Statistically speaking, the concept of “average” means that you fall right in the middle of the bell curve. No company wants to be thought of as just average, yet that is precisely where their undifferentiated business strategy places them—in the center of the curve. The most interesting and powerful brands are at the edges of the bell curve, because they’re doing things differently.
It feels like common sense to play in the center of the market, but the middle is actually the least desirable place to be. If you try to simultaneously appeal to the high end of the market and the low end of the market, guess where you end up? You’ll end up in the “mushy middle,” where you appeal to no market.
Look at most markets and there are examples of successful brands at the high end and low end, but very few successful brands in the middle. This is most visible in retailing, where there is almost no middle market at all. Marketing to the middle was the essential mistake of General Motors. This phenomenon is true even in real estate, where high-end and entry-level properties are the ones that sell even in difficult markets.
Brands that follow a “best of both worlds” strategy—selling to the middle—will never be the most famous, the most profitable, or the most successful.
Margin in mystery
Brands sell on the basis of perceived value, not costs. This is what makes the hourly rate such a pernicious concept. It’s based on a formula of salary costs plus overhead plus desired profit, which has nothing to do with the value an hour actually produces for the client.
What are the areas where clients are the most price sensitive? Things that clients believe they could do themselves if they wanted to devote the time and resources. What are the areas where clients are the least price sensitive? Services and capabilities that clients can’t do on their own, or could do only at great expense and disruption to their business model.
Taken one step further, the products and services that can command the absolute highest prices are those that the client could never duplicate, no matter how much time and money the client threw at them. Here we enter the realm of proprietary approaches, methodologies, and forms of intellectual capital that are truly unique to the firm.
Not best practices, but next practices
Rather than investing their time and energy into differentiating, most firms are busy benchmarking. The practice of benchmarking—learning how other companies do something—is mostly imitation. It produces what could be called a world of karaoke companies, where one company mimics another.
Benchmarking other brands or companies is nothing more than institutionalized imitation. Sometimes imitation is not only intentional, but is actually a business strategy, like the recreations of Paris and Venice on the Las Vegas strip. Unfortunately, most imitation is unintentional—the result of unoriginal thinking and lack of imagination.
Simply mirroring what other firms do, is not only a strategic but a tactical mistake. Your job as the leader of a professional knowledge firm is to unlevel the playing field; to make it difficult to compare your firm with others.
In new business situations, most firms attempt to stand out by saying that their work is better than other firms. But simply being better isn’t different. Only different is different.