Insights

"Commoditisation, whatever next?!"

by Simon Slater, Managing Director, Intelligent Office Consulting Services

Some words are strangely emotive. Take the word commoditisation: possibly the most despised word in the world of professional services.

This is curious.

Let's look at some dictionary definitions. First - commodity: according to the Oxford English Dictionary it is "an article that can be bought and sold" or "a useful thing".

Now let's look at the words profession and professional. Unsurprisingly, there are a number of meanings: "vocation or calling, especially one that involves advanced learning"; "a body of people engaged in a profession"; "competent"; "engaged in a specified activity as one's main occupation".

Among the 15 or so definitions of the word service there is this: "the act of helping or doing work for another."

Finally, leverage: "the mechanical advantage gained by use of a lever"; "a means of accomplishing a purpose"; "power". I mention this because leverage was the subject of my last piece for Intelligent Times and here again it is relevant.

Producing a commodity - a useful thing - takes a great deal of thought, skill and leverage. If a business gets it right it stands to make substantial profits. Why is it then that so many professionals recoil from the notion? Fundamentally, it is because they lack the skills required to re-think, re-design and restructure the delivery of their product. They shouldn't beat themselves up about this though; these skills can be acquired if they want them.

But there is another reason. They don't perceive that the production of a commodity fits with their perception of themselves as expert artisans doing highly specialised, highly profitable work. I don't buy this. Show me someone who would sniff at a profit margin of 30% generated through the delivery of a highly-geared, commoditised professional service. And then tell me why this level of profit is any less valid than a similar margin delivered by a small team of "rocket scientists" in the same firm.

Whilst there is still widespread reluctance among professionals to embrace commoditisation, not all are in denial. There have been some notable examples of commoditisation among leading professional firms in the last 10 years.

The question is: once something has become commoditised, what happens next? Is it a slippery slope to über-commoditisation? Not if a firm wants to survive, no.

Apple sells commodities. In fact, it sells very useful things indeed. Its products are no doubt bought in their millions by professional people keen to have the latest iPhone or iPad. Such irony - successful people are prepared to pay a premium for a mass-market commodity because it has leading edge functionality and beautiful design backed up by great service; a product that has been de-commoditised by re-defining its added value. And yet, it is often an anathema to the very people who buy these products to re-think their own services.

The thing is this: a mobile phone is vanilla; so is a lap top. Apple products are not.

Many professional services are vanilla. Most professional service firms are vanilla.

Fact.

So what? Here's what I say to that: the average life of a company now is 40 years and the reason is that too many of them become vanilla. They fail to reinvent themselves; they don't appreciate their asset.

My message therefore is this: even if commoditisation is inevitable, it is never too late to decommoditise, never too late to reinvent the notion of added value. Just like Apple.

Come to think of it, just like Intelligent Office.

The word "office" equals commodity. But what about the word "intelligent"? It is this that we believe differentiates our service.  What the business does supremely well is to "commoditise" the business support services of professional service firms. What this means in practice is that it delivers greater efficiency through process automation, improved leverage and the introduction of standard operating procedures (SOPs). This allows us then to "de-commoditise" - that is add value - through better teamwork, continuous improvement, creativity, product development, cost effectiveness and, ultimately, excellent - and highly customised - client service.

70% of all buyer decisions are emotional rather than rational, but too few professional service firms recognise the fact and differentiate their service on this basis.

If you don't believe me, remember the mission of another successful global brand:

"In our factory, we make lipstick. In our advertising, we sell hope." (Charles Revson, Revlon Cosmetics).

What do you sell?

simon.slater@intelligentofficeuk.com
t: +44 (0) 845 658 9443
f: +44 (0) 845 658 9445
m: +44 (0) 7786 903 530

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