PORTLAND & HACKETT

Overview

Portland & Hackett (P&H) is an architectural practice, originally founded in 1900, which provides building services to clients across a range of sectors. In 2005, P&H was ranked the 69th largest practice in the UK, employing 200 staff. The firm has six offices, four in the UK, one in Cork and one in Warsaw. In 2005 the company turnover was £10 million (€14 million). The UK architecture industry is highly fragmented, so P&H’s current ranking places it firmly in the middle of the market, based on practice size and turnover. The firm has rebranded on no less than five occasions in the last decade but a poor understanding of its core competences and how these add value to clients had left it without a clear differentiator. P&H had become stuck in the middle of the market. Its individual offices assumed niche positions in profitable segments.

P&H also faced increased competition from large global practices, led by architects with iconic status, such as Sir Norman Foster ( The strong design reputation of these powerful competitors helps them to secure large-scale, high-profile, design-focused projects, with healthy margins. Conversely, P&H’s strong retail heritage had enabled it to build relationships with blue-chip retailers, with the retail sector accounting for 70 per cent of the business’s turnover in 2004, making P&H reliant on it. Retailers tend to have strong buying power, creating intense downward pressure on fees and reducing profit margins. Moreover, a strong brand identity and customer focus is becoming increasingly important in the construction industry. Proactively developing and nurturing business relationships through networking and personal selling by the architects themselves, is key to building sustainable workloads and generating referrals to new clients. Architects frequently have to endure rigorous and costly tender processes to secure new workloads. They must highlight their USP and demonstrate their approach to understanding customer needs and satisfying the expectations of a diverse range of stakeholders throughout the construction process.

The current situation

P&H currently has a technical orientation, where teams are focused on delivering workloads for clients to sustain the business. P&H’s growth to date has not been driven by a strong customer focus. The fact that many competitors in the architecture industry have also failed to develop a marketing orientation has assisted P&H. Its executive board has decided to introduce a marketing manager, Peter Bruce, to the firm’s Manchester office to develop a marketing orientation. Peter is given a two-year contract. His remit is to devise and implement a strategic marketing plan with the key objectives being to:

  • increase revenue by 10 per cent year on year
  • improve profitability
  • rebalance the portfolio by identifying and facilitating moves into growth sectors
  • transfer ownership of relationships from individuals to P&H.

The four members of the board are sceptical about the impact marketing will have. They plan to use Manchester as a test bed. If Peter’s input proves successful the concept will be introduced to the other offices. The chairman, Cecil Smith, believes this is a low-risk strategy that will provide the board with time to make a judgement based on results. Peter will report to the managing director of the Manchester office, Luke Matthews.

A baptism of fire

The business had no previous marketing input so Peter’s arrival was met with a mix of scepticism and eager anticipation. His new colleagues were keen to ask questions: ‘What events are you going to organize?’, ‘When is the next golf day?’, ‘Will we be having some new brochures?’ Other members of the team were less enthusiastic: ‘We tried marketing before, but it didn’t work!’ These comments from middle to senior management demonstrated a limited understanding of marketing, aligned with an obsessional focus on tactics. So Peter invested time developing an understanding of the business from the inside. Informal discussion groups with project teams enabled him to become accepted as a member of the team. They helped him to conceptualise how the Manchester office currently operated. They also began to highlight some of the key issues affecting the Manchester office.

Figure C41.1 Summary of P&H based on the McKinsey 7-S Framework

With a sceptical executive board keen for tangible results, but at the same time reluctant to publicly champion the cause, Peter realized that internal marketing would play a key role in the development of a marketing orientation and the effective implementation of external strategies. He would have to work hard to win hearts and minds if he wanted commitment not just compliance. Therefore, Peter based his approach on, firstly, satisfying the needs of internal customers. He planned to establish an inclusive way of working from the outset. It would be simple to develop a strategic marketing plan that gathered dust on a shelf—the real challenge was to make marketing work for P&H.

