Ditching Hourly

DH 379: Alex M H Smith - Understanding Value
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Introduction and Welcome
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Jonathan Stark: Hello, and welcome to Ditching Hourly. I'm Jonathan Stark. Today I'm rejoined by special guest, Alex mh Smith. Alex, welcome back to the show.

Alex M H Smith: Great to be back. Thanks for having me once again.

Guest Introduction: Alex Smith
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Jonathan Stark: So today we are gonna talk about value and how businesses should think about creating value in the market. But first, Alex, could you tell folks a little bit about who you are and what you do?

In case they didn't hear our previous episode?

Alex M H Smith: Yeah, so I, I guess like many listeners am yet another. Jobbing solo consultant, um, in the field of business strategy. Uh, and uh, but you know, I have a particular angle on all of that, which makes sort of strategy more simple, more accessible. I wrote a book No Bullshit Strategy, which pretty much does what it says on the tin.

And uh, yeah, it's not a bad. Um, it's not a bad positioning, I guess, on the basis that, um, most companies do not understand and do not even do, do not even try to do strategy in the first place. So there's quite a lot of, um, uh. There's quite a lot of work out there to be done. That being said, the flip side of that is that because most companies don't try to do strategy, most companies also don't try to hire strategy consultants.

So they might need it, but it doesn't mean that the demand is there. So that is the, that is my constant battle. But fortunately with my audience on LinkedIn and, and stuff like that, I'm just about able to drum up enough interest for strategy to, to keep food on the table.

Understanding Business Strategy
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Jonathan Stark: That is great because I think when I work with people, it's the first thing we work on. When I work with someone in my coaching program, it's like, okay, what's your objective? People can usually come up with their objectives pretty easily, and then it's like, and, and then they can come up. With a million tactics that they think might get them there, but they're always in absence of a strategy and therefore they end up with tactics that are like competing with each other.

And they really just, most people don't understand what strategy is and they conflate it with tactics or a plan or something like that. And uh, and we talked about that last time.

The Misunderstood Concept of Value
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Jonathan Stark: This time we're gonna talk about another word that is woefully misunderstood, and that is the word value. And this, uh, the premise for this interview came from, uh, a, a message you sent to your mailing list, which is excellent, and I recommend people sign up for it immediately while you're listening here.

Um, and. That BS word value is just wildly misunderstood by people. I talk about it in terms of pricing, but you in, at least in that email, you talked about it more almost as like a differentiation or competitive advantage in the marketplace. So I wanted to kind of get your take on when you're working with someone, how do you where, where do they go wrong with value?

Alex M H Smith: So, yeah, I mean the. You sort of suggested before about how, you know, when you, when you're working with someone, there'll be like a sort of a strategy element to that work. And this is one of the reasons why strategy is such a bullshit word, is because, um, of course whenever people are doing a specific thing, like a social media campaign or like moving offices or something.

All of those things will have a strategy component. So strategy becomes a sub component of all these different activities that you're going to do. It's not a thing that stands all by itself except for in one circumstance, and it's the one circumstance where everybody forgets to have a strategy, and that is the field.

Of business strategy as in your business as a whole has a strategy. So like people don't, people remember, Ooh, I need a brand strategy. Ooh, I need a social media strategy. Ooh, I need a sales strategy, whatever. People will remember all of that stuff because they're doing those activities. What They just don't see that the business actually has a macro strategy that ties all those things together, and this is where the topic of value comes in.

Because like. Uh, basically in order to know what. Is a good business strategy. Uh, we can answer that very simply by asking the question of, well, what is the job of any given business? Because if we understand what the job of a business is, then we can just direct our strategy at doing that job.

Creating Value in Business
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Alex M H Smith: And for every business on the planet is exactly the same thing.

Every business on the planet is a system, which is just a system that is put together to generate value. Which it then trades for other value IE money. And so because of that, we can see very, very clearly that the more value you manage to create, the more value you manage to generate with your activities, the more value you are gonna collect.

And business is basically as simple as that. So you just say to people, Hey, just focus on creating as much value as possible, um, and then you are gonna win. However, as you said, you then immediately, uh, so this, this is the most fundamental, the most first principles, I think, articulation of what business is possible.

But you still slam into the difficulty of, well, what does that word mean? Uh, what does that word mean? Value? And you know, for a long time in my. Career. I've sort of like, you know, I've, I've made the argument I just made there and I've said that, you know, the um, um, a business's strategy is basically the same thing as its unique value.

Um, but uh, that doesn't mean you say that. It doesn't mean that people then nail it because what people will do is they'll go away and they'll come back and they say, Hey, I've got it all figured out. Our value is.do. And then they'll, and then they'll say something which doesn't really line up to value.

And I think it's because it is just still quite a vague. It's quite a vague bullshit word because it, but basically because it covers a huge amount of ground, because you know, value, it can be quite a hard objective thing. You know, like this widget helps your machine. Turn out five times more rivets than it would've done with another widget.

And then we have a very kind of a very sort of a like kind of numerical form of value that's being generated there. And then on the other end of the spectrum, you might have like a luxury handbag brand where all of the value is tied up in the brand and the way it makes a person feel and whatever. Now you imagine those two companies.

The handbag company and the widget company, both of those companies are generating value and exchanging it for money. But because the type of value is so different, we find it really hard to imagine like what is the commonality between, uh, between those things. And then you also get into a difficulty where if we take, I don't know, like what is the value of.

