Positioning for Profitability
How often have you heard the sentiment, “architects are a commodity, they all deliver essentially the same type of professional service.” This is a key issue for the profession. Until we as individual professionals fix the problem, we are destined to remain undervalued in the eyes of clients and the public. Low fees, low margins, trouble attracting and retaining the best and the brightest, competition from outside the profession as well as our diminishing influence on the built environment will continue to plague practitioners unless we get a whole lot better at distinguishing ourselves.
Positioning is key. Do you know what your firm’s distinguishing attributes are? Is your firm’s position in the marketplace clearly understood by your partners, staff, and clientele?
Weld Coxe’s book Success Strategies for Design Professionals, published in 1987, is still an excellent reference regarding the positioning of professional service firms. Other management books over the past several years have adopted similar positioning approaches. Michael Treacy and Fred Wieserman’s book The Discipline of Market Leaders, and David Maister’s book Managing the Professional Service Firm are two examples. These authors use somewhat different terminology to refer to what are essentially three basic types of firms:
|1||Strong Delivery||Operational Excellence||Efficiency|
|2||Strong Service||Customer Intimacy||Experience|
In their book The Myth of Excellence, Fred Crawford and Ryan Mathews take things a step further, debunking the notion that companies must be excellent in all dimensions. Their research indicates that successful companies are those that distinguish themselves in one dimension while maintaining threshold standards in other areas of their business.
Let’s use Coxe’s terminology for the three business dimensions, Delivery, Service and Ideas. If a firm can distinguish itself in one particular dimension–if it is truly excellent–it scores a three. If the firm’s performance is average in one of these areas–that is, maintaining threshold standards–it scores a two. If the firm is under-performing in a dimension it scores one or less. According to Crawford and Mathews a score of seven–which means a score of three in one dimension and a score of two in each of the other dimensions–represents a perfect score. For example, if your firm has distinguished itself as strong service practice, maintaining threshold standards in delivery and ideas, the scoring would look like this:
3 (Service) + 2 (Delivery) + 2 (Idea) = 7
Why is seven considered a perfect score, rather than nine, which would represents scores of three in all dimensions? Crawford and Mathews determined that the most successful companies do not attempt to be excellent in all dimensions. They propose that no company has actually achieved excellence in all dimensions, and even if a company could, they would be leaving money on the table because that’s not what customers are looking for.
Each of us experiences a similar scoring system every day. Say you pull up to Starbucks first thing in the morning, greeted by a smiling barista who already knows that you, as a regular customer, want a low fat iced Mocha Frappuccino with whipped cream topping (that’s strong service). You negotiate traffic in your Honda hybrid (a strong idea car) and on your way home you call Domino’s who deliver your pizza hot and fast (strong delivery) before you rush out to shuttle the kids to their lessons. Each of these companies has distinguished itself in a key dimension, and its customers are prepared to pay extra. You could have brewed your own coffee at home but you were prepared to pay more for the Starbucks experience. You could have driven to work in a ’72 Pontiac but you were prepared to pay more to support the idea of sustainability. You could have popped a frozen pizza in the oven but you were prepared to pay more for the convenience and efficiency of fast food delivered to your door.
Now look at your firm. The architectural marketplace suggests that far too many firms are scoring two or less in all dimensions. We have not distinguished ourselves. The profession is composed largely of “general stores.” If yours is a particularly good “general store” you may be scoring a six overall, but as Treacy and Wiersman say, “if you decide to play an average game, to dabble in all areas, don’t expect to become a market leader.”
In fact the professional associations encourage this by promoting all architects as equals: an architect is an architect is an architect. They have done a good job too. The public generally views architects as a commodity. Architecture firms have to take a different approach.
If clients are looking for experience they should be able to identify strong Service firms. These firms are designed to ensure that the experience of their personnel translates into a “no surprises, no excuses” experience for their client. Strong Service firms score a three on Service and strive to achieve twos on delivery and ideas.
Clients looking for innovation and bold new ideas should be able to identify strong Idea firms. These firms market differently, staff differently, and organize differently to achieve a score of three on Ideas and twos on delivery and service.
Some clients are looking for efficiency. Those clients should be able to find firms designed to deliver fast, economical design and documentation. If yours is a strong Delivery firm, you have hired staff, designed systems, and present yourself to clients with an emphasis on efficiency.
Has your firm chosen to excel in one dimension? Again, Treacy and Wieserman say that “Choosing commits you to a single path towards greatness, but it also purposely destines you to choose a secondary role in the other disciplines.” If you do choose, your entire practice will be impacted, from the people you hire to the projects you pursue. The question is, are you prepared to give up your “renaissance practitioner” aspirations.
Clients know what they want, or at least they know it when they see it. Architects know all too well what happens when clients can’t find what they want. It’s the same thing you do when service providers aren’t able to distinguish themselves: you make decisions based on price. If clients can’t clearly distinguish between firms, they base their hiring decision on fees.
Position your practice to score seven and refuse to be a commodity.
Rick Linley, FRAIC, PMP is Vice President-Professional Services at Smith Carter Architects and Engineers Incorporated based in Winnipeg and is an adjunct professor at the University of Manitoba.