The Art of B2B Differentiation
This post is heavily inspired by the Win Without Pitching book. Whenever I talk about a consulting startup, a software factory, or any heavy business-to-business company to someone I usually spend quite a time explaining the whys and wherefores of managing this kind of business. It’s not easy, though.
One important key point to understand is that B2B companies are (usually) easy to start. You just need someone who is willing to pay money for your work, that’s it. However, after some time you have started, is often the case that’s very hard to get better clients (the ones who pay more and argue less about your decisions).
The good part of this art of having better clients, more free time for R&D, and less noise is that we, as an industry, have developed a road-map to move early B2B companies from looking for easy clients to working on hyper-specialized problems for the best clients.
In this post, I’ll explain to you some of the most important shifts your company needs to do to achieve what is called “The art of B2B differentiation“.
Specialization is key
In a nutshell, specialization is a way to stand out from the crowd when seeking new clients. When we reduce the alternatives to hiring our company, we shift the power balance away from the client and towards us. Our experience, expertise, and the very way in which we deliver the services and products of our business is a key part of connecting with clients, earning their trust and loyalty.
“Whenever you find yourself on the side of the majority, it is time to pause and reflect.” – Mark Twain
When finding specialization, usually the hardest part is not finding a niche but rather being seen as an expert in the niche we work. A niche (ironically) doesn’t have to be tiny, it just needs to be the area of knowledge our company chooses a focus on and the place where we articulate that focus via a consistent claim of expertise. Our claim of expertise should be a lot narrower than the sum of our capabilities.
Until the day we are called experts, we need to cement our position as leaders in our field through our writing. That’s why great B2B companies have a blog, they are trying to be experts because experts write. Furthermore, having a blog has also another benefit than transforming strangers into customers: it attracts curious people which later will be great hires.
Most important of all, writing about what we do is the fastest way to deepen our knowledge. Writing might not come naturally to us, it might be painful at times, but the rewards are significant and the exercise is mandatory. If we are to be experts we must write.
Another common way of showing what we do and how we do it is to have great use cases of our past work. Having (and not having) a well-shown portfolio of the areas of expertise we claim we have tells a lot about how we work. For clients, a portfolio is the best tool for inspiration. It shows the client what could be. It shows them what others have done.
The next step of specialization is building expertise. So, we will commit to the idea that continuous learning is mandatory. Expertise is the only valid basis for differentiating ourselves from the competition. Not personality. Not process. Not price. It is expertise and expertise alone that will set us apart in a meaningful way and allow us to deal with our clients and prospects from a position of power.
But, how do we build expertise? Well, maybe I’ll write about this in the future, but in essence, If we have no meaningfully defined processes, then there is not much to train our people on. We need to build a culture of continuous learning by hiring for skill, by developing it through training, by empowering our people to form their own professional development plans that we will approve and fund, by holding them accountable to these plans, and, most importantly, by leading with our own example.
Replace slides with conversations
Having a conversation with prospective clients is the first crucial step in the pipeline of our incoming projects. When we talk, we listen, empathize and make recommendations with the expertise required to solve complex business problems. However, the essential matter is to respond to the motivation and not necessarily the request.
Understanding the client’s concerns gives us the basic information to start considering about our hopefully long relationship and if they are the proper fit for our company.
When we don’t have these initial conversations with the tough questions up-front, we devalue what should be our most valuable offering and set up the wrong dynamics between the client and us.
When asking the hard questions we need, as a company, to understand that our two main goals are:
- Freedom of execution
We welcome the client’s input on the strategy and in exchange, we ask him to grant us the freedom to explore various ways of executing it.
The experience says that the client usually has strong ideas and a strong conviction that he is correct, but is constrained by constraints that seem to him to be more immutable than they really are. As the experts we are, we should provide recommendations that are practical and affordable (affordable meaning possible, not cheap).
There will come a day when we are happy to hear from the client, “Ah, of course!” instead of the previously desired, “Oh, I love it!” — Blair Enns
- Consistent routine
We owe it to our clients to reiterate our claim and point out the gap between what they need and what we do.
Little variability in process equals little variability in outcomes. — Some guy at a pre-revenue Startup
Diagnose before prescribe
As experts, instead of seeking clients, we will selectively pursue perfect fits.
The optimal engagement length will differ from client to client, but we must embrace the idea that turnover is healthy, and the subsequent idea that our business development goal is to manage such turnover. If the objection is going to kill the deal, then let’s kill it early.
