Since very few people and teams have extensive experience with new service development, hiring a coach to help you through the process is invaluable. Coaches add value in many ways: by challenging the team’s assumptions, by pointing out the most important tasks at hand, and by encouraging the teams to keep going when the going gets tough. However, some companies balk at the cost of hiring a coach for every new service development project. Coaches can indeed be expensive, but are worth their costs when used appropriately.
Getting your money’s worth
While coaches are never cheap, they are are absolutely worth their money when it comes to new service development.
Take for instance the example of the partner tasked with leading the transformation from practice to industry groups. Where to start? The coach – who had helped other clients through similar trajectories, pointed out what needed to happen first. She successfully guided the partner through the process of transforming practice groups into industry groups. The result, new industry based service offerings their clients really valued and that lead to a 5% increase in revenue growth.
The rates for external coaches is typically between $150 and $350 hour. A good coach, will deliver a quick return on investment because they prevent you from making mistakes and ensure you can do the task at hand much faster than you could ever on your own. In short, a coach saves the team hours of development time and ensures the results are delivered faster.
For an average new service development project, we calculated the difference between using a coach and doing it without one. Without a coach it will take about 8 hours a week for 50 weeks = 400 hours, with no guarantee for success. With a coach, it will take about 4 hours per week for 30 weeks = 120 hours, with a near guarantee for success. These estimates are based on what we have seen in practice. The difference of 260 hours in billable hours, already pays for itself. When accounting for the peace of mind – less frustration, less sleepless nights, more confidence – hiring a coach is invaluable.
When coaching is not sustainable
While I certainly advocate for the use of coaches, I am aware that coaches are sometimes perceived as costly and an unsustainable expenditure.
Assigning a coach to every initiative and early stage team, and not having funds left to support teams in the later phases of development, is indeed costly. It is an undesirable and ineffective use of coaches.
The wrong way of using coaches
To give an example. At innovation center Fast Forward (not the real name), every team selected into the program gets assigned to a coach. Each cohort consists of 20 selected teams. For the 4 week program, each teams get 16 hours of coaching each. At $200/hour, this amounts to a budget of $64,000.
The teams and coaches start the programs full energy. The goal of the program is selection into a national accelerator program such as Y Combinator or MassChallenge. Of the 20 teams, typically 25% make it through the first round of such a national competition. Even fewer actually get selected and receive external funding, typically less than 1 team per cohort. By the way, from a start-up perspective these are typical survival odds.
With 5 to 10 new cohorts knocking on the door of the Fast Forward center each year, attention is given to churning new cohorts. With on average between $60,000 to $80,000 spent on each cohort.
Unfortunately, this means that there is no money left to support teams beyond the initial program. The teams that make it through, are by all measures the better teams. However, all available funding and support goes to get the next cohort of new teams up to speed. Without any further coaching support, the “winning” teams struggle to survive. As a result, the better teams eventually fail.
While Fast Forward spends a lot of money on educating teams, they have little if anything to show for in the long run. A very unsatisfactory results for the better teams and absolutely unsustainable for the Fast Forward innovation center.
From a team perspective, the programs and coaching are not a complete waste. If anything else, these teams and the team members are an experience richer. From an organizational perspective however, such coaching is not sustainable nor very effective.
When is coaching most effective?
How can the scenario above be avoided? How can coaches be used more effectively? That is, ensure the investment in coaching pays off?
It helps to realize that new service development is not a sprint. It is a marathon. This marathon consists of four phases, ideation, development, implementation and diffusion.
If there is just one team in an organization, and especially if this is the first team to engage in new service development, by all means the team should be supported by an experienced coach. They won’t survive without. The coach can support the team through all the phases and compensate for the lack of the experience of the team and the organization.
When new service development becomes institutionalized, it is not uncommon to have cohorts of 3 to 10 teams go through the new service development journey together. In this scenario, it is pays off to consider where and when coaching is most effective.
In the graph below we illustrate the trade-offs to be made for each phase in terms of learning, costs, and survival rates for cohorts. Again, these numbers are estimates, based on what we have seen in practice.
At the start, coaching is very beneficial. Teams have very little knowledge and a coach can guide the team through the ideation phase.
