Objections to Specialization

In part two of their specialization coversation, David and Blair address six arguments they have heard from certain clients who toyed with the idea of broader positioning for their firms.

Transcript

David C. Baker: Blair, this is part two of our specialization conversation and you are leading us down the path of evil again. I'm going to prompt you and ask you about all the great reasons not to specialize. You're going to do your best to convince me. You feel up to that today?

Blair Enns: Yes. I mean, normally I'd be on the other side of this argument, but because you're my opponent, I'll take whatever side you're not taking. This is like debate in high school. Isn't it?

David: There's six of these reasons that we thought we would get to this last time we talked about specialization, but it felt like we needed to pull these into a separate episode because they're fun to talk about. You and I both contributed to these reasons, and these are the things that you and I have heard in real life.

These are the reasons that come to people's minds when they toy with the idea of a narrower positioning but are the nagging things that rest in the back of their minds. They're still struggling with them, even though we're further along this path than we ever have been. There are more well-positioned firms as a percentage than there ever have been.

Blair: Yes, I agree, but the remaining arguments against specialization, these seem to be the six remaining arguments. I'll just say right now, there is a healthy amount of validity in each of these arguments.

David: You really are taking that side. Aren't you?

Blair: Yes, let's do this.

David: I am going to slay you by the end of this. This is going to be so much fun. Okay, the first reason that you or I, Mike here would be this, "We don't want to be pigeonholed." I know what the phrase means pigeonholed, but what does somebody mean when they say that?

Blair: I think we're getting old because that sounds like something my grandfather would say, but it's-- There used to be a comment back in our day, David, they used to come and say, "I don't want to be pigeonholed." I would hear that argument a lot, but pigeonhole, I don't want to be known for just doing one thing, but you don't really hear that argument anymore. It's mostly gone away.

We appreciate as a society and a profession that internet search and Google in particular has driven the pace of specialization like nothing before it. I used to hear this argument all the time, "I don't want to be pigeonholed." Then my reply was, "The pigeonholes are stuffed with cash." What it means is I don't want to be known for one thing.

You don't hear that very often anymore because I think we all understand the merits of it. Now, the times when you do hear it and be interested to hear if you hear it, but I think the times you do hear it's a small firm, the principal is a creative person and they really self-identify as this creative person. They really just want to build a business, allows to be all things to all people.

David: They use the word boutique a lot. I’m writing an article on creative bullshit bingo and boutique shows up in those conversations as well. Boutique means really special, but small. The odd thing too, if you don't mind me adding a point here is that there's an inverse relationship between the importance of being specialized in the size of the firm because it's a risky choice for a client to use a small firm in the first place.

What alleviates some of that concern from the client is, "Oh, this firm really knows what they're doing in this particular thing that I'm asking of them." It doesn't really work in the marketplace to say that we're a small boutique, a small firm, and we don't want to be pigeonholed. That's what you're saying, right?

Blair: Yes. 

David: Okay. Let's go to the second one then, some of these are going to be a little bit juicier than the others. There are many successful firms who aren't specialized and by God, that is true.

Blair: It is true. The argument is sometimes framed as, "Well, we're a generalist and we're doing fine." There are firms out there that are able to pull this off, but it begs the question, how are they doing this? I want to put that question to you, of the firms, the generalists that are succeeding, how are they doing it? How are they being the exception to the rule?

David: They're just really arrogant, this is not the right word. They're proud. There's something about---They just have this confidence that they carry with them.

Blair: The “je ne sais quoi.”

David: Yes, exactly. It just carries over into their fit for the job and what they're going to charge for it. This is somebody that's usually, pretty well-connected either with the client, target industry, or with the industry that they come from like their peers, and so on. You see, there's examples everywhere. Sometimes they're larger firms, sometimes they're smaller firms and I can't ever argue with this because it's absolutely true. If somebody doesn't have that innate confidence to be charging what they should and to be managing the new business flow, then it just doesn't work. The people that often claim this, usually aren't those kinds of people. The people who claim this are the ones who admire other firms. Those other firms that are succeeding without specialization, they're not in the admiration business. They don't look around.

