Many firms have reached a point in the evolution of their practice where they realize that in order to compete successfully, they need to find a niche market for their services. The concept is often referred to as "differentiation," and it requires a certain amount of research and introspection to accomplish. It may also require doing some soul searching on what the goals are for your practice and your life.
Some years ago, a book by Renee Mauborgne and W. Chan Kim entitled Blue Ocean Strategy (2005, Harvard Business School Publishing Corporation) caught my attention by outlining a methodology to find differentiation through a combination of value innovation, fair process and tipping point leadership. Of the three, by far the most difficult to achieve is value innovation, as it requires a fair amount of research and labor (not to mention creativity) to accomplish. In essence, value innovation is the simultaneous goal of achieving a new approach, service or offering combined with exceptional value for what is offered. This does not necessarily mean that the offering must be cheap, just an exceptional value. Fair process is offering the service with the recognition that it is done with fairness to those who are served. And tipping point leadership merely states that once the service or offering is designed and offered to clients, a continuous effort will then be made to promote it, even in the face of initial resistance.
Examples of blue ocean strategy abound, but one in particular is the case of a financial advisory firm that was searching for such a solution. When confronted with the concept of differentiation, research was done and it was discovered that the owner had a special-needs child. He had joined support groups for families with special needs children and had even begun to gain some of those families as clients. Yet, despite this, he had not explored pursuing this as a marketing niche or as a differentiation strategy.
Once the decision was made, the Web site was retooled to reflect this specialization, and marketing materials and advertising were refocused on this concept. Within 18 months, the firm experienced a remarkable growth from families who had long searched for a financial advisor who specialized in this area and had, up to that point, been unable to locate one. And while this is an isolated case, it is an excellent example of how differentiation can make a substantial difference in a financial practice.
So the question is: What steps need to be taken to develop and implement this type of differentiation strategy? The first step is to do a certain amount of soul-searching and introspection. Exploring your passions and your strengths/weaknesses can go a long way toward uncovering where your niche may lie.
A relatively simple blue ocean exercise to uncover your value innovation is called "ERRC," which stands for "Eliminate, Raise, Reduce and Create." The steps are in this order:
1. Eliminate: Write down those aspects of your profession that could be eliminated that are those factors that the financial services profession have long competed on. This might include parts of your service offerings, fee structure, marketing methods, etc.
2. Raise: Write down those factors of your practice that could be raised well above industry standards, such as communication methods, frequency, etc.
3. Reduce: Write down those things that could be reduced well below industry standards (obviously without violating compliance rules, B-D requirements, etc.)
4. Create: Write down a list of things that could be offered to your clients and prospects that the financial services profession has never offered. This might involve specialization in untraditional areas such as the aforementioned "families with special needs children," or working with high-net-worth single executive women nearing retirement. (The point is to seek out your niche, based on working with groups of potential clients in other unique professions/lifestyles in which you may possess a unique knowledge.)
What lies at the center of these four lists should be your unique value innovation, that aspect of your profession you may be able to retool your firm to specialize or capitalize on.
Once identified, the next step is to implement a strategy that not only delivers the new innovation, but provides a fair process in delivery. Fair process simply means delivery of products and services in a way that ensures fair value and recognition by the recipient of the quality of those products and/or services.