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Differentiation for Solution Providers: Stand out of the Crowd

August 26, 2010
Margins for Solution Providers

How much margin is a factor of how you differentiate

Here are a couple of examples of strategic differentiation.  The busiest restaurant in my town  allows you to bring your own wine. Now for many restaurants wine is the “Winner” – wine is to a restaurant as perhaps Managed Services are to your business. By allowing customers to bring their own wine (and charging an uncorking fee) they are using a competitive restaurant’s  “Winner” as their “Traffic”. Are they leaving money on the table? When I go there, it seems that my total bill is no different than any other restaurant I go to.

The restaurant is “up-selling” (today’s special) , “attaching” (Soup, salad, dessert). This restaurant Differentiates itself and has a Value Proposition – this is their Strategy.

A partner that I conducted a workshop for in a small city in Canada only had 8 employees but did $25MM in revenue with Operating Margins over 7%. After I gave my presentation the owner told me his differentiated strategy:  He offers a specific Managed Service at no margin: Wins the deal, maintains a reference-able client and makes money on reselling his “Winners” -service contracts.  He’s constantly working on his business strategy by finding products that have high margin to “up-sell” and “attach”. His “Traffic” is his competitor’s “Winner”.

What’s your “Traffic”? What Differentiates you? Is today’s “Winner” tomorrow’s “Traffic”?

Differentiation

Do you want fries with that?

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