Your edge quickly becomes the margin

The purpose of developing and implementing a competitive strategy is to achieve a sustainable competitive advantage.  Competitive advantage means the firm earns higher-than-average industry profit.  There are potentially as many successful strategies as there ideas for getting an edge.  However, some strategies are easily copied and the edge quickly becomes the margin.   This is what’s often referred to as competitive convergence which is a phenomenon characteristic of industries like accounting services.  New operational ideas diffuse quickly, utilized technologies are similar, employees have similar skills, the services offered are much the same, clients have more or less the same overt needs and pricing is similar.  All these characteristics yield what I call a sea of sameness.

When change is relatively slow the rate at which innovative ideas diffuse is also relatively slow.  Firms that discover new ways of doing things, or more often new things to do, can therefore enjoy a competitive advantage longer.  But when access to knowledge is instantaneous, as it is today, innovation is much less likely to offer a long term sustainable advantage.

In 1999 the AICPA initiated the Vision Project that sought to define a new vision for the profession.  Out of this initiative came an organization called the Business Leadership Institute which facilitates a collaborative learning process.  As an example, take a look at this video it has created.

The video poses the question “is your organization ready for an increasingly complex and rapidly changing world?”  Another way of expressing that is: have you looked at your strategy? Are you still running with the pack?  Change gives you an opportunity to leverage its momentum.  Knowledge acquisition and implementation must happen at a rate equal to or greater than change if you are going to keep up.  It’s that simple.

I believe the greatest opportunities facing professional service firms are going to come the deployment of new management models (note BLI’s comments about vision, leadership and strategic thinking), new customer value propositions and new ways of actually creating and delivering value to customers.

In short, new business models are going to emerge in the next 10 years that will leapfrog traditional firms.  This is why I’m going to be running a series of workshops later in the year called the Practice Development Challenge to facilitate a strategic planning process of the highest order for those people who want to point their firm in the direction the world is going.