaningful way.