Commoditized Knowledge Companies – Future?

If you are an entrepreneur interested in entering the knowledge business or a leader of a small business in the IT / ITES space, take the quick check test below:

  • Can you spell out your Unique Selling Proposition?
  • Is it necessary to be differentiated?
  • Have you spent time identifying your differentiators?
  • What are you doing to create a brand around your organization?
  • In the coming year what is your plan for increasing brand value?

How many of you felt this set simply does not apply to you as you do not require branding? We specially request all of you who feel this way to read on…

The IT and IT enabled sector has been getting a lot of attention in India over the last decade. We have seen number of companies mushroom, some have grown into billion dollar businesses and others have nearly disappeared from the scene. All in some form have taken a pie from the opportunity. While the initial players raked fortunes because of the first mover advantage and strong leadership, many of today’s small and medium enterprises have got stuck in what is typically called “No man’s land” or “Stuck in the middle” syndrome. They struck an opportunity, but did not do anything more than that. They did not spend time looking for the next game – they focused on improving productivity over identifying opportunity.

IT and ITES should have been a knowledge based industry where in expertise and value-add should have emerged as key distinguisher’s. But today the playground resembles more of commoditized market, where it is predominantly price and throughput that are determinants. This is something that is coming out strongly in our interaction with the industry. Most of the leaders pride in service quality which is associated with “giving more at less cost” or “ability to engage with customers in a more intense manner” (which actually translates to saying “YES” to everything that is being asked by the customer).

If these are the two aspects that 90% of the industry is quoting albeit in different lingo as their differentiator – then can they truly be differentiators? In our attempt to blindly race on price and time we have created today an undifferentiated market. If the choice of an organization is to be more inclined towards the commodity market – there is no need for seeking differentiators. But growing is always difficult in an undifferentiated market.

While the industry was working on providing the customer the price advantage, “low-cost service” has become a standard expectation. The customer today wants to see something more from their IT partners. There has always been an inclination for human beings to seek/reach as far up the value chain as possible and the knowledge economy is really testing the height of this value chain. Customers today are expecting “Solution specialists”, “Expert Business Understanding” and “Business Enablers” from their partners. The customers are also willing today to pay a premium if they see “Value”. The customer today is redefining the parameters of the game.

If you agree with the above, can you afford to be operating in the dynamics of an “undifferentiated market”? Do we really have a choice today? We strongly feel only those organization that buck up on creating meaningful differentiators – that are seen as “value add” by customers, will grow in the coming years. Organizations which take a call to move on “increasing internal efficiency” and “cost advantage” would soon find themselves more and more stuck

The low entry barrier for IT and ITES is making the market increasingly crowded. Coupled to this is the “buzz” of the giants in the industry seeking methods now to move up the value chain. Both these factors are also influencing the rules of the game. And if you are not familiar with the new rules – you may soon find it difficult to be in the game.

How much talk is being done around value chain –  lots and More! But are we doing something about it – very LESS! During our recent meetings with leaders of small and medium organizations in the knowledge space, it is becoming apparent that they are in no urgency to seek differentiation or build brands. Every one seemingly stumbles when it comes to defining high-end, value added services.

The most often quoted reason for not seeking to build differentiation or brand is the associated price. However one cannot help wondering, could the actual reason be the dreaded “comfort zone syndrome”? The feeling of one doing “reasonably well” today without indulging in differentiated services – is this stopping us from being prepared when the tide turns?

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