Blair: That's a great way to put it. The words that I use are they're succeeding based on the cult of personality or the strength of the individual at the helm of the firm. That person is just, as you've described them, they're confident, they're outgoing, they're connected. They're a natural salesperson. This gives light to a misunderstanding of positioning. You sometimes think if you listen to people like you and me long enough, that the goal is to position as narrow as possible. Your goal is really to position as broadly as practical, and for many firms, that means narrowing their position.

If you are that type of person, if you're well-connected, if you're a great salesperson, if you have a high degree of confidence, you feel you can sell anything to anybody, and you've proven it over time, you don't really have to listen to our advice around specializing. You might be exposing yourself to some potential negative impacts in certain situations, but it's always a series of trade-offs you're gaining in other ways.

As you point out, David, those firm owners who aren't built like the person that we've just described, who are in the admiration business and are looking at those examples. If they could pull it off, they would. I would say, go ahead and try. Once you prove that you can't pull off being a successful generalist, then come on back, start listening to 2Bobs again and go ahead and narrow to a more practical position.

We often talk about or at least think about, what are the variables that affect how narrow you should focus. It's really a function of competition density. How big is the market? How many players are in that market? It's also a function of how effective you are as a salesperson. The worse you are at this, or the less of this dominant, I wouldn't say rock star personality, but the less you are of this type of person that we're talking about, the greater you need to specialize.

David: Where that pressure point comes up for me often anyway, is let's say that a firm is like that. They embrace it. They love it and they have seen some significant success over time, but for some reason, that starts to slow down. It becomes more of a trickle of opportunities, rather than this flood of opportunities. The problem I have at that point is, I don't know how to create a lead generation plan for a firm like that.

As long as the work opportunities come along, then that's not usually a battle I want to fight, because it's a painful process to reposition. Once you are repositioned, it's not painful. Everything gets better slowly. I'm not going to pick that fight, because don't know how to build a lead generation plan around a generalist firm.

Blair: That's just one reason why you wouldn't pick that fight, why you wouldn't go with a broad generalist value proposition. Another is, when you look at economic downturns, and we appear to be right at the beginning of a very significant one, there are two types of firms that get whacked. The generalists and then specialists who've picked particularly vulnerable specialisms. I guess we'll talk about that too.

Just think back to 2008, 2009, the last economic downturn that we went through, just over 10 years ago. I remember watching in real-time as these famous generalist design firms that had been around for decades, two, three, sometimes four decades, were brand-name famous, at least in the design community. They looked like they'd be there forever. A whole bunch of them went out of business. I can't think of names right now, I'm not going to name them. A whole bunch of them just went out of business. They got wiped. There's just something about the generalist. Why would you pay a generalist, when in tough economic times, you can go get a specialist for probably the same money?

David: I'm just laughing, thinking to myself, sitting down in front of a Google window, and typing “The best non-specialists firm I can find,” or the results that they going to turn to me.

[laughter]

Yes. Crazy. Let's do the next one then. The first one was I don't want to be pigeonholed. Second one was, I know a lot of successful firms who are not specialized. The third one is also really interesting. This one I found that it really confuses a lot of people, and it's that there are large firms that somebody admires and the bulk of those are not specialized. Why this becomes interesting to the prospect that throws this at us is that they really want to grow. They are looking ahead to this other many other firms that are larger and they're not specialized, and they don't see why they would have to be specialized, since these other firms who are, by definition, large, are not specialized. That's the third one.

Blair: Yes, and that's right. The larger you are, as you said, there's this inverse correlation, the larger you are, the less narrow you're likely to be specialized, generally speaking. I look at those large firms, think of the global ad agencies. You say they're not specialized. Yes, they are there, they're specialized as global ad agencies.

David: Right. That's their specialization, handling a big global account.

Blair: Yes. The mistake that global ad agencies make, or the dilemma that they find themselves in, might be a better way to put it, you build out this global network to service global accounts and then you find an office in wherever, Romania, London, wherever it is. The office that's got excess capacity. Then they start chasing all of these smaller local accounts, which I've worked with a few of these.

It begs the question, why are you doing this? I know revenue is important in this moment, but you're devaluing the brand by chasing some of these local accounts. Fundamentally, that is the specialization, is the size, their ability to handle these large accounts or across nations or across cultures and even languages. That's a specialism. When I was growing up in advertising, I worked for some independent ad agencies. We would look at the Ogilvy's of the world. I'm sure the owners had dreams of being the next David Ogilvy because he wasn't too far removed.

