Expertise Marketplace - Professional Service Firm Marketing Blog

Would Market-Based Management Work for PSFs?

Most PSF marketers spend their careers working to move their companies to embrace more nimble marketplace practices.  (Some have wailed to me that their companies are like barges in an ocean of speedboats!)  Indeed, in these consensus-driven micro-societies, new ideas often get watered down to the lowest common denominator in order to be accepted by all the fee-earning professionals. 

In the past, I've been skeptical of management theories that glibly promote new operational constructs as if they were the true panacea for growth.  "These folks obviously aren't thinking of professional service firms," I usually cluck.

But wait a minute.  Could there be merit to the theory called "Market-Based Management?" I saw it referenced on Paul Gladen's Innovation blog, which he picked up from a fascinating Wall Street Journal interview with Charles Koch (registration may be required).  Koch leads "a $60 billion, 80,000-employee empire, which just recently became the largest and most profitable privately held company in America."

You can read the WSJ article (I recommend it), but if you can't, take a look below at just a few of Koch's ideas, which ought to quicken the pulse of any professional services marketer: 

• Free markets and economic liberty should be studied as sciences (including the political aspects of these).  It appears Koch eschews traditional management philosophies and academic preparation.  Instead, he adheres to what he calls "the basic laws of economics."
• "Long-term success entails constantly discovering new ways to create value for customers and building new capabilities to capture new opportunities," he instructs. "In this sense, maintaining a business is, in reality, liquidating a business." Mr. Koch likens the cycle to Schumpeter's "creative destruction" -- where the old and inefficient are ruthlessly swept away by the new." 

• As a way to crystallize the concept above, Koch has trademarked the term "market-based management," which encourages a company's employees to think and act like owner-entrepreneurs, always seeking to provide new value to customers and always seeking to capture new opportunities.  Take a look at the text from this 1996 speech to get a sense of the underpinnings of Market-based Management. 

Most professional services marketers will find some of Koch's points familiar:   vision, integrity, humility, tolerance, responsibility, desire to contribute, and more.   For sure, PSF marketers have a keen understanding of the organized chaos that's involved in "herding cats" to market and sell a firm's services.  Some of us wish we had what Koch espouses:  practitioners who earnestly seek to build profitability, and who continuously put forth their most critical efforts to maximize new marketplace opportunities.  (Some of us have so much of it that we have to rein in the cowboys who go off on tangents and screw up our brand's equity!)

Nevertheless, I can't recall before seeing such a market-focused management construct as this, or one that so succinctly articulates how a business could maximize the opportunities that can be had from a shifting marketplace. 

Could this construct work in your firm?  (Admit it:  wouldn't you just love to have a legion of marketing-focused professionals whose dedication to growing the firm could be harnessed under the principles of Market-based Management? )

But could it work if it were applied without the charisma, energy and savvy of a person like Charles Koch? 

The Be Better Trap

I just read an articulate article about differentiation in professional service firms, written by my esteemed colleague Bruce Marcus, in the latest newsletter from Rain Today.  Many of my readers and clients know about my extensive work (and copyrighted methodologies) on this topic, so I hope Bruce will forgive my disagreement. 

First, he begins with the premise that differentiation is fundamentally about being "better" than others.  Not!  Differentiation is about being, having or doing something that is "only."  Any time a professional firm finds itself talking about "we are more than" or "we are better," it should pinch itself hard and remember that these are simply comparisons, and not a true basis for "different."   

Second, differentiation is about a future competitive advantage, and not about what a firm is, has, or does today.  Too many professional service firms work themselves into a lather trying to discern a differentiation point that doesn't exist in the present day.  Bruce's points don't address the work that firms must inevitably do to stretch toward tomorrow's differentiation.   

Third, Bruce states that professional firms will have trouble articulating their "be better" state without having tangible evidence. Bruce, this is a sure sign of a firm that's relying simply on messaging to be different, and has not developed an actual differentiation infrastructure! If it had, tangible evidence of substantive differentiation would abound. 

He concludes by reminding professional service readers that "The focus, then, should not be on concerns for differentiation, but rather on demonstrating your own capabilities – imaginatively, effectively, thoughtfully. If you can do this, differentiation doesn't matter. Your capabilities do."  Bruce is spot-on to encourage all of us to build our capabilities with energy and insight. 

But I believe that differentiation can be achieved, and that it does matter.

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(For more on differentiation, see our online differentiation strategies assessment test.)

 

Frame it!

During the summer of 2005, I was intrigued by a spate of articles regarding Karl Rove's acumen at "framing issues" for the Bush administration.  In addition to the politically oriented newspaper editorials and op-ed columns, I also noticed the work of Melissa Raffoni, who wrote an article in July 2005 for Harvard Management Update, "Framing: Position your Messages for Maximum Impact."  (It's available as a for-fee reprint.)

Notwithstanding Rove's recent troubles, this topic has great relevance for professional services marketers.  How can our firms frame an issue such that the communication of that issue effectively influences others to see it a particular way?  It seems to me that "framing" is not done well by many professional service firms, and that we could all improve our skill with this important concept.   

