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How to test the potential of your firm's differentiation

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How to test the potential of your firm's differentiation | awezzom Blog Post

How to test the potential of your firm's differentiation

Prior to commitment to a transformational process of differentiation, the sensible question to ask is “How can we know in advance that our chosen differentiating idea is the right one?”

Prior to commitment to a transformational process of differentiation, the sensible question to ask is “How can we know in advance that our chosen differentiating idea is the right one?”

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In a recently published article (August 22, 2023) in the American Bar Association (ABA) Journal’s Mind Your Business section I’ve laid out an argument why differentiation is a responsibility of the firm. I’ve also provided some examples of how to go about it, but haven’t explained one essential aspect — how to test it. If you commit (and you’d have to) to a differentiating idea it will transform your firm. Thus, prior to committing, the sensible question to ask is “How can we know in advance that our chosen differentiation is the right one?”

The most candid answer is that it will require you to take a leap of faith. This is scary. However, there is a way to make that leap properly and in the right direction.

The way you approach this is by, first, identifying what you’re trying to differentiate: a particular service offering, a practice group or the whole firm. For smaller firms it could be one and the same.

Next, you acknowledge that the purpose of differentiation is, for that which is being differentiated, to become an essential “organ of society.” Either the firm, the group or the service offering has to become (more) valuable to buyers, to serve a function. Profitability and sustainability will be the evidence of the value of the function. The value itself cannot be created without your employees (and partners) doing the work at a certain threshold of quality. Thus, you have three constituents that need to come to an alignment around differentiation: your team, your clients and profitability.

Next, you apply the Swan-Crawfish-Pike model to your differentiating idea. To put it into a single thought: the firm has to be able to continue providing services profitably through it’s people who are capable of doing the kind of work buyers are willing to pay for.

And finally, you attempt to seek out an alignment with higher-order principles of the firm — its Core MVVP (Mission, Values, Vision and Purpose).

It’s better to illustrate this with some examples. Let’s assume you’ve identified that one of your current service offerings has become highly commoditized over the years. You’ve decided to repackage it or introduce a new service offering to your target market in an attempt to make your services different yet compelling.

First set of questions to ask in the Stakeholders pillar: “Are we (partners, managers, staff) excited about having this new service offering? Do we have the appropriate technical and soft skills for this? Will we actually follow through with our claims? Is this going to provide professional growth to those involved in the provision of the services?”

Second set of questions in the Clients pillar: “Will this create more value to our clients or potential buyers? Will this have more impact on their businesses or their lives?”

Third, the Profit pillar: “Will we be able to make money at the acceptable levels, prior to commoditization? Does this allow for a healthy profitability rate? Is this a tad risky because it’s unconventional?”

If your answers are in the positive to this new differentiated service offering, it has all the potential to become the right one. If one of the answers is in the negative, you have identified an opportunity to improve your service offering. What’s left to do is to check for any contradictions with your firm’s Vision, Mission, Purpose or Values (Core MVVP). Then you take the leap of faith and pay attention to feedback.

Conversely, you can use the same SCP model to test your current differentiator. Let’s say a firm has earned its reputation in the market for its 100% satisfaction guarantee.

The S-pillar question: are we (partners, managers and staff) still as excited about this; are we still following through with this; are we going to continue holding ourselves accountable for any deviations from this; is this still helping us stay sharp and eager to learn?
The C-pillar question: do our clients still find this of value?
The P-pillar question: are we still winning new business, in part, because of this; is this still a boon to our profitability?
And the final question: “Is this in alignment or at least doesn’t contradict our Core MVVP?” Preferably, the differentiator should reinforce the vision, mission and purpose of the firm.

How do you make this work? Well, we could pretend to accept a differentiating idea, make a proclamation, but, in case it doesn’t work, switch back to the good ol’ days. It seems to be the safest choice — testing the waters so to speak. However, making commitment with fingers crossed behind your back isn’t going to work. You’re either all-in or you’re not. And by you I mean yourself, partners, managers and staff.

While the newly imposed rules of “How we are going to do business differently from now on” will have to come from the top, they should actually emerge from the bottom. The role of the leadership is to identify and articulate the kind of a differentiating idea most of the staff are already eager to voluntary accept and embody.

The awezzom question of the day:
Are the stakeholders, clients and profitability in alignment with this differentiating idea?

Sergei N Freiman marketing consultant for Professional services firms

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