A BMW for sake of argument, people really will tie themselves in knots where they're like, well, it's a car and the purpose of a car is to get you from point A to point B. Uh, so is the pur is the value that BMW provides tr about transporting you, but that applies? Or, or, or is it something that's particular to BMW?

So the whole, so the whole thing, the whole thing is kind of a mess. So this is why, uh. Rather than, no, you could bash people over the head explaining, you know, this is what value is and this is what you know. And like, and if you were going to explain, if you're gonna try to explain someone what value is, you know, it's, it's pretty similar, I suppose to, it's pretty similar to the sort of the, the benefit, um, of the thing or the, um, or the reason why people would want.

The thing you, you kind of start to get there with that. 'cause we can understand that the reason someone wants a Louis Vuitton handbag is not because it has like n 0.75 liters of carriage capacity. Right. So we can, we can, we can start to, we can start to, uh, answer it, but people still have trouble with it.

Innovating Beyond Traditional Value
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Alex M H Smith: And this is why recently I've just been experimenting with a kind of like a different way of, um, sort of provoking people to do strategy without using the word value. Where the kind of the, the notion is instead of saying to someone, Hey, your job is to go out there and create value, which then people will invariably kind of mess up somehow.

Um, instead, um, I've been thinking about saying your job is to go out there and create something or do something new that wasn't there before or wasn't being done before, just. Do something new. Now this, it's, I think this is kind of clever because people, the main issue that most companies have with with strategy is that.

If we think about it from a consultant's point of view, you know, um, the main issue that they have with their own strategies is that they never actually make any particularly interesting moves or do anything interesting or say anything interesting that you could reasonably expect to deliver a surprising, um, result.

For what you're doing. So like you can't just keep on doing the same old, boring crap you've always been doing, um, and expect that then suddenly you're gonna get these miraculous results. I think there's a Michael Porter quote, I literally read it yesterday and I was like, oh, that's a good one. I've gotta remember that.

Which was the dream of most executives is to do the same things as everyone else, but to get different results than everyone else. And I think this is true.

Jonathan Stark: Yeah, that's good.

Alex M H Smith: I'm gonna do exactly the same thing as everyone, because it's easy and safe, and I know what, where I'm at, but I'm gonna get these amazing results.

And so it's just, it's stupid on the face of it, but this is, this is what we all do. So, um, that is the issue that, like, basically when people start tying themselves up in knots about strategy, like fundamentally, when all said and done. Where it nets out is that they don't, they don't do anything. They, they just don't end up doing anything sufficiently radical to get new results.

So I say, well what about if we flip it and we start, forget value for a moment, just forget it completely. We start with the first principle. The only requirement is just do something new. So get the actual doing part. Um, get the doing part, uh, um, sorted. And then I think that when we are thinking of what new thing to create or new thing to do, um. When we're trying to judge, well, shall I do this new thing or shall I do that new thing? It's sort of it by definition. We are gonna want to choose the one that we think sounds like a good idea, a reasonable idea, the thing that might work. And when we're going through that thought process, we're actually naturally gonna be thinking about value without ever actually having to apply the word value to it.

Because you know, if I. You know, if I was, again, BMW and I could say, well, why don't we, like, why don't we make the interiors of all BMW's smell of cheese or something like that would, that would be a new thing. That would be a new thing, but, but everyone's gonna be like, Hmm. Yeah, but like, is that, how is that gonna work?

Is that gonna like help us? Probably not. So you see they're already having the value conversation. Without having it, but they're having it from a foundation of, okay, we're actually gonna do something. Step one, we'll do something. Now let's figure everything else out.

Jonathan Stark: Hmm. Yeah, I really, I, it is clever. So, one thing before we, before I even drill into that, I want to sort of summarize something you said earlier that is, I think. At the heart of why people don't understand what value is, and it's because value is created in so many different ways, like the Louis Vuitton handbag versus the, the widget that five x is productivity.

It's like the, the actual value, the concept of value is basically the same. It's kind of like the benefit, like you said before, it's kind of like, you know how much money. Would I spend to, if I could wave a magic wand and have five times more output or feel the way I feel with a Louis Vuitton bag, how much, what's the most amount of money I would spend?

That's how you would measure the value of the thing. How the value is created is so different in both of those situations and really every situation that, uh, that has to have something to do with contributing to why people are just so unclear about how to create it on their own. So that's real. I love that insight.

Um, the, this most recent thing that you were talking about here of just like do something new for crying out loud, and when you're considering your options, you're automatically gonna be like. Well, would that create any value for people? And there's this sort of like, is is it a utilitarian value, like the widget or is it a, uh, the way that you feel like the Louis Vuitton bag?

Like who is it? Like what is it? And, but that's gonna happen automatically in the discussion of the group, I guess. So, so here's, so here's where, um. I think that's an interesting way to get people unstuck and thinking about at least doing something novel.

Practical Examples and Market Research
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Jonathan Stark: Uh, folks I work with, a lot of 'em are from the software space and they're very familiar with a concept called product market fit, which is basically not doing any market research before you spend a year and a million dollars to build something and then find out that no one wants it.

So there's, there's. In, in our space, it's almost a cliche that people think, oh, I'm gonna build a better mouse trap. I'm gonna build a better slack. I'm gonna build a better Google. I'm gonna build a better Facebook. And then no one cares because they don't understand well, for whatever reason, because there already is one of those and we don't need another one, let's say.

