Jack of all industries, master of none
Is your engineering firm spread thin across several market sectors, or does it focus on a select few? Here are some tips on how to analyze your firm’s status.
In how many different markets does your firm claim expertise? Unless you are a large, multinational firm, your answer should be in the single digits.
Only when a firm has a dedicated profit center mentality to a single market is it able to effectively penetrate that industry and claim any real level of expertise. Is your firm a jack of all industries and, therefore, a master of none?
Many firms revert to a “jack of all industries” mentality when faced with a recessionary economy .
Fees are discounted, marginal projects are accepted, and a general philosophy of any revenue is good revenue prevails. Industry experts, however, seek to raise their fees during a recession knowing that customers are willing to pay more for their specialized knowledge. True market leaders enjoy economic corrections as the process shakes out industry pretenders and further solidifies their position as a premium provider.
How do you become a market leader? The process is not difficult%%MDASSML%%just time-consuming. It requires an understanding of market definition and a willingness to become integrated into the industry functions, language, and idiosyncrasies. As an engineer, you already understand the foundation of any industry. It is the application of your knowledge that leads to market dominance.
Definition of industry markets
For many, there is confusion over the definition of industry markets as compared to functional areas. An industry market is defined as an economic segment that portends to have its own language, operating philosophies, and standards of performance. (Health care, transportation, law enforcement, and education are all examples of broad industry markets.)
A simple test to define an industry market is to look to governmental hierarchies . The majority of broad industries are represented by a national, state, and/or local government agency. You’ll notice that technology is not represented by a government agency (with the exception of a chief technology office that is used to support the overall government administrative activities, not the philosophies of any individual market). And, while government representation of a market is not completely inclusive, it does provide an initial step to helping you make that demarcation line between industry and function.
Investment of business development resources
Effective business development in an industry marketplace requires adherence to the three Ps: publish, present, and participate. Sure, many engineering firms make appearances at annual industry conferences where pass out business cards and “man” the tradeshow booth. But true business development requires a higher degree of involvement. It necessitates being viewed as an expert by industry practitioners%%MDASSML%%the “go to” person when problems or issues arise.
The only way to build that reputation is to be visible in different media. As all industries have various trade publications, seek out media calendars, and begin the process of submitting article queries . Once published, use the content as a basis for conducting seminars at regional and national industry venues. Simultaneously, build your customer contact database of industry participants and institute periodic touch programs to keep them engaged.
A profit center mentality
Effective market penetration necessitates a profit center mentality. A separate and distinct accountability must be maintained to ensure that progress is being made in your selected industries. Otherwise, industry markets become convoluted and engineering principals revert back to a “revenue at any cost” business model. As one client put it, “We are a mile long and an inch deep in our market penetration.”
The good news is that industry specialization is often based on providence. A new customer provides you with a new industry experience and, based on that project, nudges you into a market where you can excel. Nearly every successful firm has happened upon their markets through unexpected means. The realization is that every project may open a new opportunity for future market dominance.
Where to start
A $9 million engineering firm was contemplating its future strategic direction. A quick review of its current customer billing histories revealed that they had activity in more than 50 different industries. Upon further investigation, it found that nearly 74% of its project work could be assigned to seven primary markets. The firm consisted of four principal owners and three high-level project managers. Logically, it was assumed that each firm leader could be responsible for the further penetration into each of the firm’s primary industry markets. That logic proved to be faulty.
Of the seven industries in which the firm enjoyed strong revenues, only three of the markets were generating acceptable profit levels. Two industry markets (religious institutions and apartments/condo) were actually losing money. One market that didn’t even make the top seven producing markets was generating premium level pricing due to the specialization of the work product. Now, what market strategy made the best sense for this firm?
The answer was reached through a combination of careful analysis and loud discussion. The unprofitable business lines were immediately discontinued as there was no effective way to turn those markets into effective producers. The three larger profit-producing industries were assigned to each of three senior leaders. The smaller high-yielding industry was assigned to an up-and-coming project manager who, under the tutelage of the managing principal, was vested with the opportunity to grow that market. The final component of the plan was to carefully assess new projects in light of potentially new market opportunities. After all, it was providence that brought them their current market successes.
If honest with themselves, most engineering firms will agree they fall into the “jack of industries, master of none” moniker. And, in up economies, this philosophy may be effective as revenues are flowing freely. However, when an economic downturn hits, it is the industry experts that rise above the fray to extract higher levels of acceptance and premium rates for their services. The transition from “jack” to an “expert” is not difficult%%MDASSML%%only time-consuming.
Dawson is the managing director of LTV Dynamics and has 27 years of management consulting experience. He is a frequent lecturer to international entrepreneurial businesses and has clients in the United States, Russia, China, Mongolia, and Latvia. He can be reached at BLDawson@LTVdynamics.com