The greatest challenge of all companies is to figure out and properly implement profitable growth strategies to boost sales and enter the profit zone. Today’s guest is Thomas Michael Hogg, the author of Profitable Growth Strategy: 7 proven best practices from German companies. In this episode, Thomas discusses with Michael Zipursky the key factors that make Germany a leading market leader in the world, how to implement them in your own consulting company, and why it’s essential to have a business model design. At the end of the day, it’s about delivering the highest-quality value to your clients. But how do you communicate that to your company in a way that’s easily replicated? Join in the conversation to learn more!
I’m with Thomas Michael Hogg. Thomas, welcome.
Thanks, Michael. It’s so good to be with you.
You are the Managing Director at TMH Consulting and Investment Group. You’ve been running this for many years. You’ve been featured in Bloomberg, CNN, The Economist, and you’ve worked with some very well-known clients like Adidas, PepsiCo, Campbell Soup, and many others. I want to jump in right off the bat to your latest book, Profitable Growth Strategy: 7 Proven Best Practices from German Companies. You and I were talking that you are originally from Germany and now based in Mexico. What interests you so much about German companies and why write this book?
The German business model is really interesting. There’s a lot of literature out there about the great business models and the American business models. When we talk about Google, Facebook and Amazon nowadays, there’s a lot of literature. I was looking for literature and also studying German companies. When we talk about Lufthansa, German automakers, Porsche, Volkswagen, Audi, BMW and Mercedes, I find that there’s not a lot of content out there. My task was to deep dive into why German companies are successful and what are they doing?
I found that the German companies, not only the big ones, also the medium-sized ones have one thing in common. That thing is profitable growth. They are structured in their finances and having quarter-by-quarter good results. I wanted to understand, “What is this about and why German companies, not only the big brands we may know but also these small and medium-size segment leading their markets?” Because I found out that there are 1,500 German niche market players, German companies in engineering and many other industries and sectors. This is unique. There is no other country in the world that has so many market leaders.
I love that because I think you’re right. Often, people read and focus on the most profitable companies, which in most cases, not all. There are some Chinese companies that have raised media attention, but a lot are US-based. Some of the greatest breakthroughs of new ideas that lead them to higher levels of success come from outside of the main areas of focus. Because if everybody’s studying the same things, it’s hard to get a breakthrough from that.
I love that you’ve looked at German companies. Germany is known for executing very well on time and getting things right. From your research, what stood out? You mentioned profitability and focus on finance, but are there any other principles that when you think about a consultant or a consulting firm or a service-based business, is there anything else from your research that stood out from those German companies that you think might be relevant or could apply to that consultant or consulting firm?
What Germany and also German companies are famous for is quality. When I was working in 2005 in Germany at Adidas in the product development department, we were preparing all the product categories for the FIFA World Cup, for the Soccer World Cup in 2006 in Germany. It was a big deal for me to work there and being a part of this team. When it comes to research, development and quality, when I was at the test center there, it was amazing to see that they told me, “Look at all the products we are testing.” Our competitors, when we talk about other brands, Puma, Nike, and specifically about soccer balls or footballs, we did some tests and they told me, “The FIFA standards or to get approved from FIFA are at, let’s say 100.” In our test center, we are testing all the products to reach 150% quality.
This was a mindset I learned. This was a key learning for my whole career that they look and try to have the best quality in the market. When we see this in other industries, in other German companies, this is a mindset, an obsession that I have seen that we are so quality-focused. There is heritage on this quality approach. When it comes to certifications, we know a lot of ISO certifications or the two certifications that comes to 100 or 200 years ago were in the German industries, they try to have more security and higher quality standards. They are also responsible for implementing all these certificates and certifications. This is history-based and this is where it comes that Germans are really focused on quality.
With that mindset that you’ve now embraced over the years of what you’ve done in your own consulting business at TMH, are there any examples of how you’ve tried to implement that and things that have worked or things that maybe haven’t worked? Are there any lessons you can share?
At the end of the day, it comes to the day-to-day business, not the day-to-day how you engage with clients and set standards. First of all, it’s important to set standards high with your own team and that they know, “What are our standards about delivering value to a client?” We can compare it to quality, but at the end of the day, you have to deliver value. When we talk about consultants, you have to give and transform the business and you have to deliver financial results. This is why all our consultants are trained on this profitable growth model or this profitable growth concept that we developed to help clients not only to boost sales but at the same time being profitable.
The greatest challenge of all companies or of the CEOs out there, even more now in crisis is, “How do I get in this profitable growth zone?” In our consultancy, first of all, we have internal training on, “What does profitable growth mean? How can we achieve it? How do different industries have different profit margins? How should we set the standard, find and define strategies to help the clients to get into this profitable growth zone?” This is important. First of all, your team has to understand the standard and later on engage with the clients and deliver these standards or reaching or surpassing the standards together with the clients.
Often the leader or the founder of a company might have these standards or have an idea of what they want to create or the value that they want to communicate and put out there, but it’s not being communicated to other members of their team. There isn’t an alignment. Not everyone is moving towards the same goal or they don’t know what to expect of others or of themselves. You’re making a good point there.