So it's a little bit, so the idea, so I want to get. Specific around how you would, what you would do next with a, a client that was like, we want to make a BMW that smells like, let's say rose petals inside and not cheese. So like, we're gonna add, we're gonna add like this pleasing scent, so they're all gonna smell like an anthropology store or you know, something like that.

Or cinnamon buns. So how would you then. Do you, is it sort of up to the client to do their own market research at that point and say like, does anybody value this? Would anybody pay? Like saying, does anybody value this? Would anybody pay more money for A BMW if it smelled like cinnamon buns? So, so then what?

Because novelty on its own doesn't create value.

Alex M H Smith: Uh, no. What novelty creates is sort of notional competitive advantage because if it's, if you are, if it's new, then you're the only one doing it. So you have complete ownership over that idea, whether it's good or bad, which is already a positive step forward. And then, yeah, the, the, the, the sentence that I.

Always revert to is, um, which sort of, you kind of like said it already, but like, you're, you are, whatever the thing is, or the move that you're gonna make is you're like, well, why would, why would somebody want this? Or under what circumstances would this be good for someone? Um, or what type of person would want this?

Um, uh, and this is the, the hunt for this is the hunt for value. Fundamentally, um, the only real difference between this and the way that people normally do things is that we don't start with value and then work our way back to how are we gonna create that value, which fundamentally, basically we're not really smart enough to do most of the time.

Instead, we start with the thing and then we explore. How can value be drawn from this and under what circumstances it is, is this thing valuable? And so if we take that, let's just take the BMW spelling of cinnamon buns kind of thing. Silly idea. Fine. Um, but then actually, well hold on a second. When we actually then.

Start, and I don't think it's very on brand for BMW, but nonetheless, when we start to pull the thread on that, okay, MW smelling ci cinnamon, uh, buns is a pretty stupid idea. But when we start to think under what circumstances might this be valuable, we can start to see that there is a territory here. Over like making a car more of a sensory experience, more of a, kind of like a hyper luxurious place to be.

You're obviously more in the Rolls Royce sort of territory there. This is actually the sort of thing that they might well do. It actually doesn't sound that stupid in that particular, um, in that particular world, you know, it might be. So you might pull the thread and you might go down a route of customizability.

What if people could choose their sort of own sense people? People apply sense to other things. People apply sense to, you know, washing up liquid and obviously perfume and like, um, bedsheets and whatever. So it's, um, so, so the point is, is that this stupid idea isn't that stupid when you start to twist it and broaden it and actually ask questions over, okay, could I see us create, could, could I see us finding new market space here and normally.

Normally the right idea is pretty self-evidently a good idea without you needing to sort of, without you needing to market research it. Maybe I should say that with a, with a, maybe I should say that carefully. 'cause I suppose I'm relying quite a lot on people's tastes there and some people think that some terrible ideas are good ideas.

Um, but, but, but, but at the same time. I don't think you can really market research it, because I don't think that you could have ever market researched your way to Crocs, for example. And Crocs is now a $5 billion business. So some things they just have to be done in order to prove that they work. We could never have just jaunted around and shown people a picture of Crocs and said, would you buy this shoe?

Like it just, it just wouldn't have worked. So you've gotta be. You gotta be careful of having a crap idea, but you've arguably got to be even more careful, um, of, of, of sort of just relying on an idea being, uh, innately researchable.

Jonathan Stark: Right.

Unique Value Proposition
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Jonathan Stark: It's wild because I feel like we sort of like the two of us, sort of are coming at the same thing from different sides of the mountain, like we're both. Climbing up to the top to get to the same place, but from, from a diff in a different way or in a different path. So the way, the way I think about, 'cause what you're basically saying is, and my translation in my own head is like, you have to innovate.

And at some point you can't, you can't have the market tell you, you know, you probably, probably couldn't have, couldn't have market researched due to an iPhone either. You know, it's like the, at a certain point. Or, or maybe most things perhaps, or most new things. So the way I think about it is, um. Maybe this is just because it's my, you know, the space I'm in, it's like solo consultants and freelancers and that kind of thing.

So they're selling services and the way that I think about it is I don't want, I don't want, I'll just use myself as an example. 'cause otherwise it'll be too confusing. I don't want people to tell me what they want. I don't wanna research and have people tell me, oh, um. We want you to start creating masterminds or we want you to start doing this specific thing, and we would buy it.

Because first of all, they probably wouldn't, I, I've, I've fallen into this trap before where they're like, you know what would be great for you to, to do? You should do this. And then I, you know, like, okay. And then I'd do it and no one buys it, so, right. So they're like, it seems like a good idea for someone, not me, not right now, but it'd be great if you, you should really have that.

So I, I don't think that people are great at. If you interview them or potential clients or something like that, I don't think they're great at telling, at articulating the solution that they would actually buy, but they're fantastic at articulating the things that are driving them crazy. So if you, so this is where the innovation comes in, in my mind.

So if you, if you are aware of, or stumble across like a really painful problem of some kind and. Then that's very interesting. Like I, my website originally was called expensive problem. You wanna find an expensive problem, which is a problem that someone would gladly write a big fat check to make, go away.

And once you see the problem, that's, to me, that's where the innovation starts, where you're like, okay. A bunch of people that I would like to serve have this same problem. They're not getting enough leads or they're not getting enough sales, or, uh, the morale of their team is in the garbage. There's terrible morale or, uh, their brand is, you know, not growing, whatever, whatever the problem is in this audience of people.

