What sets you apart?

A firm’s competitive advantage, often called its differentiator, is the myriad of activities which added together create value for the client. It is why a client will buy from your firm and not the competition. To be called a competitive advantage it must be hard to copy, unique, superior to the competition and applicable to multiple situations.

McDonald’s competitive advantage is a mixture of location, store environment, processes, and cost control. Added together the customer gets fast cheap food, of the same standard every time at a price point that is attractive to passing trade, lower incomes and harried parents.

The logistics firm Brambles adds value through its control of the supply chain, multi country coverage, quality of assets, customer risk transfer, speed of shipment, sharing of shipment costs, and processes which reduce the direct and indirect costs of its customers.

The iron ore giant, Rio Tinto uses technology and other means to keep it a cost leader. It can operate at a profit when many other miners struggle to do so.

Professional services firms have historically been poor at determining their competitive advantage, and most still are. When I ask a leader “what is the competitive advantage of the firm?” he will generally say one of the four elements below. But these are NOT advantages. Not unless they are incorporated into a package that other firms cannot replicate, or at least cannot market as being different.

On their own, these are NOT advantages:

1 Relationships

Services firms of all types regularly inform me that the relationship they have with prospects and alumni is their advantage. In my opinion it’s not. Building relationships is marketing. It’s a promotion channel. A client selecting on relationships is taking the pain out of the supplier selection process.

2 Key personnel

Law firms are particularly pleased to advertise the acquisition or retention of staff who are heralded for their nous. Skills and abilities are advantages of the person not the firm as their artistry goes with them on departure. However the process of knowledge transfer can be an advantage.

3 Involvement of senior personnel in projects

There is a growing trend for clients to demand the involvement, or at least obvious oversight, of senior staff. I hear this most in engineering consultancies. It appears that the boom time with overuse of junior staff has made clients worried. Use of senior people does not add value to straightforward projects, it simply manages risk – or so the client hopes.

4 Aboriginality, gender and other quotas

And what about quotas such the number of native Australians and women on mine sites or the use of green energy? Meeting this need is service provision. The client needs a problem solved. It buys the solution. There are other firms selling these services. The advantage shows itself in what sets the firms apart, and if nothing does then the firm competes on price.

(When gender is an advantage)

The Australian firm, Female Choice Plumbing has moved gender from a service that will compete on price into an advantage. It has been so successful that The Plumbing Guys, amongst others, tout themselves as women friendly. On the face of it, Female Choice Plumbing is offering sexual and financial safety from lewd and aggressive men and tapping into the belief that women are cleaner, pay higher attention to detail and fast. But anyone can employ a woman. To turn it into an advantage it needs more, so Female Choice Plumbing meets the standards offered by its competitors including a broad range of offerings, 24/7 availability, no interest ever, 1 hour service and to give even more confidence showcases quality suppliers and very happy customer reviews – and of course its all performed by women. Its not being female that’s an advantage, it’s the entire package, and the way its promoted, that is.

Sustainability

The thing about an advantage is that over time it can be copied. It may be expensive or difficult to do so, but it can be done. Not so long ago service quality was considered an advantage. Now it’s a hygiene factor, albeit one that is expensive to provide. Lowest cost on the other hand is an advantage, but a hard one to keep. The commodities sectors demonstrate again and again how the gains of cost leader are replicated.

The only way to achieve continuous solid profits and longevity is to remain in front of the competition. This means that firms must understand themselves thoroughly. It is not enough to understand the prospects and their problems. There is the need to know what the firm does well, and what its clients buy. Going back to McDonalds: There is a lot more than food being bought when the burger is sold. What is being bought in your firm?

Knowing the firm, its strengths, its weaknesses, and the value it provides (and is seen to provide) is the start from which other aspects can be added to create an advantage that secures a price point that protects cashflow, profits and value – at least for now. I work continuously with clients examining and refining their advantage to keep the firm ahead. It is not a set and forget activity. It needs constant review.

Most professional services firms don’t know what their advantage is. Does yours?

Jennifer is a strategy implementation coach who helps leaders turn their strategies into results.

She assists executives and business owners to achieve goals such as improved profit, productivity, leadership skills, business value. Her services are Business and Executive Coaching, Group Facilitation, Strategic Planning, and advising on Board Governance.

 To find out how she can help you, call +61 439 520 182 or email.