We weren't too far removed in time, like a couple of two or three, maybe four decades I don't know, from the time when David Ogilvy built essentially what I think was the first global ad agency network. He did on the back of one client, Shell. He had Shell as a client, and the client asked him to open offices in various parts of the world and then started servicing other clients that benefited from having offices around the world.

There was a time when that was a valid strategy. It still is a valid strategy. It's a little bit harder to pull off, but it's really hard to do that as an ad agency. I think we appreciate something I've said before, a friend of mine said to me 15 or 20 years ago, and that is, "The world is now too small to segment geographically." You pick your niche and you appreciate that you're going to travel far and wide, even as a small firm. This idea that you're going to build these global offices around the world, it's just not as common or as relevant anymore.

David: Right. Yes, I agree with everything you just said there. In my practice, I've found that the firm that can pull off the full-service claim has to be at least 45, 50, 55 people, and that becomes the first point of differentiation. It doesn't even have to be stated sometimes, but if you really talked with the prospect, they would say, "We're only considering firms this big because we need this sort of a footprint." But then they always come right back at you with a second question. They want to establish category experiences, how they phrase it at that point. That's why even the massive accounting firms have different practice areas. The massive law firms have different practice areas.

The holding companies may have 250 firms in it, and they can assemble all those firms to put together exactly what the client needs. That's the third one. There are no large firms were specialized, and we think that maybe that gives us a license to not be specialized when we're not that large. The fourth one, I can't wait to see what you have to say about this one. This is, "My employees will get bored," or stated otherwise, "I won't be able to attract the best creative talent." This is sometimes coming from somebody who is going to socialize, maybe even democratize the decision a little bit. When people say this, they really do mean it. What's your response typically to them?

Blair: I think there's some validity to this one, I'm probably more open to this one than you are. I don't think the concern, as it's stated by the principal, is ever as large as they think it is. In fact, 30 minutes before we started recording, I was in a conversation with a client. We were talking about just this challenge. I said about the idea that, "Okay, we've got these 10 really big clients. Maybe we should be thinking about these 10 smaller clients where we're allowed to flex their creative muscles and give our people something really interesting to work on."

I granted him that, "Yes, I think that's a valid way to think about it as long as the margin is there and the big ones." Then right after that, he basically corrected himself and he said, "I don't think that it's the issue that it used to be." He said, "I just know so many designers who are now going to work in-house and they're in-house working on one thing, one product all the time."

His point is he repeated something that we've been talking about in the creative professions for years, the idea that if you're overly-specialized, your people will get bored. Then he right away said, "I don't think it is the way that it used to be."

Blair: I want to point out here that in the episode that we recorded previous to this one, we were talking about the book range. I pulled out the Adam Smith idea that you could raise the production of a pin factory by two orders of magnitude if you specialized the labor. What most people don't know is Smith also talked about the mental effects of doing specialized work. He warned against what he called mental mutilation. The idea that people would go crazy because they're not intellectually stimulated doing the same job over and over again.

I think that's entirely valid when it comes to cutting, shaping, shining pins. I think he recommended that you do one job and then you keep changing jobs after a little while. I think when we're imagining getting bored, we are imagining this mental mutilation that can be real. I think it's less likely to be real in knowledge work or creative work, but I do think it's there, I think there are some people, some really broadly creative people who just wouldn't go do specialized work. I just think it's a lot less than it used to be and it's never as pronounced a problem as the principal thinks it's going to be.

David: I'm really glad this is on the list because where we rank this, I'm not sure, but in terms of how a principal who's thinking about a decision, how they rank it, this is often one of the first things they think about and it's motivated by the right things. There's a social contract they have with their team and they don't want to violate that. I've seen a little bit of distinction here in the age of the average principal because the age of the average team member, typically follows the same delta as the principal gets older.

If the principal is 45 and let's say that the team has an average age of 30 or something, then this might present as a more serious issue than it would be five years later, because as we talked in that previous episode, when people get out of school and start working at one of these firms, they really are still in the exploration stage and that's healthy, that's the way it should be. This is less of an issue when somebody is thinking about making a change later in the history of the firm, I found.