And then you can, you can come up with a hundred ways to. Sort of help them with that, that issue. Some things that are very surface level, some things that are very deep and get at the root cause. Uh, so I, so I totally agree with you that you, at a certain point, I like some feedback from the, from. I want to, I want to know that there's some demand, uh, but that doesn't prevent anyone from then doing something completely novel to serve that demand.

Does that align or misalign with what you're saying here?

Alex M H Smith: Well, it's in some ways it misaligns because, um, well obviously you hear that, that formulation quite a lot. You know, find a problem that people want solving. Solve it and then collect money kind of thing, which of course is completely rational. But the only problem is that the number of problems that people are looking to get solved is incredibly narrow, generally speaking, and they are all quote unquote solved.

Maybe not well, but solved to the best of people's ability a million times over. So, um, you. So, so often you feel like you are looking for something that you, that you just can't find now. So I mean, you, you said one example there, like, you know, oh yeah. The clients, you know, the problem that the client has is, I hear this one all the time, don't you?

Like, I just don't have enough leads. Right. So this is. It is a massive problem, but like your awareness that that problem exists doesn't actually really help you come up with something new to, uh, uh, new, new to solve it. So, um. So that's why I feel like we, we almost, you might take it as a given that the client, that the client's looking to solve that problem.

But if you start from, you know, you're not starting with a completely blank sheet of paper. You're obviously starting with whatever general type of product or service. You, you are in. If we start from the norms of that product or service and then we try to undermine them by doing something new and we try to sort of like, and we try to like change the frame of reference, then you are gonna come up with a new angle on that industry, which then use, you are gonna find easier to sell.

To people and, um, even if the, the ultimate thing that you are helping them with the ultimate sort of like a benefit of what you are. I mean, it's really complicated, but I'll try and get this, I'll try and make this clear like. Like there's, there's a distinction. Remember how I said like A BMW gets for you from point A to point B, there is a notional benefit of, um, any product, category or service category, which is kind of fixed.

It's like there isn't much movement in it. And then there are, and, and then the value is the kind of like the extra thing on top that makes me choose this one, not that one. So, um. If I take my own case, like, you know, if I'm doing strategy stuff, like, you know, what is the client looking for? Like, oh, I dunno what direction to go next.

Oh, we want to grow the business. But it, it, it's all just like completely like generic stuff, which you can solve in a million different ways. Now, my. Oh, my kind of like unique value as it is, has actually got nothing to do with the problem that I solve for clients in terms of like, what does strategy do for them?

That's, I'm no different than anyone else. My u my unique value is obviously all about the kind of like the simplicity and the style and the, and the sort of like accessibility of the way that I talk about strategy. Now, if you think about it like. The way that I talk about strategy and like the simplicity of it, that is not, that doesn't really have anything to do with the end result of doing a piece of strategy work, which is ultimately generic, just in the same way that like the unique trappings of A BMW don't really have anything to do with the.

Gen the category generic job of what a car does. So these, what I'm saying is these client problems, the ones that you are likely to find people begging for, I need more leads, dah, dah, dah, dah. These are the category generic things that we just take it as red. You solve that your competitor solves that.

Everyone solves that. 'cause you can't actually even be in this category. Um. Without doing it. Where you are gonna get your leverage is by essentially finding a kind of a, sort of an additional second order. Thing to solve, which is sort of complimentary to that, but which takes the conversation in a different direction.

One thing that I sometimes say to people who are like consultants is that you, it's quite nice to sort of think about your pitch as a conversation change. So you know the conversation that. The generic conversation that someone would be, would be having in this industry. And so rather than saying, Hey, listen, you know, I know that you want new more leads and I can get you more leads, the, the, the frame of your conversation is a bit, rather than bragging about how you can get more leads, you almost like put it, you almost dismiss it and you say, listen, of course.

What are we talking about here? We're talking about getting more leads. Obviously I'm gonna do that and frankly, so are the other people that you're gonna speak to, uh, you're gonna speak to as well, but here's something that you haven't thought about and then you kind of, like, you, you, you sort of switch the script.

You, you flip the script and you talk about a different angle to solving, to solving that same problem. So again, this is why, this is why it is quite tricky, because like you, 'cause Yeah. Again, in this sort of whole value conversation. You really get knotted up between like, what is ownable value? And that's why I always say, what is the unique value?

Like getting the client leads can never, ever, ever, ever be unique value, right? So, um, uh. Uh, so, but people, they, when they try and answer this question, one of the common mistakes they make is that they just pick something which is actually just an expected form of value in that category. Um, uh, and then they say, this is what we're all about.

And I'm like, well, you're gonna get no leverage, are you? You know, like, again, if. Like, I mean even like using the examples we used before that we were being a bit flipped, but they were actually quite bad examples because like, okay, fine. So I dunno if a Louis Vuitton, if a Louis Vuitton handbag, you know, makes you feel like important or whatever the f whatever the feeling is, like you aren't really describing unique value of Louis Vuitton.

You're describing the unique value of an expensive luxury handbag. So you actually haven't gotten anywhere with that. At all. Um, the o you only get somewhere when you drill it down to this particular company or this particular consultant, them and them alone. What is their X factor that they're bringing to the table in addition to the fact that yes.

It has an oh 0.50 cent liter carrying capacity. Yes. It makes you feel, yes. It makes you feel important. Yes, it's high quality materials, all of this stuff, which just what a bloody luxury handbag is, but what else? Right?

Jonathan Stark: Right.

