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Combating Commoditization

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Architects and engineers commonly complain about how their profession has become increasingly commoditized, but
do little to try to reverse the trend. In this workshop for the SC Engineering Conference, we explored the likely reasons for the devaluing of your services and what steps you can take to fight back.

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Combating Commoditization

  1. 1. COMBATING COMMODITIZATION Combating Commoditization Delivering Business Value to Clients Mel Lester June 12, 2015 SC ENGINEERING CONFERENCE
  2. 2. COMBATING COMMODITIZATION What Is a Commodity? A product or service that is widely available and interchangeable with what competitors offer
  3. 3. COMBATING COMMODITIZATION How big a concern is the commoditization of your services? 1 2 3 4 5 Not a concern Serious problem
  4. 4. COMBATING COMMODITIZATION What are the primary causes of commoditization in our business? Our own mistakes? Clients? Market forces? The economy?
  5. 5. COMBATING COMMODITIZATION What are the most serious implications for your business? Is the pain worth considering a change?
  6. 6. COMBATING COMMODITIZATION Three Primary Strategies DifferentiationEfficiency Stay the Course
  7. 7. COMBATING COMMODITIZATION Provide More Efficient Delivery OPTION 1 ESCAPING THE COMMODITIZATION TRAP
  8. 8. COMBATING COMMODITIZATION Cost Cutting Strategies Streamline project delivery practices Control growth of your overhead Outsource select services and functions Hire more paraprofessionals Use hoteling to reduce office space needs Offer more standardized design products Design your business for low-cost service delivery
  9. 9. COMBATING COMMODITIZATION Differentiate Your Firm OPTION 2 ESCAPING THE COMMODITIZATION TRAP
  10. 10. COMBATING COMMODITIZATION 5 Strategies for Differentiation 1. Meet strategic needs 2. Focus on a few markets 3. Bundle and rebrand services 4. Deliver exceptional client experiences 5. Master relationship building
  11. 11. COMBATING COMMODITIZATION
  12. 12. COMBATING COMMODITIZATION Strategic Needs Technical Needs Personal Needs Delivering business results relative to: • Financial issues • Competitive issues • Operational issues • Political issues • Regulatory issues • Management initiatives Levels of Client Needs 1. Meet strategic needs
  13. 13. COMBATING COMMODITIZATION Missing the Strategic Driver PROJECT: Combine two small existing WWTPs into one CRITICAL QUESTION: “Why are they doing this?” CRITICAL MISTAKE: “We can do this project!” 1. Meet strategic needs
  14. 14. COMBATING COMMODITIZATION Communicating Value? Lowdown Infrastructure Improvements. Earnest Engineering has recently completed phase III of the infrastructure improvement program commissioned by the Town of Lowdown. During the past 5 years, three separate CDBG grants totaling over $1.5 million were utilized to design and construct water, sanitary sewer, and storm sewer lines to improve utility services for existing and new customers in the Town. Included in the projects are over 16,000 LF of 1”, 4”, 6”, and 8” diameter water mains, over 2,000 LF of gravity sewer, and over 6,000 LF of storm sewer including, all service connections and miscellaneous appurtenances. Design services utilized during these projects included a WaterCad model of the distribution system that was used to determine the most effective replacement schedule of existing water lines to reduce water loss and improve distribution pressures. Since completion of these water line connections, the Town has observed a reduction in water loss in the distribution system from approximately 100% to 19%. Our project descriptions typically describe what we did… …not what we accomplished. 1. Meet strategic needs
  15. 15. COMBATING COMMODITIZATION Weighing the Consequences 1. Meet strategic needs
  16. 16. COMBATING COMMODITIZATION Commitment Questions Adapted from: Rackham, SPIN Selling (1988) Course of Action Questions Consequence Questions Concern Questions Context Questions Needs Assessment Problem Definition Solution Development The Question Progression 1. Meet strategic needs
  17. 17. COMBATING COMMODITIZATION Course of Action Consequences Concerns Context Commitment Initial Value Gap True Value Gap SOLUTION THAT CLOSES THE GAP QUESTION PROGRESSION Adapted from RAIN Selling, RainToday.com (2009) Question Progression in Action 1. Meet strategic needs
  18. 18. COMBATING COMMODITIZATION How can your firm better meet your clients’ strategic needs? 1. Meet strategic needs KEY QUESTION:
  19. 19. COMBATING COMMODITIZATION
  20. 20. COMBATING COMMODITIZATION 2. Focus on a few markets Are You an Outsider or Insider? Client Your Firm Client’s Industry Client Your Firm Client’s Industry Market knowledge adds greater value to your expertise
  21. 21. COMBATING COMMODITIZATION Becoming an Industry Insider Research your clients’ business Talk to them about strategic needs Get involved in trade associations Share your expertise in writing/speaking Develop helpful industry resources Build relationships with other providers Don’t confuse BD with industry focus Hire people out of target industries
