Empowerment by Design Series: Surviving the Commoditization Trap

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by Steve Whitehorn

Editor’s Note: This is the third article in the Empowerment by Design series by Steve Whitehorn of Whitehorn Financial Group, Inc., providing A/E professionals with practical tips for a more successful, profitable practice.

The design industry has seen substantial change in business models over the past 15 years. The financial crisis and slow recovery coupled with the rising popularity of design/build have created pressure to reduce fees and lead to fierce competition. As a result, architectural firms are falling into the commoditization trap.

Commoditization occurs when clients don’t understand the difference between goods and services. The ever-increasing availability of computer-aided design and the myriad of delivery options available for design services in today’s marketplace have led to the misguided notion that design is a good rather than a service. Project decisions are increasingly being made based on price and ease of delivery, rather than design expertise or lasting value.

Many firms are struggling against commoditization by trying to be all things to all clients. Others are becoming bloated and unfocused by taking on any and all projects just to bring in revenue. These reactionary tactics can lead to a race for survival among competing firms.

How can you avoid commoditization? The first step is to define your value proposition. A value proposition is a succinct statement that explains why a client should choose your firm over the competition. Your value proposition needs to communicate exactly what services your firm is offering, and what differentiates your firm from the others. It should also clearly convey the value your service can bring to a given project.

One of the best ways to define your value proposition is to perform a “Dangers, Opportunities, Strengths” (D.O.S) analysis.

Begin by making an honest self-assessment of your firm. Assemble your firm’s leadership and key-stakeholders to discuss your firm’s dangers, opportunities, and strengths. Ask questions such as: What do we do best? What is our current specialization – healthcare, hospitality, cultural facilities, etc.? Who are our preferred clients?  Who are our competitors? What differentiates our firm from our competition?

Next, ask your clients the questions from their perspective. Talk to your top 20 or so clients and ask questions about dangers, opportunities and strengths. The following are some example questions that can help you formulate your client-facing D.O.S. analysis:

Dangers: What do your clients see as obstacles to their projects – project financing, divergent interests of stakeholders, community pressures? What are they most concerned about during the construction process (issues arising from delays, changes to the plans, etc.)?

Opportunities: What do they see as the prime opportunities for their projects, for example: building a legacy, visible impact, community improvement, etc.?

Strengths: What influenced their decision to work with your firm? What does your client see as your firm’s advantages and differentiators?  How will this/these projects support their vision and their strategy?

Review your clients’ responses and compile their common top three answers on dangers, opportunities, and strengths into one list. When you have that list, compare it against the list of answers from your internal review. Are you on the same page as your clients? Do they see your D.O.S. the same way you do? Are you adequately addressing their concerns? Do you understand your clients’ aspirations in the opportunities column? Does your client see your firms’ strengths the same way you do? Identify the gaps between your clients’ answers and your firm’s answers and determine a strategy to bridge those gaps.

Now you are ready to define your value proposition. Go back to the questions you first asked yourself: What do we do best? What is our specialization? Who are our competitors? What differentiates our firm from the competition? Use your D.O.S. analysis and the input from your clients to refine your answers. Make a pro-active plan to mitigate the dangers, take advantage of your opportunities, and refine and reinforce your strengths.

Your value proposition needs to be simple and direct. Explain how your firm can meet your clients’ needs, the specific benefits your firm can deliver, and why the client should choose your firm over the competition. Above all, keep an eye out for changes in the market. Revisit your D.O.S. analysis as necessary to identify how your value proposition can fulfill a unique niche in the current market.

Knowing who you are, what you can deliver, and understanding your value proposition will help you break free from the commoditization trap.

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Steve Whitehorn is the author of the upcoming book, Ensuring Your Firm’s Legacy, and Managing Principal of Whitehorn Financial Group, Inc., and is the creator of The A/E Empowerment Program®, a three-step process that helps firms create a more significant legacy and empowers them to achieve greater impact on their projects, relationships, and communities.

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