Competitive Advantage 101

Competitive Advantage 101 Strategies That Create Results “Deal making is glamorous; due diligence is not.” Jeff Cullinan, Bain&Co, Harvard Business Review – 4/04 Session Objectives    The research by Porter on strategy and competitive advantage Creating a strategy for winning the decision making process The value of strategy mapping and creating a picture for the client Making your case and differentiating yourself to provide a competitive advantage over others  Michael Porter on Competitive Strategy Porter’s Law Competitive Advantage And Value Are Created When: 1. You provide a desired differentiation in your product or service that allows you to command a premium price 2. Providing the same product or service for a lower price Developing Your Strategy How Do You Differentiate Your Value Proposition to Your Customer?  Low Total Cost  Product Leadership  Customer Solutions Developing Your Strategy Low Total Cost  Deliver a combination of quality, price, and ease of purchase that no one else can match – Good Quality, Easy Purchase, Appropriate Selection    Dell Southwest Wal-Mart Developing Your Strategy Product Leadership  Continually develop products that offer superior performance for customers – Speed, Size, First to Market, New Product Segments    Sony Intel BMW Developing Your Strategy Product Solutions  Bond with customers; a complete bundle of products & services they need – Quality of Solutions, Customer Retention, Not Always Product Leader   IBM (1960 to 80) JLL, Trammel Crow and others in facilities management Developing Your Strategy Developing Your Strategy Strategic Empathy: Understanding the rational and emotional reasons and processes clients use when they decide to use your or another’s services Potter, Winning In The Invisible Market Strategy Map: A uniform and consistent way to describe strategy so that objectives and measures can be established. Kaplan and Norton, Strategy Maps The Challenge: Getting selected in the first place Potter’s Two Market Theory Visible Market (RFP -SOQ) Invisible Market (Pre RFP, Sole-Source) The Visible Market  Mostly competitive  More selling  More proposals  Vendor-centric The Invisible Market  Sole or preferred  More executing  More referrals  Client-centric Potter’s “Invisible Market” At Work Potter’s “Invisible Market” At Work How does the RFP process really work? What is the best strategy to get selected in the first place? RFP Decision Process Search Screen Select RFP Decision Process Who is capable, available and can do the assignment? Search RFP Decision Process Who is capable, available and can do the assignment? Search Who can do it better? e.g. capability, price, fit Screen RFP Decision Process Who is capable, available and can do the assignment? Who can do it better? e.g. capability, price, fit Who will take care of me? e.g. comfort, commitment, understanding,passion Search Screen Select How to Get Selected (The Rational Decision)  Search  Company and Personal Profile   Ads, meetings, articles, speeches Provide as many alternatives as may be necessary to assure (or provide the appearance of) a good decision  Screen  Rational Differentiation   Your difference aligned with client preference Survivors include market leaders for reliability, innovative candidates for creative idea leverage, and lowest cost candidates for price leverage How to Get Selected (The Emotional Decision) Select Congratulations you made the short list!  Emotional Differentiation  Comfort, confidence, understanding and commitment Pop Quiz!  If you didn’t get selected, what is the number one excuse you will hear? If You Didn’t Get Selected Price is the excuse, not the reason “Price is not in any psychological list of basic human needs. Worth is… What leading with price does is to tell consumers…price is important.” Dan Hill, Body of Truth Vendor-Centric vs. Client-Centric How to Get Selected Vendor-Centric approach: The more the client knows about me the more likely they are to hire me.    High talk/presentation ratio Premature solution syndrome The goal is to impress and “knock their socks off” with your presentation and knowledge How to Get Selected Vendor-Centric vs. Client-Centric Client-Centric approach: The more I know about the client the more I can help them solve their problems and achieve their objectives    Listens more than talks Aligns with client Looking for ways to help (creates trust) The client-centric approach helps you win points for the short list “emotional decision making” process How to Get Selected From The Short List (The Emotional Decision)      Who do I know and trust better? Who is ranked number 1? Who fits us better? Who understands us better? Who is more committed and most able to deliver the solution to us?  Who do I know and trust better?   Who do I have an existing relationship with that has delivered on a similar job? Who has made an extra effort to make my life easier or make me look good? Pop Quiz!   Question #1: What is your win rate for business when you have no existing relationship? Question #2: What is your win rate for business when you are dealing with an existing client relationship? The Role Relationships Play When The Client Has An Assignment  Can we do it?  In house solution Is there a preferred provider  Do we know someone who can do it?   Do we know someone who knows someone who can do it?  A reference How to Get Selected (The Emotional Decision) Who do I know and trust better? Who is ranked number 1?    Who is ranked number 1?   The lower the perceived rank, the higher the perceived risk – The highest ranking service provider is the safest choice “No one was ever fired for choosing IBM” How to Get Selected (The Emotional Decision) Who do I know and trust better? Who is ranked number 1? Who fits us better?     Who fits us better?   Whose corporate culture is most like ours? Whose size, location, people etc. are most like ours How to Get Selected (The Emotional Decision) Who Who Who Who do I know and trust better? is ranked number 1? fits us better? understands us better?      