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The Origins Of Strategy

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parameciumI started this discussion of Rainmaker Marketing by discussing the life cycle of an accounting practice. Today, I want to talk about the origins of strategy.

 

As time goes on, I’m going to teach you the difference between your Marketing Strategy, your Business Model and your Marketing Tactics. Once you understand these parts of your business, then you can build a Business Model that will take advantage of your practice strengths, select a strategy that effectively matches your business model with your target market, and helps you select the appropriate tactics for your strategy.

But, before we could begin with the typical analysis of business strategy (which by the way, is too generalized for a small local accounting practice), you need to understand where a strategy can take you.

That is why in an earlier post, I talked about the life cycle of an accounting practice. And, I do hope you have committed that particular topic to memory. It’s important.

That life cycle description was drawn from observations about professional firms in general. What I wanted you to do was to get an overview of what the general stages of a professional practice’s life were. Not the typical bell curve that you see outlined in college textbooks for an ordinary product, but what actually happens in the life of a professional practice.

So, today, it’s time to begin a discussion of strategy.

Before you can select a strategy, you need to understand what strategy really is and where it comes from. And, I have to say that it’s not where you think. As a matter of fact, it’s not even where the textbooks teach you to look.

post-0-102-img-001Let’s step back and look at an experiment that was performed back in 1934 by a professor G. F. Gause at Moscow University. Professor Gause demonstrated that when two different species are competing for the same resources, they cannot coexist. One species will drive the other into extinction, unless the other species is able to develop an alternative resource with which to support themselves.

Growth In The Absence Of Competition

post-0-102-img-002In the first stage of his experiment, Professor Gause placed two species of paramecium each into its own petri dish, and fed them the same foodstuffs. They both prospered and grew to similar populations.

Growth And Failure In The Face Of Competition

post-0-102-img-003In a second experiment, Professor Gause placed both strains of paramecium into the same petri dish and fed them the standard dose of foodstuffs. This time, one parmecium was able to dominate by consuming the majority of the foodstuffs, starving the competing paramecium and totally dominating the petri dish.

This led to Gause’s Law which states that as long as the environment remains unchanged, when two species (businesses) compete for the same resources (customers), one entity will force the other to extinction (failure).

And, that gives us a new definition of Strategy.

I’m sure you’ve heard all kinds of analogies, equating Strategy to war, but that is not a definition of Strategy. In his seminal work, titled “What is Strategy?”, Porter defined strategy as “Strategy is the creation of a unique and valuable position, involving a different set of activities.”

However, Porter’s definition is too ambiguous. It implies properties not associated with the actual requirements of Strategy. Strategy is, and must be based on “The Struggle For Existence,” as identified by Dr. Gause in 1934, and which leads us to the following definition:

“Strategy Is The Plan or Planning of Competitive Domination.”

That is the only definition allowed.

It is the only definition that fits with Professor Gause’s discovery, and the only definition that fits with the uses to which Strategy can be, or ever has been applied, whether it is in marketing, in war, in sports or any form of competition. It defines the domination of a market and the absorption of resources away from competitors targeting the same market.

Remember that definition. It is the only definition that you can use if you want your practice to survive and prosper.

Interestingly, however, Gause developed a second law, named Gause’s Paradox, which states that two species who would ordinarily compete for the same resources can co-exist as long as they specialize in the resources they consume.

And this is the foundation for specializations and niches which exist in the accounting industry, and gives us our own “Rainmaker’s Paradox.”

When two accounting practitioners are competing for the same customer dollars, nature decrees that one practitioner will dominate and the other will fail.

Therefore, the Rainmaker’s Paradox says that “When there is a significant differentiation between the two practices, then each will attract only the clients that exist to use the services of that practice.”

You can use your imagination to come up with reasons for a practice’s successes or failure, but if you understand the laws of nature that control your environment, then you will have a better chance of adapting to the changing environment and dominating your niche.

You must dominate or die. There is no in between other than a slow and lingering oblivion.

If you plateau, then you have either maximized your potential by absorbing all the potential clients in your niche, or you are ceding resources to a competitor and are doomed to extinction, known in the business world as failure.

The one saving grace is that practice differentiation is easy if you select the correct strategy, and have the appropriate business model.

As we go on, I plan to give you a complete rundown on how to do both, select the correct strategy, structure your business model, and even select the correct tactics for your market. Or how to make corrections if you are already in practice.

No matter which strategy you choose, practice differentiation is as simple as modifying your business model at any single point.

Look at McDonald’s, Burger King and Wendy’s.

You can drive down a street in almost any city in the USA and you’ll find restaurants of the genus “Hamburger Stand” coexisting side-by-side.

But, if you look at the customers who patronize any one of them, you’ll discover that each of these restaurants has positioned itself to attract patrons seeking a particular feature or specialty.

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Want consistent taste, go to McDonald’s.

 

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Want Onion Rings, go to Burger King.

 

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Want hamburgers from square cows, go to Wendy’s.

 

In an accounting practice, your differentiation may take the form of price and efficiency, such as that practiced in Britain by the Mazuma accounting franchisees, or in the United States by small bookkeepers and General Business Services franchisee’s. Or, you may specialize in a specific industry or niche, as exemplified in the Practice Builder Publishing Industry Specific Marketing Kit series, or you may add service specialties such as Practice Builder Publishing teaches in products like its Cost Segregation, Payroll or Troubled Taxpayer marketing systems.

I’m not pitching those products here, I’m just trying to explain where a service like those fits into an accounting practice’s resources. Each point of differentiation you create in your practice helps you develop a market that is completely yours.

And, if you provide the correct solution, you will gain one-hundred percent of the market for that solution.

Trying to figure out your market share is a waste of time. As I just said, if you are able to acquire a client, you have 100% of the market that want that solution.

Your chore is to determine what market you want to serve and what practice differentiators will serve that market. Identifying a larger market and modifying your business model to accommodate that target market is the only way to increase your revenue if you always have 100% of your market.

That’s what we’ll start in on when we start talking about simple ways that you as a local practitioner can use to identify the strategies of competing accounting practices in your community, and then how you can use that knowledge to design your business model and your strategy.

Don’t worry, we’ll eventually get around to tactics and start doing all those cute little things that Practice Builder Publishing members talk about in the weekly Rainmaker Marketing webinars.

You know, direct mail, postcards, public speaking, etc.

The difference is, that that is the stuff that the ordinary practitioner starts with. The stuff that those folks who don’t have the beginnings of an understanding of how Business Models, Strategy and Tactics really fit together and jumps into with both feet.

 

Video: The Origins Of Strategy

 


 

 


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Best to you and yours,

kirks-sig

 

Kirk

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