One area that I know you spent a lot of time thinking about is business model design. I’m wondering at your company, is there anything that you’ve done to architect the model for your consulting firm? Is there anything that you think is a little bit different or you feel has worked well to create the model that supports the business you want to have, the level of profitability and lifestyle? Is there anything else that stands out to you regarding your business model?
At the end of the time, I’m in there. A lot of consultants out there are good consultants and focused on the analysis part. When we are talking about the analysis part, there is one big thing about data. You have to analyze all the client data. The second thing and I guess even more important is the client himself or herself or it’s about people because at the end of the day, you have to change the mindset, and you have to move people to achieve certain results. This is where we focus on the analysis part of the data, but also on profound client interviews and engaging with the clients. What is my approach a little bit, is not only knowing and asking about the company goals and the professional goals but also asking about, “What are your personal goals?”
Especially when we engage with the company owners and business owners, it depends on the company size, but normally we are working with also mid-sized companies, and we are engaging with the company owners to ask them, “Where do you want your company to be in 3 or 5 years?” On a personal level, “What’s your role? Where do you want to be in the next 3 to 5 years?” When you understand that the company owner, him or her, it is much better, and then again, you have to engage with the executive team, with the different directors of each area. You are in need of this personal relationship with your client and with the people.Try to have the best quality in the market. Click To Tweet
What about the actual structure of how you’ve structured your consulting business? Take us through what that looks like. You have yourself and other team members. Are you charging clients on an hourly basis? Is there a margin between what you pay your team members and what you collect? Give us a bit more detail about what the actual structure of your firm looks like.
First of all, we have the operations side where we have the consultants and where we do all the analysis, the strategy design and then the strategy implementation. We are focusing on practical implementation. This phase is important. We have specialized consultants there and also analysts who are helping us.
How many people are on that analysis side and so forth?
We are a small team and a niche team. We have six consultants on the strategy operations and the implementation. We have two people on the marketing side. For all the events, webinars, podcasts we are attending and also our social media, we have two people in charge of marketing. We have two persons on the administration side for accounting. What I have learned and I have worked for a bigger consulting firm is I try not to go to a client with a big consulting team, try to work with the client and making the project leader of our client accountable and responsible to be the head of the team. Also, that a lot of tasks have to be implemented by the team because sometimes in the consulting world, you can find a lot of theory. You can find a lot of high-level recommendations and then it lacks implementation. My model is more to work with the company owner and his team to set up strategies on our advice and to help them on analysis so we can have a joint plan and implement it with them directly.
Let’s talk about your clients in terms of the business and how it’s been built up. You’re a German guy. You are running a consulting business in Mexico for many years. How does that happen? I’m asking with interest because of my background as well as building a consulting firm. We took the consulting firm that we had and when I moved to Japan, I opened up a branch office there and built that business. It’s always interesting for me when you have not only the challenge of doing business, but then you have potential language and cultural challenges. Walk us through, how did you go from being a German guy in Mexico and then starting to work with clients? Are you working with Mexican companies? Are you working with global businesses? Take us through the beginning, the early stages to begin with. What did that look like in terms of who was your first clients?
Some of our first clients were from my network. I built up a network for my executive MBA that I did here. In there you have a network. I am participating in some ONGs. One ONG is about down syndrome.
When you say ONG, is that a nonprofit?
Yes. I’m engaging with the board in helping them to raise funds and to invest in the cause. I had already some different networks in the business school, on the social side, on my board memberships connections and even also in the church. You have this network and also you can connect to some businesses and company owners. This was the first step. They knew a little bit about my CV. For example, working for this down syndrome ONG, they saw how I had this organization grow. The company owners and the other board members said, “I want you to help me with my company.”
You then start to connect to other people. The first project is in the inner circle or the network you have and the people that already trust you. You start to deliver results and they recommend you. Year by year, you get more clients or different clients. This was the start, but on the other hand, you have to build a brand about your topics, strategic planning, business model design, commercial strategy and being recommended or knocking doors on the companies you want to work for. I also engaged with the most important industrial-technological trade fair in the world, which is the Hannover Messe in Germany. In Monterey, I’m representing the fair and connecting to the company owners and to all the topics the fair is offering. In there, you are also getting in touch also with the people, company or a business.
You mentioned stage one of the business was your inner circle, your network and the people that you had met from business school or from being on different boards of nonprofits. You said the next stage in order for you to grow beyond your network and connections is you have to think a little bit more strategically and start to use different tactics to generate more conversations, leads and business.
You said one of those was connecting with a large trade fair in Hannover, Germany and representing that fair in your local area. Talk about what the strategy was or how did you do that? What I’d like is for all of our readers to think about, is there some opportunity like that for them as well. It might be a bit different, but how can they think more creatively and out of the box around opportunities to connect with ideal clients? Take us through what did you do there step-by-step?
When you’re planning your business and our business plan was you have to think about how can you engage with your target market? There are different places in some boards or associations. You have to deliver value there. On the other side, you can say, “I can present the fair to many companies and business owners. They have some goals and objectives so you have to put a value on the table as well.” What I also came up with was writing a book, which also helps what we talked about internally that your employees understand the business model, but also if you’re launching it out to the market, they see, “He knows what he’s talking about.” Before having my own consulting firm, I worked for around ten years in the consulting business. “He knows what he’s talking about. He helped other big clients. Now, he’s trying to help or support more medium-sized companies.”