Involving members of the Manchester team in each step of the development of a strategic marketing plan and the introduction of associated systems and processes would build an understanding of what marketing is, why it is important to the business and how individuals can contribute. Establishing an inclusive way of working would make marketing an integral part of each employee’s job. Increased motivation and commitment to the cause from employees would lead to external customers being well served.
Developing the strategic marketing plan

P&H did not have a formal approach to environmental scanning. Peter subscribed to the relevant trade publications and circulated them around the office, inviting colleagues to submit any relevant articles they read. He informed the office that he planned to write a report to identify the major factors in the macro-environment that impact on P&H. He held a brainstorming session with each project team, covering a key area (i.e. political, economic, socio-cultural, technological, legal and environmental issues). Peter realised that tacit knowledge did not benefit the organization. With assistance from his colleagues he was able to pool environmental information quickly. Using government and industry reports (e.g. Keynote and Mintel), as well as Internet sources and other media, Peter produced a comprehensive analysis of the macro-environment. The business environment impacting upon P&H was deemed to be complex, yet relatively stable. His conclusions were disseminated around the business.

The absence of market data resulted in a weak understanding of the market environment. P&H’s lack of direction meant that it failed to respond to how the market had evolved. There was low awareness of the growth trends within the UK’s construction market or trends in UK architects’ fees. Consequently, the business was slow both to identify growth sectors and take advantage of new business opportunities. This resulted in a scattergun, ad hoc approach to marketing. Peter nominated sector champions to cover key industry sectors. It was their responsibility to monitor key industry publications and flag articles of interest. Using this data and a range of other sources Peter produced an in-depth analysis of the UK construction industry and architects’ fees. The report covered 2000–2009, detailing historic and predicted trends for all the major operating sectors.

The support of the sector champions allowed Peter to develop a continuous approach to environmental scanning. Each month submitted articles were grouped by sector and relevance to existing or prospective clients and a simple bulletin was circulated around the office to keep everyone updated.

Peter identified the following growth sectors:

  • Shopping centres—catalysts for urban regeneration (e.g. the Bullring, Birmingham).
  • Retail—designing branded environments, managing national store roll-outs.
  • Education—heavy government investment in all major subsectors especially secondary schools.
  • Residential—three growth segments increasing in prevalence:

– homes for the elderly—increasing demand because of the UK’s ageing population

– affordable homes—rising house prices mean publicsector workers can no longer afford homes in large conurbations, especially in the south-east

– urban living—increasing demand among young urban professionals for city-centre apartments and mixed-use developments.

Peter also instigated a survey of existing and potential clients. The findings revealed that P&H had a low profile in Greater Manchester. The firm had even been described as a ‘well-kept secret’.

Delivering workloads on time and within budget had enabled P&H to secure sustainable workloads. However, there was little emphasis on proactively managing relationships within the customer’s organization. This was characterized by a limited understanding of clients’ procurement processes, the structure of buying units and the identity of key decision-makers. Hence, P&H failed to anticipate its clients’ future needs or exploit the potential value of clients.

The firm had always categorized workload by sector; there was no effort to identify distinct segments of customers with the same needs. The business also demonstrated a low level of awareness of the number of potential customers. Peter sourced data from a research agency that revealed there were over 1000 active residential developers within a 90-minute drive of Manchester. This information included the details of key contacts. Peter was also able to secure similar data for the retail sector. He then segmented the data to prioritise prospective clients based on:

  • number of developments
  • sector and segment
  • size of projects (m2)
  • value of projects
  • proximity to Manchester
  • client’s design aspirations.

P&H displayed limited awareness of who it competed against, or its competitors’ strategies and approach to competing for workloads with existing clients. P&H’s six offices had high levels of autonomy. In effect, six competing, independent silos had been created, characterised by low levels of collaboration and poor inter-office communication. Interviews with colleagues at all levels within the 50-strong Manchester office revealed a distinct lack of communication across project teams. Staff had little knowledge of P&H projects being designed in other locations, but Peter was even more alarmed to find that colleagues had just as little knowledge of what happened outside the realms of their own team. An insight into the company’s vision, mission and strategy was all but a distant dream. Undaunted, Peter suggested the following:

  • Increase workloads from existing clients by developing a proactive approach to managing customer relationships. Analyse the profitability of existing work streams.
  • Market penetration. Within the financial year 2005–06:

– attract one new retail client, securing a lead roll on a national store roll-out; alternatively, assume the role of lead consultant designing retail environments

– attract one new residential client in the urban living segment designing a new-build development in excess of 20 apartments.