Alex M H Smith: That problem approach can't really do that, I guess.

Jonathan Stark: Yes, I agree. Um, I maybe I'm starting, I'm thinking of people starting in a different place where, where they want to create something that there's not even demand for. You know what I mean? Like, like it's not even that. It's like it's not, but no one cares, which is different than, it's not novel and no one cares.

Alex M H Smith: Which, oh yeah.

Jonathan Stark: It reminds me a little bit of, um, Domino's Pizza. What, what you were just saying about that sort of like special sauce of like, why is this luxury handbag different than that luxury handbag in a way that matters to the buyers? It's like Domino's Pizza, their guarantee is about, their guarantee is 30 minutes or lesser.

It's free. It's, it's not even a promise of the quality of the product. It's not, it's like they're not even trying to make the product better. Like they're, they're promising that you'll get it fast, not good. So it's. And they seem like they're doing pretty well. So it's just an example of exactly what you're saying where it's like, okay, we're pizza place, we make pizza.

People eat pizza. Everyone likes pizza, right? So it's like table stakes that you're gonna get something round with tomato sauce on it.

Understanding Differentiation in Business
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Jonathan Stark: Like you basically know what you're getting. So, and there they decided not to compete on the quality of the actual product, where like a lot of places would do that. And say, well, we have the best pizza.

It's like, well, how do I, that doesn't seem like a credible claim, but they can credibly claim that we'll get it there in 30 minutes or less. Or it's free, and then they've got a meaningful differentiator apparently because people seem to, you know, to the extent that that influences people's choice of pizza place.

Right. So it's, uh, so I, I totally agree.

The Importance of Unique Positioning
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Jonathan Stark: You know, the way I talk about this, and I know you don't like talking about positioning, but the way I talk about this is like, you know, in laser focused positioning statement, you are disciplined, which is kinda like the category you're in. I'm a lawyer or whatever.

Uh, who helps? Specific target market. Very, very specific target market. This is consulting. Uh, I'm a discipline who helps target market with expensive problem, unlike my competitors' unique difference. So that's where you would bring in the special side. And I wouldn't say that's not an elevator pitch, that's just a sort of a, a, a way to think about your own business strategy as a consultant.

Consulting Strategies and Unique Differences
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Jonathan Stark: That unique difference piece. It, it feels to me a lot like what you're talking about here. So like the unique difference needs to be something that is. Meaningful to your ideal buyers. And another thing I talk about that you basically also just said in a different way is like, you can't just be one of many.

You have to be the one and only, not the best, the only. So what, you know, finding that space. In, you know, 20, 25 after a hundred, 200, 300 years of industrial revolution, uh, revolution and problem solving and globalization. It's like all the obvious things have been solved. Like people, like you said, there's, you know, probably a.

A hundred thousand consultants who are like, or business coaches that are like, you need more leads. I can get you more leads. It's like, okay, great. A thousand people are promising to get me more leads. How are you different in a way that I care about and.

Examples of Effective Differentiation
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Jonathan Stark: You know, it's like for people listening, um, the, the hard goods like the BMW and the the Louis Vuitton bag, those, you know, examples might not be landing so well because we're like, we sell something so intangible and it's, it, I can hardly think of a situation where people would hire a consultant because of the way it makes them feel like, I suppose there's a luxury consultant who is like.

The most expensive or

Alex M H Smith: I mean, with celebrity consultants, I think they definitely would, you know, if it was Simon Sinek or something like that. But, um.

Jonathan Stark: that's true. Okay. Yep.

Alex M H Smith: Uh, but look, I mean, I, I, I agree with everything that you say and I think the one important thing to raise here, 'cause I can already see where people would, would get this wrong, is that it can be quite tempting to think of this like, um, this, this point of difference that you have.

Even that term point of difference already has this issue with it as being a kind of like, uh. Sort of like a little quirk or USP inside what, inside what you do. But your Domino's Pizza example was an extremely good example because, um. To be qual, to qualify as a strategy, it has to be the overarching idea of the business.

Like I said before, the thing that the business fundamentally does in a way that it affects everything else. So if Domino's is all about speed, that means that every single part of that business, including, you know, the composition of their recipes or whatever is subservient to. The speed of the delivery of the people, which is exactly what Dominoes did.

And it worked and it worked really, really well. Now, in the world of like a, um, uh, in the world of a consultant, like it is, uh, it is the same thing.

The Role of Specialization in Strategy
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Alex M H Smith: You have to start in, just like everybody out there has to do, um, you have to start in a well understood, kind of like category of consultant, because otherwise it's just too difficult to generate like, um, interest or understanding in what you're doing. And then, uh, it isn't like saying, you know, okay, I'm a leadership consultant. Um. Uh, and, uh, I'm a leadership consultant. Um, but I, I don't know, but my, uh, I don't know, like was was a sort of random sort of like little kind of faux differentiation point, uh, that, uh, that someone would have. But I, like, I'm the barefoot leadership, uh, consultant and, and, and I'm, and I'm, and I'm, and I'm sort of like super chilled out and whatever.

And this is like, like it doesn't actually really change what. That what you do for the client. Like I'll to give an example of like someone who I did work with a little bit who was a leadership consultant, hence me using this example like what she did. And so this is a good example of an actual like strategic, um, move for someone like that.

Is that she sort of saw that like in the world of leadership consulting, you have like two sort of different speeds. You kind of have the ge the more general like help people to up their leadership game and to become better leaders, dah, dah, dah, dah, dah. Which is a kind of a more day-to-day the, the broader part of the market.

