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Repeatability
The equation is simple: Repeatability drives margin. This is a natural law from which you can't hide. Repeatability helps your margins in two ways. First of all, the more of your direct revenue that comes from services you've rendered before, the greater margin you'll see from those services. This is true for several reasons. The first time you implement a new solution, your employees are in "learning mode." Learning involves making mistakes. Mistakes at customer sites must be corrected. This takes time and costs money. The next time you deliver the same type of solution, however, your employees are much more effective. By the third time your staff delivers the solution, they're experts. Not only are they delivering the solution in an optimal fashion, but the customer is willing to pay a premium price for their expertise. Figure 4 illustrates how this effect can play out over several implementations of a target solution.
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Figure 4 Improving project margins.
In the first implementation, the professional services firm actually loses money on the project and experiences a project margin of –33%. But by the third implementation, things are getting better. The delivery teams can execute more effectively and customers are actually willing to pay more for the expertise (which reduces the overall risk of the project failing). By the fourth implementation, the benefits of repeatability have driven project margins to +38%.
The second way that repeatability helps margins is in the area of reusable IP. Recall that reusable IP represents deliverables that are generated for one customer and can be used for another. If you target specific solutions to deliver again and again, you begin to identify these reusable components. You begin to capture and improve them until ideally you're redeploying the IP throughout your global organization to generate high-margin engagements. The equation is simple, but the implementation is difficult. It requires discipline.