Furthermore, like any other competent professional, possessing our own formalized diagnostic methods, whether they are proprietary to us or not, goes a long way to our positioning in this matter. From the business perspective, it’s reasonable to expect that if we address similar problems on a regular basis then we would have a formalized way of beginning the engagement.
Generally there are three phases in engagements:
1. Diagnose the problem or opportunity
We will agree with the client on the strategy before any development begins.
2. Prescribe a therapy
Prior to presenting any therapy, we will review the agreed-upon strategy with the client. We need to give continuous reference to strategy.
When we present options, we will strive to limit them to as few as practical. As experts, we need to present fewer options of better quality. There is an inverse correlation between the number of options we present to the client and the confidence we have in their quality. Moreover, we will recognize our obligation to recommend one over the others.
3. Apply the therapy
We must address that there is a line that separates proving our ability to solve the client’s problem from actually solving his problem. We shall not be lured into crossing over this line before we are paid. The paper is produced only once the agreement has been reached.
These phases should not be confused with a waterfall model, but we should never put ourselves in the position where we are prescribing solutions without first fully diagnosing the client’s challenge. Remember, the goal here is to be profitable, not necessarily creative!
Rethink what it means to sell
Making things and selling things are the two basic functions in business. For our business to succeed we must succeed at both. Sales cannot be avoided.
Being a great salesperson isn’t about being able to talk up your product. It’s about determining a fit between the buyer’s need and the seller’s supply and then facilitating the next step. Let’s face it, no is the second best answer we can hear.
However, we sell ideas and advice and so how we sell impacts what we are able to deliver. So, a great salesperson needs to know that the psychology of buying is the psychology of changing. Selling, therefore, is change management.
In summary, when we sell we need to focus on two main components:
- The sales mission: position ourselves as the expert in the mind of the prospective client.
- The sales objective: our objective at each and every interaction in the buying cycle is just to see if there is a fit between the client’s need and our expertise suitable enough to take the next step. That’s it. It is not our objective to convince or persuade. Convincing has no place in selling.
Address Issues of money Early
The Art of B2B Differentiation is a long-term process. It’s not something you can magically do overnight (the same way that wedding photographers don’t make $10,000 on their first wedding). Just because you’re starting to charge more doesn’t mean you’ll get the cash flow you need to pay your bills.
However, one of our goals is to make money; therefore, we must form the habit of talking about it early and often. Like our competitors, we too will use pricing as a positioning tool; but unlike them, we will strive to demonstrate higher pricing and thus benefit from all its positioning implications.
We will invite the client to tell us that he would prefer to work with a more affordable firm. We will not apologize for charging more; it is fair compensation for the increased value we deliver as experts. It lets us improve our offering by giving us the means to reinvest in ourselves and, most important of all, it almost certainly improves the outcome and the experience for the client. Superior service does not improve profit: profit improves service.
As experts, we will not discount with new clients today for the opportunity to make money tomorrow. This is important, and we need to be aware about some important things when we are talking about money and with prospective clients:
Guarantees
Clients may attempt to negotiate because they are unsure of the value of our services. In these situations, we can consider guarantees as alternatives to discounting. Not guarantees of return on investment – for too many variables remain out of our control. Not guarantees on our entire spectrum of offerings – for they may be used against us late in the engagement.
It is appropriate to guarantee the first phase – diagnosis and prescription – of a phased engagement in order to reassure the client of the value of moving forward with us. There is far less risk in this guarantee than there is in pitching free ideas and hoping to get paid.
Terms
Clients may see the value of our offering but attempt to negotiate based on their inability to pay. In these situations, before we discount we should consider offering favorable terms that let the client pay over time.
We Leave it to Last
First, we will ensure that cutting price is the last thing we do. We will search for and address all other objections before we agree to discount. Second, we must ensure that such discounts are clearly identified in all written documentation, including contracts in order to remind the client of the true value of our services.
Our expertise is not a commodity
We sell our thinking but we do ourselves a gross disservice in selling it in units of doing: time. When we employ commodity pricing we invite commodity comparisons, regardless of the value we deliver. If we cannot win while charging more, then we must face the reality that we are selling a commodity.
We must price our upfront work, and thus clearly imply that our pricing for these services has little to do with the hours it takes to deliver them.
This implies the need for our pricing to change as the size of the client changes. The larger client pays more to ensure his commitment to solving his problem because we are delivering a service that has a greater dollar value to him.
We are not a pro-bono organization
We will treat charity as charity and not confuse it with business development. Every one of our for-profit engagements will bring us profit. Our carefully selected pro bono clients will bring us nothing but fulfillment.