There's also a subset of the market, which is more like kind of remedial leadership. Coaching and sort of, um, almost like emergency leadership coaching where basically if a leader is completely dropping the ball in an organization, would, they don't wanna fire that person. 'cause it could cost them a huge amount of money.

They want to try and make it work. And so they need to sort of like quickly, it's like a company turnaround, but for an individual leader, like a sort of leader turnaround. And so, mm-hmm. She, uh, so she was gonna make her whole thing and did make her whole thing about this kind of like, about these sort of like this sort of break glass in case of emergency with sort of problems. Problematic leaders, right? So it's not about just like leveling up your team or something. It's like, Hey, listen, if you have an executive where ultimately like they're not performing, things aren't working, and you're like, shit, what are we gonna do? That's when she comes in. So you see how like that is a very good example of a, um, of a kind of particular angle.

Um, which is reasonably ownable in that particular space. So it's still within the general concept, concept of leadership coaching, but it's an entire company. I was sort of one person, company, whatever, but sort of entire company proposal, which then affects everything, uh, everything that they do and is gonna be something that's meaningfully different.

To, uh, to the client. So, yeah, I mean, you can see why people get this stuff wrong. 'cause there are just so many, there are so many like traps that you can fall, that you can fall into. Um. It's, uh, uh, it, uh, it's a minefield, which why you've always got to just pull yourself back to the first principle of like, what is the, what is the fundamental thing that this business does above all else?

And that thing needs to be something unique and fresh. I think if you adhere to that, then the rest of it can probably just about work itself out.

Jonathan Stark: Yeah, I, I'd go a step farther and I think, I think I heard Rory Solo, Sutherland say this the first time. His point is basically like you have to decide to be mediocre at all the other things. He has an example of a restaurant where, uh, they went to all these five, you know, his whole team, this restaurateur and his whole team went to all these five star restaurants or whatever it is, three star Michelin restaurants, and they, and of course it was great.

Of course they were all great, and he was like, okay, what about the experience that any of these kind of stunk. Somebody was like, um, the beer choices were terrible and the coffee was mediocre. And so he said, that's what we're gonna do. We're gonna make, we're gonna be the, the best restaurant in the uk, uh, that we're gonna have a for beer, like, like for beer snobs who want to go to a five star restaurant?

We're gonna be the one. And, and they basically were like, we're not gonna. We're not gonna be wine snobs. I don't even know if they sell wine, they probably sell it. But it was just like, you know, the idea of like, we're gonna be different in this one particular way. It will matter to beer snobs. And, you know, as evidently it was successful for them.

But the, the, the key point is like, it's like Domino's can't, isn't, it doesn't need to deploy resources to make their pizza better. They need to make sure it gets there fast. I think it, it would be a mistake to think I'm gonna be great at everything, but I'm gonna specialize in this one thing. Being great at the one thing, the executive turnaround or whatever.

It's gonna force you to kind of be mediocre at a lot of other stuff.

Embracing Weaknesses for Strategic Advantage
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Alex M H Smith: Exactly that is the, this is the fundamental thing where like, you know, you people don't realize that if you choose to suck at some certain things, it gives you a huge amount of flexibility to do other things that are incompatible with those things that you are sucking at. So, so, uh, so even like, you know, if you take, you.

You know what I do? Like if you compare me to like the platonic ideal of a strategy consultant, right? There are certain things that I have basically just put in the bin, right? So like, um, so for example, like, uh, research in my work version of strategy more or less goes in the bin. That isn't because research isn't important or useful, but like, I'm trying to, like, I'm trying to visualize.

What does strategy look like without spending thousands on research and, uh, analysis, rigor? It kind of goes in the bin. It goes in the bin because like if you create too much complexity and too many hoops for people to jump through to do the strategic work, what happens? They just don't do anything at.

All. Whereas if you lay out a kind of more streamlined, sort of like, um, rough and ready version of strategy and they actually do it well, you are gonna achieve more by doing a rough and ready version of strategy than not doing the perfect version of strategy. So you see how like I have to put these very important things in the bin in order to, in order to then create the whole sort of no bullshit strategy, school of thought.

I can't create it. By being good at everything, right? And so like it, everything, ultimately the end of the day is always gonna come down to you looking at your category, looking at the norms of your category, looking at what your competitors value, and saying which of these things am I prepared to put in the bin?

And. Of course, what then might the benefits of that be? And the beauty part is, is that you're probably already doing this, but not on purpose, right? Because everybody, everybody's a bit rubbish at something. And what about if you just like owned it, right? What about if you just lent into what you're rubbish at and then explored the hidden benefits of that weakness?

And every, every single weakness on the planet pretty much has got a flip side

Jonathan Stark: Some flip side. Yep. Yeah, that's great. Big fan of that.

Balancing Specialization and Market Reach
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Jonathan Stark: So, uh, as we wrap up here, do you think the example you just used with the, the executive turnaround. Uh, is basically a specialization. We're, what we're just talking about here is like picking one thing for consultants, picking one thing to get really good at and being fine with all the other stuff that you're not good at, and not trying to be great at everything.

So do you think that ultimately this, uh, value creation in this, you know, point in time at this point in time is essentially a specialization exercise or is that just one for

Alex M H Smith: Dangerous, dangerous, super, super dangerous. I mean, in, in some, in some senses, the answer is yes. In that isn't all strategy a form of specialization as in like choosing, we are going to like be about X, so therefore whatever we, whatever X is, is the thing that we sort of specialize in. So in some senses the answer is yes, but the problem is, is that like.

