Differentiation from the Dark Side
Have you ever been startled seeing yourself in a different light? Sometimes things look different than how we perceive them. Dr. Kord Wissmann began his career as a geotechnical consultant, but over 15 years ago, he moved to the “dark side”- geotechnical contracting. Here, Dr. Wissmann shares his thoughts on the forces driving geotechnical commoditization and provides examples and suggestions to motivate all of us to set our organizations apart from the rest.
Remember the first time you saw the Star Wars Trilogy? Episodes 4, 5, and 6 are where we first met Luke, Han Solo, and Darth Vader. Remember when we learned that Vader was Luke’s dad, and we had to come to grips with a good guy going to the Dark Side? Vader’s story is not so mysterious to me; we both once lived on the Bright Side (of geotechnical consulting), before going over to the Dark Side (of geotechnical contracting). The force is indeed a bit different over here. Living on the Dark Side, you get to look back to where you came from and see things that you didn’t see before.
There’s lots of talk over there on the Bright Side about an evil shadow approaching; a shadow called commoditization. Over here on the Dark Side, we laugh about this shadow because we know it so well. You, on the Bright Side, make us walk in this shadow every day, with your specifications and your endless need for competition. We have adapted to it. We know how to deal with it. Before we go there, I’ll reveal one of our many secrets. Over here on the Dark Side, we wear costumes to hide our darkness. This costume includes a dress shirt. Our shirts are all made overseas by skilled workers in factories that make many dress shirts for many vendors; a secret practice called private labeling. They ship these dress shirts to different vendors, who aim to sell them to us. Some of us buy them at Wal-Mart. Those who are looking for a bit more luxury go to Tip-Top Tailors or Harry Rosen. While the dress shirts are a bit different in each place, it’s not the shirts that make us go to these places. We select these places for something else: the experience. The vendors know something about us that they keep to themselves. It’s called differentiation, and it’s expressed through a value proposition (VP).
Wal-Mart gives you a reasonable price, always. It’s a good VP, and many people like it. Tip-Top Tailors gives you special attention and makes you feel important, and the price is pretty fair. And for those of us who have ever visited the tailors of Harry Rosen, well, they deliver luxury. They give you a shirt and a back massage, hand you a powdered wig… and then steal your wallet. The secret of the value propositions is that each venue differentiates its services according to the preferences of each customer group. To exercise its VP, Wal-Mart cannot serve the egos of those who regularly shop at Tip-Top Tailors. It would bankrupt them. Likewise, Harry Rosen cannot provide its VP at the price offered by Wal-Mart. Differentiation is a reaction to a market condition, and it is something that takes some skill to exercise. The providers can’t dictate the market – it’s as impossible as dictating the tides. A market that is undifferentiated is called a “commoditized market.” This is the shadow that we are seeing. This kind of market cannot distinguish between vendors on anything other than… price.
Dress shirts, from the perspective of the workers overseas, are a commodity. But dress shirt providers are not. They use points of differentiation to create protected markets for themselves. So how does this relate to us… I mean you… on the Bright Side? In the past, differentiation was upheld because there were only a few players who delivered a product poorly understood by their clients, like a secret recipe. But the past mechanisms of differentiation are fading and are no longer enough to hold back the shadow.
So perhaps now you are thinking… how is it done on the Dark Side? Some of us do not differentiate on anything other than price. You know who we are.
There are those of us who differentiate with very specialized machines requiring strength and capital. There are others who thrive on innovation, inventing new tools and processes to lower the dollar value of construction – protecting these inventions with proprietary approaches, patents, and trademarks covering the costs of development. If commoditization is the absence of differentiation, the first step for all of us is to actively decide how we wish to differentiate. Who will be the low-price leader? And who will have extended service offerings? The market will demand that somebody is the low-price leader. If we do not differentiate in other ways, we are placed by the market in the low-price group, and to survive, we must be the best at it. We need to be a Wal-Mart, relentlessly reducing overhead, use lean management strategies, and maximizing our efficiency on all tiers.
Differentiation can also be achieved by providing a unique customer experience. This is the strategy used by Harry Rosen – make customers feel a certain way when they use your services, and charge more for them. This is a good strategy, and it works, though it is easy to replicate. Differentiation can also be achieved with relationships – the Tip-Top-Tailors model. Our customers get an ego boost when we hand-tailor the deliverable. It’s another good strategy, but one that’s difficult to scale up and grow, requiring that those who practice this strategy remain small to execute their VP.
The best differentiators, the ones most secure in their market position, are those who differentiate by understanding knowledge gaps. They then use their acumen to form bridges to the unknown.
These differentiators actively seek to understand what services they provide that are easily understood and replicated, and what knowledge they have that is valued but not easily understood. They create unique bridges across the knowledge gap. Examples of differentiated knowledge on the Bright Side include underground support, dewatering, geotechnical instrumentation, ground improvement, hand-held sensors, Lidar, and management systems such as 6-sigma. Make no mistake, battling the shadow of commoditization is not easy. Over here on the Dark Side, we’ve learned that we cannot change the market. But we can adapt. And you can, too, if you wish to survive. For my friends still on the Bright Side, if we figure out how to differentiate, the Bright Side will remain brilliant, and the clouds of commoditization will be penetrated by the sun.
Kord J. Wissmann, Ph.D., P.E., D.GE is the president and chief engineer of Geopier Foundations. For any questions in relation to this article, or otherwise, Kord can be reached at email@example.com