B2B Differentiation?

Differentiation is often misunderstood, especially in professional firms. In his
Marketingprofs article entitled "Product differentiation in a B2B market," Jeff Thull makes some good points, but, I think, misses some other important points.

Thull starts out by making the obvious point that B2B company's portraits of the solutions they offer to their customers "end up looking amazingly alike."  "Of course," I thought, "that's because these companies are still approaching differentiation as if it's a layer of window dressing, and not a truly substantive, operationally supported initiative."   

Thull surprised me next, by mentioning a point from Theodore Levitt, one of marketing's leading thinkers. "The search for meaningful distinction is a central part of the marketing effort.  If Marketing is about anything, it is about achieving customer-getting distinction by differentiating what you do and how you operate.  All else is derivative of that and only that" (from Levitt's book, The Marketing Imagination, Free Press, 1986, page 128).  This is the first time I have seen any marketing writer, besides myself, discussing differentiation and operational support in the same breath. 

Unfortunately, Thull's setup was not followed by anything that relates to product differentiation, or operational initiatives to support differentiation.  Thull makes the point that how a company operates is akin to its business model.  I'm not sure I agree.   From there, Thull goes on to assert  that "problem-oriented differentiation, or Diagnostic Marketing, is the most effective way to bring complex solutions to market."  From this point forward in the article, he focuses exclusively on his methodology about the crafting of targeted messages that he believes can effectively guide customers' behavior change.  Even if his thesis has merit, he lost me. 

Except for his reminder about Levitt's well-made points, I don't think Thull effectively addressed the question of differentiation, nor anything substantive about B2B products and services.

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For more on differentiation, see our online differentiation strategies assessment test.

Hunters versus farmers

At the inaugural meeting of the PM Forum USA's New England chapter in Boston the keynote speakers presented a talk entitled "Brand, reputation, and professional services."  Most of their comments could be categorized as introductory, except for a few points that made me wonder about the way professional service firms really think about branding.  Specifically, the presenters described three strategic decisions that form the basis for all ensuing brand strategies: 

1. Hunter versus Farmer: culturally, is your firm a group of "hunters" -- always looking for the next conquest, externally focused, assertive, seeking control?  Or is your firm culturally more like "farmers" -- planting seeds, patiently waiting for their fruition, plucking the opportunities that are presented (even if not the best ones), somewhat passively taking what you get? 
2. One brand versus many: is your firm more likely to be a branded house or a house of brands?  If it is a house of brands, what will be the brands -- a slew of productized services, or the firm's professionals (the stars) themselves?
3. Synchronized swimming versus volleyball versus track and field:  each sport bespeaks of a different kind of work, from highly coordinated team work to individually driven. 

The presenters suggested that these three strategic decisions are crucial to the ultimate development of a brand strategy. My response is "yes, but!"

While I believe that is appropriate to examine a firm's cultural foundations for its ultimate choices of strategies, I wonder if these three aren't too simplistic.  For example, can a firm only be a "hunter"or a "farmer?"  I think it's unfair to lump all professional service firms into only two cultural categories. Secondly, regarding the question of one brand versus many, it seems to me that professional service firms (regardless of size or stature) will have a difficult time enforcing a one-corporate-brand strategy.  There are very few that have done this well (Accenture, McKinsey), and even they have a hard time holding the one-brand ship on course. Third, again I wonder whether any professional services firm really can sustain something like synchronized swimming, and whether clients -- most of whom still say they make buying decisions based on individual service providers -- even want that.

Creating Experiences

Ever since the book The Experience Economy was published in 1999, I have encouraged professional service firms to stage experiences as a way to differentiate.  Beyond occasional public commentary by the book's authors, though, I have not seen much written or presented about this topic. 

The November 2005 issue of CMO Magazine included the following top-ten list of ways to create and manage experiences. It's a good list, although it assumes that you know the guts of the concept. 

10 Ways to Create and Manage Experiences

1. Experiences don't just happen; they need to be planned.

2. Think about the customer experience first—and then about the functional features and benefits of your brand.

3. Be obsessive about the details of the experience.

4. Create a small touch that sums up and stylizes your experience. (The Conrad Hotel in Hong Kong places yellow rubber ducks in its bathrooms—a quirky, memorable touch.)

5. Think situation, not product: "Grooming in the bathroom," instead of "razor"; "casual meal" instead of "hot dog"; "travel" instead of "transportation."

6. Strive for holistic experiences—experiences that are sensory, emotional, thought-provoking and relevant.

7. Track experiences across media: logos, ads, packaging, advertising and websites.

8. Use multiple metrics—from quantitative to verbal to visual. Be explorative and creative and worry about reliability, validity and methodological sophistication later.

9. Consider how the experience changes as the brand expands onto the Web or across international borders.

10. Add dynamism and "Dionysianism" to your company and brand. Most brands are too timid and too bureaucratic. Be ecstatic, passionate and creative.

Source: The EX Group