  22. 22. COMBATING COMMODITIZATION How can effective marketing help you become an industry insider?
  23. 23. COMBATING COMMODITIZATION Marketing Indirect Encounter Examples: Publishing, speaking, press releases, direct mail, website Goal: Gain the client’s interest Sales Direct Encounter Examples: Networking, sales calls, presentations, proposals, negotiations Goal: Gain the client’s commitment Business Development Marketing vs. Sales
  24. 24. COMBATING COMMODITIZATION Seminars and other in-person events Conference presentations Webinars Articles in 3rd party publications Search engine optimization PR pitches to journalists Sources: RainToday.com, The Bloom Group, MarketingProfs, Junta42, BlissPR, AMCF Best Marketing Tactics Email newsletter Articles posted on your website
  25. 25. COMBATING COMMODITIZATION Why Content Is King A portable and readily sharable expression of your expertise Keeps you in front of prospective clients until the need arises Extends your reach by providing advice accessible at client’s convenience Builds your reputation as a content expert Reinforces your sales efforts Strengthens your relationships with existing clients
  26. 26. COMBATING COMMODITIZATION How to Build Your Content Library  Identify your target audiences  Stay abreast of what matters most to your clients  Create your storage and filing system  Develop a plan for sharing content  Track content-sharing touchpoints on your calendar  Always think about who might find content item helpful
  27. 27. COMBATING COMMODITIZATION KEY QUESTION: How can you become an insider in your clients’ industry? 2. Focus on a few markets
  28. 28. COMBATING COMMODITIZATION
  29. 29. COMBATING COMMODITIZATION TRUE OR FALSE? “The AEC industry is fragmented, inefficient, and adversarial because each team is responsible for its own silo of work and attempts to maximize their individual profit in the areas of their own expertise.” 3. Bundle and rebrand services Source: Ghassemi & Becerik-Gerber, “Transitioning to IPD,” Lean Construction Journal (2011)
  30. 30. COMBATING COMMODITIZATION Building an Integrated Solution High-Value Integrated Solution Strategic Outcomes Technical Outcomes Personal Outcomes Strategic Needs Technical Needs Personal Needs 3. Bundle and rebrand services
  31. 31. COMBATING COMMODITIZATION Collaboration as Strategy? 3. Bundle and rebrand services Construction OperationDesignPlanning • Change orders = 4-8% of construction costs • Coordination errors = 50% of change orders • Average of 5 coordination errors per contract drawing Source: Bill Nigro, Redicheck
  32. 32. COMBATING COMMODITIZATION Bundling / Rebranding Success 3. Bundle and rebrand services • Bundled technical, legal, real estate, insurance expertise • Deliver guaranteed fixed-price remediation, liability transfer • $571 million environmental liabilities  $2.5 billion current asset value • $4.5 billion planned development value • 100+ sites Exit Strategy®
  33. 33. COMBATING COMMODITIZATION
  34. 34. COMBATING COMMODITIZATION Closing the Value Gap Sources: Kennedy & Greenberg, Clientship (1998); The BTI Consulting Group What Clients Say They Value What Consultants Say Their Clients Value 4. Create great client experiences
  35. 35. COMBATING COMMODITIZATION 1 2 Source: Accenture, Experiencing the Brand; Branding the Experience (2005) What Leading Companies Do 4. Create great client experiences
  36. 36. COMBATING COMMODITIZATION Benchmark Expectations Identify Gaps Create Service Deliverables Implement Service Plan Prepare Service Plan Solicit Client Feedback Client Experience Delivery Process 4. Create great client experiences
  37. 37. COMBATING COMMODITIZATION
  38. 38. COMBATING COMMODITIZATION Creating a Relationship Building Process Identify common traits among your best clients Determine steps taken to build relationship Develop a process for relationship building Pilot the process with top sales opportunities Goal: Move beyond individual competency to a reproducible winning methodology 4. Master relationship building
  39. 39. COMBATING COMMODITIZATION  Availability: No entrenched incumbent?  Interest: Interested in relationships?  Accessibility: Access to decision makers?  Potential: Promising business benefits?  Values: Consistent with your firm’s values?  Chemistry: Good people to work with? YES Engage Relationship NO Pursue Transaction NO No Go Screening for Relationships 5. Master relationship building
  40. 40. COMBATING COMMODITIZATION Meet strategic needs Focus on a few markets Bundle and rebrand services Delivering exceptional client experiences Master relationship building Differentiating Your Firm From the Rest
  41. 41. COMBATING COMMODITIZATION For more information: Contact me for links to articles exploring these strategies in more depth: mel@bizedge.biz Don’t worry, I won’t be contacting you further unless you ask me to!
  42. 42. COMBATING COMMODITIZATION Check this out: www.ae-resource.com Subscribe to my monthly ezine

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