Blair: That's a really important point. The idea is that more specialized firm, a larger specialized firm, just think of, you've been in the market for a while, you're established, you've got a track record, you're more readily able to pay for more expensive, more specialized talent. Generalist firms tend to be populated by younger people because generalists firms generally do not have the margin to pay for specialized talent, and as we talked about last time, when you're early in your career you don't want to specialize, you want to try a whole bunch of things.

It's actually a great career move at the beginning of a career for a designer or other professional to spend some time in a generalist firm. It's often a sweatshop-type environment because the margins aren't there and the nature of the work and the nature of the clients you attract, but that's a great place to start. Then after the principles been around a while, you start to see the merits of specializing you start to age, you start to hire people who are older who are more interested in specializing themselves, so it all seems to come together with a little bit of time.

David: This next one, the fifth one, this is also really valid. It's hard to argue against this one, and we can all think of examples of it. The fifth one goes like this, "If I specialize in something more narrow, what happens if there's a downturn in that particular industry like we have all of our eggs in one basket." There's an assumption here, it's a valid one that this objection is coming around a vertical specialization, so a particular industry. We could think of, say, the oil and gas industry recently or back in the '80s, and so on.

Blair: Real estate marketing.

David: Yes, up and down all the time and in different parts of the country or entertainment recreation right now nobody's traveling, the travel industry. This is legitimate, but what's the right answer to this when you talk with somebody?

Blair: The right answer is, like you've said, there are a few susceptible verticals in particular, that are more susceptible to others when there's an economic downturn. We just named some of them, maybe luxury goods is another. If you're going to go into those verticals, you do so with your eyes wide open, knowing that you're going to want to, A, create the cash reserves, and B, make the ruthless decisions quickly when a downturn does hit. Then I would say, many of those specialized firms that I've worked with that have declared specialism in those verticals, they also keep kind of a generalist brand open so that they can do business under that generalist brand. Does that make sense?

David: Yes, that does make sense. There's a roof of this I can hear between the lines as you're talking and it's one that I also feel, and it's a little Darwinian, but the truth is that in a difficult downturn, it's not going to wipe out all the firms, it's going to wipe out the weakest firms. I think of the kid who's hanging on to the playground and it starts to spin faster and the weakest kids get thrown off. I always come up with these awful images. Yes.

Blair: I love your metaphors.

David: As long as you can run faster than the guy behind you, who's getting chased by the bear, you're going to be fine.

Blair: Yes, you don't have to overrun the bear.

David: I really do believe that. It sounds macabre, but I do believe that. There's always going to be 2 or 3 or 15 firms that are going to thrive in a downturn. In fact, they may even thrive at a higher degree during a downturn.

Blair: Who survives at a higher degree? Is the ones who have been through a downturn before. We've talked about this in the early COVID days and we're recording this in mid-July of 2020. If you've been through a downturn before and you are in a vulnerable niche, you probably have the cash reserves, because you don't want to go through what you went through before.

If it's your first one, you might be caught unawares, and it might be the end of the firm. It's not the end of you, but it might be the end of the firm. If you come back in the same vertical or another one that's just as vulnerable, you'll know better. You'll know to have more cash on hand and you'll note what ruthless decisions you need to make and how quickly you need to make them.

David: Yes, an example of that is a client of mine, and you know them as well. They're in the outdoor sports and recreation field, like a 50-person firm. They saw this coming and reacted very quickly. It was painful for the staff, obviously, but they're still, in my mind, one of the very top firms in this space. When that starts to come back, they'll come roaring back as well. They've learned from what's happened in the past. That's the fifth one. The last one, these are arguments against specialization, is this one, "We're hired because we don't bring baggage."

Essentially, they're building this argument on an exception to it. They've heard some clients say it or they've heard another firm say that they've heard a client say it. They've never heard it themselves and feel like they can build a whole practice on an exception. I do hear this more now than I've ever heard it in the past. What would you say to a client who says, "We don't want this, because," for instance, financial services, "We found that when we go work with financial services, they don't want to work with a firm that specializes in that?" That's their argument.

Blair: I think any firm that's been around long enough has been in that situation where they've been hired because they weren't bringing that baggage. There are some categories in particular, where the marketing in that category just seems to be so semi. Hospitals is one, real estate agents is another.

David: Insurance.