  • Market development. Target new markets with existing services. Within the next 18 months:

– understand the needs of education clients; establish a relationship with an education client designing a new-build facility

– secure a fee-earning relationship with a client in an emerging residential sector, i.e. elderly living or affordable housing.

  • Brand issues. Establish a clear proposition and core values through the development of new marketing communication tools utilising P&H’s new logo.

Luke Matthews had always focused on tactical activity. Peter believed that developing client-specific strategies for P&H’s four key existing client sectors would help Luke and the office to develop a marketing orientation. Peter devised strategy workshops to develop an understanding of how P&H managed customer relationships. A workshop was held with each project team without directors being present, enabling teams to speak openly. To gain compliance Peter explained why strategy is important and highlighted the benefits to P&H and to the team. This helped the teams to contribute effectively. The workshops facilitated high-quality management discussions, out of which strategic plans were developed. These were implemented over the following six months. Peter monitored progress and provided support where necessary.

Peter worked closely with Luke Matthews and the other members of the management team to develop a list of target clients within a 90-minute drive of Manchester. To clarify the P&H proposition, Peter worked with project teams to develop sector-specific brochures on the theme of the benefits working with P&H would bring, which would appeal to and engage clients in the target markets. These were supported by a new website. This helped P&H staff to understand the key features and benefits of P&H’s services for individual clients. The brochures were sent to target clients in monthly waves. They were to be followed up with a phone call from the management team to arrange an introductory meeting. Peter provided sales training to help build the confidence of management and encourage them to make these calls. He also highlighted the key corporate events that potential clients would be attending.

Implementation

P&H’s reliance on low-margin work streams meant that teams were frequently under-resourced to control the base. Staff constantly worked at full capacity. Luke Matthews and his two directors were unwilling to create a marketing budget. Peter therefore found it difficult to secure financial, human and time resources to implement the marketing strategy. The directors had delegated accountability for the implementation tasks to the overstretched middle-management team. Although the middle managers had supported Peter’s initiatives and worked closely with him in the development of the marketing plan, they felt the directors should take responsibility for generating new workloads.

Although a clear process and system was in place, supported by relevant training and metrics, due to the lack of commercial training in the business, the implementation phase began to falter. There was increasing friction between middle and senior management and the executive board chose to remain detached from events in Manchester.

With six months remaining on Peter’s contract, the unexpected happened. An existing, blue-chip retail client made P&H the lead architect on a £100 million (€140 million) project in the heart of Manchester. This project would double the Manchester office’s annual turnover for the next five years. Peter had been aware of this opportunity for over a year. He had consistently raised awareness of the project among senior management and it featured heavily in the client-specific strategy. However, he sensed there was a perception across the business that this project would have materialised with or without his input.

Peter is now concerned that P&H will become so engrossed with this new project that it will, ironically, become ‘too busy to market’. He believes the management team will become so focused on delivering the scheme that it will fail to recognize or take advantage of the associated opportunities (e.g. raising the profile of the business in the region, building relationships with major players in the construction industry and diversifying into new sectors). He is left to consider the best way forward.

2004–05 revenue for P&H

The revenue generated by the Manchester office in the financial year 2004–05 was £1.5 million (€2.1 million). The breakdown is shown in Table C41.1.

Table C41.1 P&H 2004–05 revenue
Sector / % of total income
Retail / 66
Education / 1
Residential/shopping centre / 12
Leisure / 2
Office / 5
Public sector / 12
Mixed use / 2
Total / 100
References

Hartline, M. D., J. G. Maxham III and D. O. Mckee (2000) Corridors of Influence in the Dissemination of Customer-oriented Strategy to Customer Contact Service Employees, Journal of Marketing 64(2), 35–50.

Piercy, N. (2004) Market-Led Strategic Change (3rd edn), Butterworth Heinemann.

Questions

  1. Evaluate Peter’s approach to internal marketing. Was it appropriate?
  2. What would be required for a successful implementation of the marketing plan?
  3. How would you advise Peter to handle the last few months of his contract? How should he try to secure a permanent position?

This case was written by Caroline Tynan, Andrew Smith and Matt Caldwell, Nottingham University Business School.

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©McGraw-Hill 2013

Principles and Practice of Marketing 7e David Jobber