Monday, September 7, 2009

The Deceptive Distinctives

Virtually all firms want to pursue differentiation and the rewards that come with it. This is evident in their marketing literature. They make various claims that essentially communicate: "Hire us; we're different."

But how different are they really? Several surveys suggest that clients see few significant differences among competing technical consulting and design firms. The differences are particularly difficult to discern in their technical capabilities, the very thing most firms trumpet as their competitive advantage.

Are you interested in true differentiation? A good starting point is to acknowledge the ways that firms in our business try to distinguish themselves that really don't work. I call them the "deceptive distinctives." Four, in particular, come to mind:

Technical distinction. A few firms might claim an advantage technically. These firms have done the first, the most, the biggest, or for the longest. They may have solved a unique problem. They may have won an award for their work.

But such distinctions are usually fleeting at best. Innovative solutions are quickly duplicated by competitors. Having done 150 such projects often isn't viewed by clients as a meaningful advantage over another firm having done 75--both are well qualified. Awards are won among a select field, not necessarily the best in your industry.

Research and experience indicates that clients aren't all that impressed by our claims of technical distinction. They expect technical competence and are usually skeptical of claims that somehow "we do it better." RFPs may suggest otherwise, typically listing technical capability as a key selection factor. But an SMPS-commissioned survey of clients showed that technical capability is a relatively small factor in selecting the winner among shortlisted firms. At that point, all firms are deemed qualified.

Technological distinction. Some firms have invested hundreds of thousands of dollars in various design, enterprise, and communication technologies. For the most part, these expenditures amount to simply "keeping up with the Jones." Yet many firms still tout technology as a competitive advantage.

Like technical distinction, firms can sometimes have a temporary edge on the competition. But if it truly yields an advantage, other firms are typically quick to catch up. That's one shortcoming in striving to achieve technological distinction, but there's another hitch that's even more problematic.

Various studies have uncovered few significant productivity gains through investing in computer technology. Why? Because people are slow to leverage the potential advantages of the technology. In most firms, employees are using only a small fraction of the capabilities of the so-called productivity tools at their disposal. Enterprise and project management software commonly fall short of performance expectations because staff resist changing their routine work practices to take advantage. Bottom line, technological distinction rarely works as a differentiation strategy.

Quality distinction. Most A/E firms boast about the quality of their work. Many claim it as a competitive advantage. But clients, for the most part, aren't buying it. If quality distinguishes, it's usually negative. Poor quality will get you noticed. But it's hard to make good quality a point of distinction.

Part of the difficulty is how quality is defined. In the most basic sense, it is meeting client requirements. It's expected; it's not a bonus. Most firms do about as well in fulfilling the scope of work, avoiding mistakes, and satisfying deliverable standards. In fact, our quality assurance processes are oriented towards this minimum standard of quality.

The typical approach to quality in our industry is what I call "defensive quality control." The focus is on minimizing mistakes. Rare is the firm that seeks to exceed the industry norm through its quality process. In fact, it may not be worth it. Higher quality usually means higher cost. Can you convince clients to pay more for additional reviews, fewer mistakes, and higher quality deliverables? Most clients would say, "Give that to the same price. What else should I expect?"

Satisfaction distinction. This is the most seductive of all the deceptive distinctives. Why shouldn't you be pleased if your clients indicate they're satisfied with your firm's work? Because research indicates a surprisingly weak link between customer satisfaction and loyal customers. For example, consider one broad-based survey that found that 85% of customers who changed vendors were either satisfied or very satisfied with their previous supplier. Or consider that in the auto industry customer satisfaction scores average 85% to 90% but repurchase rates average no higher than 70%.

A study by concluded that if you're using a 5-point scale to measure client satisfaction, you can only depend on those giving you the highest score to remain loyal. Those giving 4s were only modestly more loyal than those giving 3s. This study found that almost two-thirds of professional service firm clients were open to switching from their current providers.

So the bottom-line goal is not satisfied clients, but loyal ones. How do you get there? By continually providing them with something they can't get from your competitors. That's the going standard for differentiation in today's marketplace. It's not easy, but that's why it's a point of differentiation!

As I've noted in previous posts here, the keys to true differentiation are strong relationships and superior service. Rare are the firms that make significant investments in pursuing either. That's your opening.

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