Seven MegaTrends of Professional Services – #7 Commoditization

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Continued from Globalization. Full table of contents below.

MegaTrend Seven: Commoditization

A commodity is quite simply a product or service for which the customer sees only one significant difference between what’s on offer: the price. The drive towards commoditization is perhaps the most powerful force in business today. The reality is that we live in a desperate “me-too” economy, in which most companies, apparently entirely deficient in any creative instinct, look at what other companies are offering, and imitate them. The true innovators are in the minority. Today, the MegaTrend of Transparency means that their innovations are seen by and copied by competitors almost as soon as they get to market, or even before. Unfortunately, the imitators find no way to differentiate their offering other than price. The MegaTrend of Globalization means those competitors can emerge from anywhere.

In short, the MegaTrend of Commoditization is the culmination of all of the other MegaTrends. Many professionals claim that their clients come to them because of their outstanding expertise. That may be true, however it is very likely also true that their clients believe that there are many professionals with equivalent expertise. Being highly capable rarely differentiates professionals at the top end. That’s what it takes to get into the game.

Now we are seeing clients use requests for proposal, tenders, panels, and a legion of other devices to specify what they want, and get the lowest price for it. The corporate procurement function, which used to focus on stationery and widgets, has broadened its ambit to include many professional services. Companies are increasingly likely to shop abroad as well as at home for the best service providers. Loyalty is increasingly trumped by pragmatism. One professional I know bemoaned the fact that 20 years or more of servicing a client can count for nothing when it comes to choosing providers for a new project.

Yet the reverse side of the MegaTrend of Commoditization is that of client partnership. In my speeches and workshops for professionals around the world, I often ask the audience whether the trend they see in their clients is towards the commoditization of service providers, or towards seeking partnerships with their professional firms. Both are powerful trends. Yet the most sophisticated clients tend to be seeking partnerships with their top-end service providers, at the same time as trying to commoditize the provision of low-end services. Certainly commoditization is a stark reality, but on the other side of this is an opportunity.

Table of contents

Introduction

MegaTrends

MegaTrend 1: Client Sophistication

MegaTrend 2: Governance

MegaTrend 3: Connectivity

MegaTrend 4: Transparency

MegaTrend 5: Modularization

MegaTrend 6: Globalization

MegaTrend 7: Commoditization

Responding to the MegaTrends

Lead Your Clients into Knowledge-Based Relationships

Build Strategic Transparency

Create a Highly Networked Firm

Evolve Your Business Models

Developing and Implementing robust strategies