The Pitfalls of Over-Niching
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Alex M H Smith: It's very, very similar to the whole niching down thing, which I'm, which I'm very against because people interpret this. Um. It basically just like people unavoidably basically interpret it as, oh, right. So I need to just become really, really small and just do something that has got like the tiniest addressable market in the world until it's so specific that I'm literally the only person in the world who does that.

Like one particular kind of, uh, who does that one particular thing now, the, the net. Effect of this, this can work, this kind of thinking. But I think in general, the net effect of it is that people just, number one, they trim their potential market down to such a small size that um, uh. That, uh, that they kind of, they do damage to themselves.

And then secondly, they also make a massive error, which is that they sort of think, you know, if I do website design and I specialize, like, oh, website design for like dentists or something like that, um, you've got to ask the question like, is it actually. Is that actually good for a dentist to hire a dentist specialist?

Oftentimes the answer is no. Like, you know, like oftentimes specialization actually makes your, what you are offering look shittier than the more generic option. Like if I was doing an ad campaign. For basic arts. Would I rather get Wyden and Kennedy to do that or get like some advertising for solo consultants to do that?

Obviously, I think Wyden and Kennedy would be better. I couldn't afford them, but like, it would be like the, the, the, the niching. Doesn't necessarily actually create new value for the customer. The only reason you are niching is because you are basically running away from half of the market. It's almost like a cowardly move.

And so the specialism point, it has that same, it has that same issue with it. So I think that like, uh, less than niching, but it's still, but it still has a bit of a, a whiff of that. So I think that you need to think about it in a way whereby, what I like to think is that like whatever you are doing.

Whatever your company's all about. It needs to be applicable to lots of different types of customers in lots of different scenarios. So, um, like, let's just take that leadership turnaround example. So it is a spec, it's a special, it is a, it's a specialization in a, in a kind of. Situation that might occur, but that situation occurs extremely broadly.

Is it corporate? Is it smaller businesses? Is it like women? Is it, uh, uh, is it men? Are these people very, very senior? Are these people, uh, are these people more, more junior? You can chop this up. So then there's optionality. For the consultant of lots of places they can go. In my case, like at the moment, I'm literally working with like, uh, you know, uh, a company that has got a, God, I don't know, like 40 k turnover, and a company that's got a 40 billion.

Turnover. Where is my niching? Right? There is no niching because I am about a certain school of strategy, which you can apply to corporates, you can apply to SMEs, which you can also apply to consultants, which you can also teach to other strategy professionals, blah, blah, blah, blah. Again, I've got, I've got optionality.

I know what the core value is I'm offering, and then I ask the second question, right? Who could this help? Who would be interested in this? Boom, boom, boom, boom. I've got all these different like options, just like how Ikea, we all know what IKEA does. Cheap Designer furniture, boom. They own that. But you've got students, you've got people with tiny Flats who need the storage solutions.

You've got people who've bought a new house and they're like trying to like what? They're trying to do, the whole house, um, et uh, et cetera, et cetera, et cetera. So like, is IKEA a specialized company? The answer is yes, but. That doesn't mean that they are a company with a ridiculously laser targeted scenario beyond which they can't roam and play, and I just have a bit of a problem with that.

There are exceptions, a hundred percent, but generally I have a bit of a problem with people going just like, you know, super razor focused, laser focused, and thinking that it's gonna solve all their problem.

Jonathan Stark: The, the thing, the thing that, uh, I think gets lost in the niching or the specialization thing is, uh, again, this is for this audience. I'm not saying this is. Broadly universal. Um, like if you make flashlights or something like, you know, you're not gonna make flashlights for Dennis, that'd be ridiculous. Or maybe, I don't know, maybe that's not ridiculous.

Maybe it's not.

Alex M H Smith: Yeah.

Jonathan Stark: So, uh, but with the, the people I work with are so. So generic in two ways. They're totally generic in their skills. I, I'm a full stack web developer. I've, you know, I can do CTL, I can manage people, I can do, I can do everything. They basically think like an employee and, uh, and like their, their marketing is kind of like a resume. they'll do it for any, they'll do it for anyone. So they're just this complete. Just one of many web developers or react developers or, or even landscape architects or mechanical engineers. But these solo professionals, um, are so skills oriented and they, they like learning new skills. They have this, they're general in, in two dimensions, who they help or, or what problem they, so, so basically who they help and what problem they solve is kind of the same thing to me.

So it doesn't need to be like, who they help, doesn't need to be a vertical like dentists. It could be, um, executives who are, uh, you know. Potentially gonna get fired or leaders of any kind. Like your, your spec, your, your target market doesn't have to be a vertical, it could be a psychographic, like skeptics or Democrats or

Alex M H Smith: But you would agree that a lot of the time people lazily just like revert to the vertical thinking because that

Jonathan Stark: That is a problem. Yes. That is a

Alex M H Smith: mind way that people

Jonathan Stark: That is the top of mind thing. Yes. And that's, it is lazy. And, and you're right, that is risky, uh, because it almost never works. It's too obvious. It's, but something more like a psychographic is much better.

Alex M H Smith: Yeah. And, and, and, and, and there. I completely agree with you. I actually have a question for you. Um, uh, if we've got a couple more minutes, because I'd, I'd really genuinely curious about this. 'cause obviously you know more about consultants than I do. Um, would you.

