- zero entry or exit costs (there are no/low startup costs),
- zero transaction costs (customers are free to go where they please)
- firms have a relatively small market share (no single firm dominates the market),
- ‘factors of production’ are mobile in the long run (labour and capital can be modified easily), and
- an homogenous product (an easily substitutable product, characteristics do not vary across suppliers).
In such a market there are only two conditions which can be altered by the firm itself; one is modifying labour and/or capital, the other is defining their product so it is perceived to be ‘less substitutable’ or to use plain English - different. The latter is also the only way a firm can command a price premium above that of ‘the market’.
The perfectly competitive market is mostly a theoretical concept; this specific set of conditions do not generally occur together, although some industries have notable similarities and are what you could call “near-perfect”. Utilities are one example; how many times have you been asked to change electricity companies and not really understood (or cared about) the difference?
The professions are arguably another; relatively low startup costs, few barriers to entry, clients can easily change suppliers and our ‘factors of production’ (our people) are fairly mobile. Notwithstanding their similarities, all professional firms say they differentiate their product - but in reality do they?
Value propositions, marketing strategies, corporate values and the like, are often part of a carefully crafted ‘Differentiation Strategy’. Despite careful consideration putting these into the ‘right’ wording and attractive designs, these efforts often fail to help customers see a firm as something different to another firm because these efforts generally focus on ‘table stakes’ rather than highlighting anything that truly makes the firm different. Of course “Honesty, integrity and respect” are important principles, as are “partnering with our clients” and “providing cost effective solutions” but would you ever knowingly work with a firm which didn’t have these values?
Founder of Ignition Group, a thought leader and consultant to top advertising agencies of all shapes and sizes and advisor to Fortune 500 companies, Tim Williams has built a career advising his clients how to truly differentiate themselves. His most recent book, Positioning for Professionals: How professional knowledge firms can differentiate their way to success (2010) is an excellent guide for any professional firms wanting to move beyond ‘table stake’ definition.
Tim discusses many myths about professional firm differentiation- especially taking a well researched and justifiable dig about most firms positioning strategy. “Size” is not a strategy.. neither is "full service”, “middle-of-the-road-stand-for-everything” nor is “hope” or “effort”. He clearly defines what a differentiating positioning strategy is- being different: meaning “going deep versus wide”, narrowing your focus and defining not only the features you have, but more importantly the features you don't have.
Written in plain English (not marketing or academic speak), Positioning for Professionals is a brilliant collation of proven methods professional firms can use to create an effective differentiating positioning strategy. It is not only a resource to assist firms develop a truly differentiating value proposition and define their brands boundaries- a firm’s “calling, customers, competencies and culture” as Tim calls it and he also suggests steps to implement and bring that strategy to life (without execution, "initiatives remain good intentions").
Tim is also a Verasage Senior Fellow, so it goes without saying that he has little sympathy for those firms that cling to the “we sell time” mentality and he is also not shy about his disapproval of benchmarking or “institutionalised imitation”, favoring “next practices” over mirroring what others have successfully done.
Needless to say, we cannot recommend this book highly enough.
Of course it is great to be better than your competitors but frankly most of your customers really would not know if you are, or are not- and you probably don’t want them to know. Tim sums it all up nicely by saying “If you stand for nothing, you will have nobody against you, and nobody for you.”
What differentiates your firm from your competition? No, truly differentiates your firm?
by Jess Hadley, John Chisholm Consulting