You say that it was a strategy essentially to position yourself as a representative connecting this big opportunity of this world’s fair in Hannover or this big event and then contacting companies in Mexico who you thought might benefit by going to that fair or being a part of it. When you’re reaching out to those companies, you’re not doing it with the positioning of, “I’m a consultant. Do you need some help and services?” You’re positioning it more as, “I’m representing this fair or I’m from Germany, but now in Mexico. Here’s an opportunity for a lot of Mexican companies like yours and here’s why.” Is that the idea behind it and that created an initial conversation or was it different?
In the first place, you cannot sell. It’s not a good idea to go out there and say, “I’m doing this. Buy from me.” Somehow you have this myth. It’s about delivering value. It’s not about selling in the first place. It’s about serving a community. It’s about serving as a company and that they see that you do not have only in your mind to sell them but to deliver them some value. We traveled with 120 companies to Germany to this trade fair. I put up an agenda for them to present their companies and also to get engaged with the new technologies. All the Industry 4.0, the technology and what is going on in the competitiveness with the companies globally.
I got a lot of clients there because they have seen, “He’s taking care of the big trend and we want to engage them a little bit more.” What I told you is that first, it’s about the inner circle, but then the 2nd and 3rd steps are the same things. It’s about trust. Their concern is about buying trust. They trust your company. They have to trust in you because, as you know, they open their whole company to you and their whole life. They’re trusting in you that you can help them to boost their company. It’s all about trust, at the end of the day.
Aside from referrals and your network, what are you finding is working best for you to create conversations with your ideal clients? Are you sending them a book? Are you doing direct mail? Are you doing phone calls, emails, LinkedIn or advertisements? What are you finding for yourself in your business aside from the network and connections that you think are most helpful in building the business, revenue and brand?
It’s about speaking engagements or doing your own webinars or webcasts or looking for speaking engagements.
How are you doing that now? Given that with COVID, in-person speaking almost doesn’t exist in many places. You’re in Mexico. Mexico has been impacted by COVID as well as many other places around the world. Germany has too. It’s a challenging time for many. What have you done? How are you handling and navigating that the in-person talk? It’s not possible the way that it was before. What are you doing to navigate that or what have you been doing?You have to build a brand around your topics, strategic planning, business model design, and commercial strategy. Click To Tweet
At the end of the day, you have to make the meetings online. I tried all of that. I tried to get in touch with my prospects and clients, doing a lot of webinars for free, doing a lot of speaking engagements for different associations, chambers of commerce in different places, and also to universities. You come up with the topic. I’m talking a lot about the German, US, and Mexican economies. For them, it’s interesting to listen to a foreign expert, “What does he say? What is happening now on global competitiveness? What are the big disruptions and the financial disruptions that I see due to COVID? Also, the digital disruption and what is happening at the same time?”
You talk to them, “Let me tell you what is happening in the States and in Germany. Let me tell you what is happening in China. Let me tell you what is happening in Mexico.” I tried to give out content, but deep content to say, “What are the different business models? What are the big trends?” I’m then telling them, “What do you have to do as a business or a company owner to boost your business? What are the key practices? What is the key focus? The key strategies? You need some data.”
Why speak to universities? What’s the thinking behind presenting to a university or giving a talk at a university? It doesn’t sound like they’re your ideal clients in the audience or maybe they are? Tell me what your decision behind that is?
At the end of the day, it’s a mixture of personal goals. I do have to help students and to become better information because there’s a lot of theoretical stuff out there. Especially here in Mexico, I have a plan. I’m writing another book for Mexico 2050, where I want to see the country in 30 years. This is why I’m engaging and one goal with a lot of universities is giving value to the students because, at some point in our careers, we might go, “Somebody or someone trusted in us.” Maybe it wasn’t a company or a university, but there were people who trusted in us. We did not have the motivation. We did not have the money. We did not have the preparation to go into the next steps. Somehow, it’s giving something back to this community.
On the other hand, when I’m engaged with private universities, the children of the company owners are studying there. It’s interesting that I got 2 or 3 projects because they told their dad or mom, “I got to know this German consultant. It’s interesting how he helps companies and how he thinks about Mexico, Germany, and the US.” You engage and having trust with them and they present you to your target market, which is their parents.
I don’t think you would think that connection could exist, but you clearly have made that work, even if that’s not the initial intention. That’s a powerful demonstration and example. I want to make sure that people can learn more about you, your work and everything that you have going on. Where’s the best place for them to go?
The web page of the book is www.ProfitableGrowthStrategy.com. You can find all about the book there, which talks about the seven best practices for German companies and also, on the homepage of our consulting firm, which is TMH.com.mx.
Thomas, thank you again so much for coming on here and sharing some of your wisdom and experience with us.
Thanks a lot, Michael.
- TMH Consulting and Investment Group
- Profitable Growth Strategy: 7 Proven Best Practices from German Companies