Who understands us better?    Who seems to know what our issues are and what we are trying to accomplish? Who seemed to ask the right questions? Who can communicate and work with all the different departments/people involved with our real estate Create a map to visually show your knowledge of their objectives Final Objective Current Situation Asking Questions Creates A Strategy Map Major Client Objectives Measures Measures Measures Measures Targets Targets Targets Targets Relocation of Offices Site Selection Objectives Deal Structure Objectives Build-out & Move-in Objectives Asking Questions Creates A Strategy Map Client Objectives  What are your overall real estate objectives?  How do they support your strategy?  To help achieve your strategy, what are your objectives for this lease/purchase? Asking Questions Creates A Strategy Map Client Objectives  How would you measure your objectives and what are your targets    Cut operating costs by X% Ability to expand by X Acquire a new product line or competitor by X date Mapping Client Objectives Client Objectives Site Selection Deal Structure Cut PSF Occupancy Costs By 10%, Maintain Quality Image & Have Ability for Future Expansion Objectives Measures Targets Asking Questions Creates A Strategy Map Site Selection Objectives  To help achieve your strategy, what are your objectives for this site?  How would you measure them and what are your targets     Rate image/location/transit/security/visibility on a scale of 1 to 10 Ability to have X amount of expansion space, power, HVAC, floor load capacity, storage, parking Efficient layout with X occupancy cost per employee Location within X miles of existing site Mapping Client Objectives Client Objectives Site Selection Deal Structure Cut PSF Occupancy Costs By 10%, Maintain Quality Image & Have Ability for Future Expansion Flex/Quality High-rise Large Flex Floor size 15 K Now 20K in 18 mos. Asking Questions Creates A Strategy Map Deal Structure Objectives  To help achieve your strategy, what are your objectives for this lease/purchase negotiation?  How would you measure them and what are your targets    X year term with X options to expand or contract or to purchase at X price in future Rent of X amount for X period of time with all above standard tenant improvements amortized at X% over the lease term Free rent for X period Mapping Client Objectives Client Objectives Site Selection Cut PSF Occupancy Costs By 10%, Maintain Quality Image & Have Ability for Future Expansion Flex/Quality High-rise Large Flex Floor size 15 K Now 20K in 18 mos. Deal Max Flexibility Structure Length of term Num. Of Options 5 yr term w/2 5yr. op Asking Questions Creates A Strategy Map Build out/Move in Objectives  To help achieve your strategy, what are your objectives for the build out & move in?  How would you measure them and what are your targets   Construction starts by X date and move in by X date Construction costs not to exceed X Mapping Client Objectives Client Objectives Site Selection Cut PSF Occupancy Costs By 10%, Maintain Quality Image & Have Ability for Future Expansion Flex/Quality High-rise Large Flex Floor size 15 K Now 20K in 18 mos. Deal Structure Max Flexibility Length of term Num. Of Options 5 yr term w/2 5yr. op Build-out/ Move-in No current $ out Amount of TI Allowance $45 PSF Allowance A Strategy Map Creates A Picture There Concerns Questions Objective 1 Objective 2 Objective 3 Here Obstacles How to Get Selected (The Emotional Decision) Who do I know and trust better? Who is ranked number 1? Who fits us better? Who understands us better? Who is more committed and most able to deliver the solution to us?       Who is more committed and most able to deliver the solution to us?   How are these people different from the others? Do they inspire my confidence? Provider Differentiation  To differentiate yourself you must be able to answer the following questions     What is your approach or solution? How is it different? Why is that important to the client and why should they value it? How can you prove it? Differentiating Yourself Your solution for their objective or problem Why you’re different Why your service is valuable to (Core Competency) the client Proof or evidence Differentiating Yourself Your solution for their objective or problem Move now & take advantage of tenant market Why you’re different Why your service is valuable to (Core Competency) the client Only have No new seasoned brokers brokers learning on your deal Proof or evidence All our brokers have 10 years in the business Differentiating Yourself Why your service is valuable to (Core Competency) the client Only have No new seasoned brokers brokers learning on your deal We can sublease We Our existing your existing specialize in tech client space tech tenants base Your solution for their objective or problem Move now & take advantage of tenant market Why you’re different Proof or evidence All our brokers have 10 years in the business We represent 7 of the top10 tech firms If You Can’t Differentiate  If you cannot clearly communicate your unique value proposition, clients won’t:        Meet with you Listen to what you have to say Share problems and explore solutions Agree with or commit to your recommendations Choose you over your competitors Pay you what your worth Recommend you to others Additional Information Session Review    The research by Porter on strategy and competitive advantage Creating a strategy for winning the decision making process The value of strategy mapping and creating a picture for the client Making your case and differentiating yourself to provide a competitive advantage over others  Some Final Thoughts... “In times of change, learners inherit the world - while the learned remain beautifully equipped to deal with a world that no longer exists.” Eric Hoffer And Finally...