Rooting in Recognizable Categories
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Alex M H Smith: I work, I work on the principle that like everybody needs to root themselves in a recognizable category of service, which their customers would plausibly be shopping for.

And the, so like, you know, like web developer, like, um, copywriter, brand person, whatever. Um. Then after you've like established that general place, then you can play ball. Now, if you were to go, if you were to just only think in terms of problems that you're solving and you sort of like you, you and you, you kind of throw the category out of the window and you just say like, right, this particular thing that can come up in such and such a type of company.

I deal with that now. Without actually rooting yourself in a particular thing. And everybody, you know, they could be at a push rooted in something. Nobody's like doing something that's completely unprecedented, but, but people will sort of like sometimes resist that because they'll be like, you know, because they find it to be somehow reductive.

Now, do you, would you agree with

Jonathan Stark: or the person who's positioning themselves,

Alex M H Smith: who's positioning themselves? They might think it's reductive to say, oh, at the end of the day you're a web developer or whatever. Um. Would you agree with me or or disagree that, um, if people just go pure problem without rooting themselves in something that customers are already shopping for and understand, they're creating hard work for themselves?

Jonathan Stark: I totally agree. Yeah. And that's in the laser focused position statement. That's the, the discipline at the beginning. I'm a lawyer.

Alex M H Smith: exactly. Yeah. You did have that, didn't you? Yeah. Yeah.

Jonathan Stark: Yep.

Alex M H Smith: Oh, I, I, I, I'm, I'm glad that we agree on that. 'cause Yeah. I was like, that's what I believe, but I, I wasn't a hundred percent confident of it.

Jonathan Stark: Yeah, it's hard to, because, and you said it perfectly, you're just creating a lot of work for yourself because people want, they want to understand quickly. It's like, it's like that, a really common way to. To do like a, a really fast, basic position is like, I'm like X, but Y. So like, I'm like Uber, but for dogs.

And you, you immediately like know what Uber is and you know what dogs are and maybe you can imagine you need to get your dogs transported around. But it, it's like, yes. It's, it's it, you're, uh, if you don't do that, you are. You, you can free ride on somebody who already did, you know, billions of dollars of marketing by saying, I'm in this category.

It also reminds me of, um, writing. If you're writing fiction, especially, uh, or movie or whatever, uh, newbies will want to. Do like this genre defying thing. They don't want to be, I don't want to be just a thriller writer or, or a sci-fi, you know, I don't wanna be pigeonholed as a, as a horror writer. It's like you have to, you have to do that because people are looking there.

They 'cause they like a genre. They don't like thrillers, they don't like horror, they do love, romance, whatever. And then, and then inside of that, like. There are certain things you have to do in a thriller or it's not a thriller. So it's the same in music. I went to music school. It's the same with music. If you want to sound like you're doing jazz, if you wanna be a jazz musician, there are certain things you have to do or it's not gonna sound like jazz.

So there, and, and the teachers back then they would say, um, there are no rules for music, but there are style practices. It's this sort of similar thing, like a human wants to sort of orient you in a space very quickly. Like what is this solution that you're potentially bringing to the table? What, what flavor is it?

Like, is this a legal thing or is this a marketing thing or, you know, so yeah, I think it's super important. And if you, if you don't do that, you're just giving up a lot of free marketing.

Alex M H Smith: I, uh, yeah, a hundred percent. Very, uh, very well said. And you know, in my own case, it's always just, it's a funny exception. It's like the exception that proves the rule. And so I always say to people, you gotta be sort of a bit careful. Copying my scenario because, because business strategy, like I said, uh, at the outset is not something that people have an intuitive understanding.

If, if, if you say, someone says, what do you do? And you say, oh, I'm a lawyer, or whatever, then people get the gist when I say, oh, like, you know, strategy, like, nobody knows what I mean by that. And there's always a follow up question of what do you mean by strategy and blah, blah, blah. So like, I am. Against that rule.

But then the only way that I've managed to overcome it is that obviously if you get enough of an audience, then you can brute for, then you can actually educate the market and you can brute force your way through. But like that, if you don't have that as like for like, for like a decade, I was doing this without that, basically, you know, you're getting like.

Six or seven leads a year in your conversion. Damn well, better be good. You know, so it, it's not a good way to be.

Jonathan Stark: Agreed.

Conclusion and Resources
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Jonathan Stark: Well, I know we gotta wrap up, so let's leave it there. But this has been super helpful. Thanks so much for joining me again.

Alex M H Smith: No cheers, mate. It was fun.

Jonathan Stark: Where could people go to find out more about what you're doing and maybe sign up for that excellent mailing list?

Alex M H Smith: Oh, yes. Um, I made a little, um, welcome page for podcast people, um, with a whole bunch of resources, free resources and stuff on there at, um, basic arts, a rts.org. Slash newsletter where, no, sorry. Yes, you, I was the wrong one. You can go there too and sign up for the newsletter. No basic arts org slash welcome.

There's, uh, there's, there's my book there, there's the YouTube, uh, channel. There's some free downloads. So yeah, you can, uh, have at it.

Jonathan Stark: Excellent. Yeah, the videos are great too. Cool. All right, well, thanks so much.

Alex M H Smith: Cheers. Bye.

Jonathan Stark: All right, folks. That's it for this week. I'm Jonathan Stark, and I hope you join me again next time for Ditching Hourly. Bye.