Finding Value in Your Operating Model
How do you take something that is working and make it better? Avantis Co-Founder Tony Purpuri explains how to find and exploit those high value elements of your operating model in order to increase your performance, grow and become more profitable.
Avantis founders Tony and Sam joined the consultancy start-up IMD Group in 2017 and 2018 respectively. Together as part of a small team they turned it into the highly successful Digital Transformation company VIMA Group. With over £4m gross profit in 2021 (35%) and 110 staff VIMA sold to KBR in 2022 for £75m (including earnout opportunities).
Part of IMD/VIMAs growth journey was an investment from Private Equity firm Chiltern Capital. Following the investment in mid 2019, there was an increased focus on accelerating growth and scaling the business.
To fuel the required expansion IMD/VIMA needed to diversify. To enable this they had to go back and look at how they could both scale their operating model and make it more profitable. This would enable them to grow their current markets and reinvest the increased profit into diversification.
As the account lead for IMD/VIMAs largest account Tony took on responsibility for driving increased growth and profitability. Tony’s background includes significant experience of delivering cost & data analysis, cost estimation and investment appraisals for multi billion pound programmes. He is also a co-author of the Association of Project Management (APM) Estimating Guide.
Tony was able to use his experience and analytical abilities to undertake a thorough review and analysis of the investment required to improve IMD/VIMAs growth and profitability.
Establishing growth and profitability as key requirements, Tony collated operational data including current contract profiles, outputs from the CRM including the sales pipeline and average sales cycles, recruitment pipeline and onboarding lead times. After analysing the data Tony was able to put in place a strategy that would grow IMD/VIMAs largest sector, and create the profit that could be reinvested to fuel diversification into other sectors.
The analysis had identified two key value drivers within the operating model. The first was the time required for effective business development. The second was the profitability and lack of return on investment of using expensive associates to deliver key services to clients.
Tony built his strategy around two outwardly simple concepts:
- Specialist Business Development support. Recruiting a Business Development Manager (BDM), to accelerate the growth of the sector.
- The increased use of staff rather than expensive associates.
The recruitment of the BDM, whilst challenging to find the right individual and requiring a degree of investment, was relatively simple. However increasing the use of staff within the account in a sustainable manor required a more complex and joined up approach.
Effective operating model analysis needs to be undertaken objectively and straddle the sales/operations divide. Both functions are key in discerning where the value is and therefore what should be enhanced and what should be removed.
Tony was able to use his experience and analytical abilities to undertake a thorough review and analysis of the investment required to improve IMD/VIMAs growth and profitability.
Establishing growth and profitability as key requirements, Tony collated operational data including current contract profiles, outputs from the CRM including the sales pipeline and average sales cycles, recruitment pipeline and onboarding lead times. After analysing the data Tony was able to put in place a strategy that would grow IMD/VIMAs largest sector, and create the profit that could be reinvested to fuel diversification into other sectors.
The analysis had identified two key value drivers within the operating model. The first was the time required for effective business development. The second was the profitability and lack of return on investment of using expensive associates to deliver key services to clients.
Tony built his strategy around two outwardly simple concepts:
- Specialist Business Development support. Recruiting a Business Development Manager (BDM), to accelerate the growth of the sector.
- The increased use of staff rather than expensive associates.
The recruitment of the BDM, whilst challenging to find the right individual and requiring a degree of investment, was relatively simple. However increasing the use of staff within the account in a sustainable manor required a more complex and joined up approach.
There were a number of options when it came to replacing associates with staff.
Staff could be recruited to directly replace specific associates. However this ran the risk of damaging IMD/VIMAs reputation as a people centric organisation by dismissing often long standing and respected associates . In addition recruiting for specific requirements was time consuming when there was already a growing demand for specific resources to deploy into other new sectors to aid diversification.
Backed by the cost analysis Tony convinced IMD/VIMAs board to invest and recruit more people than the business had roles for, in other words to hold a bench. By understanding the breakeven point, Tony was able to demonstrate to the Board that consistently holding a bench of five people whilst growing was more profitable than reactively recruiting to switch. This enabled an approach that associates were switched out when it became appropriate to do so. This maintained IMD/VIMAs reputation and at the same time increased the profitability.
Tony recollects: “The challenge was convincing the Board that holding a bench of around five people was the correct strategy. As an SME, “bench” is normally a dirty word that costs money. However, for IMD, the bench enabled agile and rapid deployment for opportunities across all sectors. It enabled increased profitability through the switch out of associates for staff, whilst also releasing highly experienced consultants to grow other sectors and capabilities. The diversification enabled by this approach directly increased the value multiplier for VIMA which ultimately led to the acquisition of VIMA for £75m by KBR in 2022.”
By understanding the breakeven point, Tony was able to demonstrate to the Board that investing in holding a bench of five people whilst growing was more profitable than not!
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