However, regardless of the experience of the incoming teams, the fall out rate is very high at the ideation phase. Typically fewer than 1 in 4 projects continue beyond the ideate phase. This is absolutely normal, as the Ideate phase is about figuring out whether a project is worth pursuing. In most cases, after a little research and some serious effort, the project simply turns out to be not worth pursuing. Either because the technology is not ready, the solution turns out to be a nice-to-have instead of a must-have, there is a cheaper alternative available etc. If this surprises you, welcome to reality of new service development!
Thus don’t expect coaches to significantly change the survival odds of your new service development projects in the ideation phase. Their value is in helping teams realize in a timely manner that their project is not worth pursuing or that a major pivot is needed. Coaches are not wizards who can change the odds of success for early stage ideas.
During the ideation phase, all teams in a cohort will go through similar challenges. In addition, the enthusiasm of these starting teams enables them to overcome most initial hurdles. In other words, teams that participate in a program and are part of a cohort, there are more efficient ways than 1:1 coaching to help the teams along.
Alternative approaches for coaching in the ideate phase
There are alternative approaches for teams that go through the ideate phase as a cohort . In a program with 4 to 10 teams per cohort, peer-to-peer coaching is a valuable alternative. Peer-to-peer coaching is a cheaper alternative that works well for teams that go through the Ideate phase as a cohort, because all teams face similar issues at that stage. In addition, it offers a unique learning experience for the coaches. It is much easier to see and learn from the mistakes of others than to recognize your own.
Alternatively, for smaller programs training programs like T4 can be useful, as it requires minimum coaching, since the tools enable coaches to easily and quickly identify weak areas, where the team needs to put more effort and focus. Thus significantly reducing the time investment needed by a coach to support a team. Moreover, once you have a few teams in your organization using the tool, you will have your cadre of internal coaches. They can be used to assist future cohorts.
The development phase is when the going typically really gets tough and the needs of teams start to really diverge.
By this time, all projects have significant potential. Otherwise they would not have made it this far. However, now serious time commitment and resources are required to develop an actual working solution and capture the identified opportunity.
With a lot more at stake, both in case of development costs and in terms of lost opportunity, the development phase is where an experienced coach can deliver tremendous value. Because not one project is the same 1:1 coaching gives every team the support they need.
With just a few teams in the development phase, assigning a coach to each team is affordable and well worth the investment.
New service development projects differ significantly from another also in the implementation phase. However, typically at this stage the development project is better embedded in the organization and the contribution of the coach typically slowly starts to wain.
That is why in the implementation phase coaching intensity can be reduced drastically. However, I would advise to still keep the coach involved. As their experience and in-depth knowledge of the project and newly developed service come in very handy in the diffusion phase.
Diffusion is a rather unique to new service development. New services just don’t spread like wildfire, even when they go viral. After all, for each service delivery you need a provider able to deliver the service.
The diffusion phase ensures there are adequately trained other providers to offer the new service. Depending on the complexity of the new service, the diffusion process is more or less labor-some. Sometimes a simple manual will do. However, if the new service involved open heart surgery, obviously it take a lot more effort to enable other surgical teams to deliver the same procedure .
For complex new service offerings, the coach – who was involved in the development of the new service all the way through implementation – is an invaluable resource. This coach can facilitate the adoption process and help teach the adoption teams. Their help takes pressure of the original team, who by that time are engaged in new service delivery and diffusion activities. Moreover, this coach knows – probably better than the original team – what the challenging and game changing steps are to successfully create and deliver the new service. Adopters will greatly benefit from these insights.
Use coaches when it matters most, that is for single teams that operate in an organization with limited experience in new service development. The expertise and the experience of the coach will be invaluable.
When your organization frequently launches new service development initiatives, peer to peer coaching probably is a better option in combination with an online program, especially for the ideation phase. Alternatively, you can opt to use online support tools – like T4 – to reduce the overall coaching cost while maximizing the effectiveness.
For teams in the development, implementation, and diffusion phase, coaching by an domain expert pays off. Most professionals go through the development process once or twice in their lifetime. A coach with experience can ensure the process runs smoothly, that everyone involves saves time, and significantly increase the success rate of your new service development projects.
In sum, use the expertise and experience of new service development coaches. Their involvement pays off.