Blair: Insurance, swap out the logos, that's all the same. I think that idea is more relevant to some categories than others. I think I've heard you say this years ago, and I've stolen it from you without attribution so I give it back. The idea is okay, your value proposition is, hire us, we've never done this before. That's the value proposition you're taking to the market.

David: [chuckles] Now, let's transfer that to surgeons and tax attorneys.

[laughter]

Blair: Yes, put that on the front page of your website.

[laughter]

David: I also think maybe part of the answer, I'd like to think this is true, anyway. You'll keep me honest here, but I'd like to think that if you're one of the firms that specializes in some vertical, I would not want your work to look like it did. I want you to be breaking the norms consistently. People would be drawn to you. New clients would be drawn to you because of your understanding of a particular vertical, but the fact that you're always bringing something really new and interesting. For every ad on life insurance, it's not a picture of a father running down the beach with his daughter in hand. It's something different each time.

Blair: I think I've seen agencies try to position themselves against the run of the mill, more rote work that some firms produce. It would be kind of the anti-category. Was it Scott Stratten who wrote a book called Unmarketing?

David: Right.

Blair: I haven't read it, but it's a great title. We're the anti-agency, Unmarketing. There's an idea there. To pull off that kind of contrarian point of view, that's where it belongs. It belongs in your point of view. You're a specialized firm in healthcare and your contrarian point of view or perspective, and we've talked about that in multiple episodes, all your content, thought leadership should be framed by that perspective.

That's the perspective you put out into the world, which is, all hospital marketing looks the same. You would just bang that drum a million different ways. Then from that point of view, falls away of working. You [unintelligible 00:26:41] model for how you go about solving these problems for this market, in this case, hospitals without falling into the trap of all of the usual messages. Just riffing here, I would imagine that somebody was trying to take that point of view to the market would have a taxonomy of ridiculous hospital marketing messages. Right?

David: Right, yes.

Blair: We've got the teaching hospital, we're smarter, we've got the we care more, we've got the face for we believe more, et cetera. You could poke a lot of fun at the marketing by doing this taxonomy, giving them labels. Man, it's fodder for a whole bunch of great content. You're going to capture the attention of those marketers out there who are just fed up with the sameness in the category as you are. I think there's a better way to take that point of view to market rather than saying, you hire us, we've never done this before.

David: That's a great perspective. I'd never thought of that quite like that, but I love that or you could use your creativity in your humor as well. Let me list these six again. We don't want to be pigeon-holed. Second, there are many successful firms who aren't specialized. Why can't we be one of them? Third, we don't see any large firms who are specialized so why do we need to be one? Fourth, my employees will get bored. I won't be to attract the best creative talent. Fifth, what happens if there's a downturn and we have all our eggs in that industry? Then sixth, we're hired because we don't bring that baggage. Now I'm going to give you a grade. You are doing your best to convince me.

Blair: That was A+.

David: No, is there anything worse than an F? You've not convinced me. Actually, we're not trying to be that harsh, we're trying to be realistic about some of the natural fears that people have, and we're having a little bit of fun with it. I'm not as harsh about specialization as I used to be, maybe because I'm tired of fighting with people about it. If there's nothing really wrong, then I don't push this too much. To me, the biggest issue is, all right, you don't have enough opportunity and you want to lead generation plan. Now, explain to me how we're going to sell your current positioning. That's the one that I always fall down on.

Blair: Again, I think I've said this, there's some validity in most of them, but I think all of them, they serve as a rationale for a creative person whose strength is seeing around corners. Whose strength is solving the problem they haven't previously solved and who wants to build a business that allows them to play to their personal strength and ignore the marketplace reality that says, if you don't specialize, it's really hard to get hired.

David: Well, this has been very interesting. We've had a bunch of principals just furiously taking notes and wanting to use these arguments back on their team.

[laughter]

Blair: Hopefully, we've dismantled most of them. Again, some validity there, but there are ways to deal with the few implications. There are ways that are better than avoiding specializing at all. If you're succeeding without specializing, good luck with that and let us know how it goes. Man, that sounds really uncynical. We started the show by saying we both know, lots of firms that are broadly positioned and doing well, it seems they always have this moment though, where they realize there's a better way to do this.

David: Yes, and that moment is while they're listening to this podcast, they're in tears right now.

Blair: Because we are have such a profound effect on people's lives.

[laughter]

David: All right, I think we need to end right there.

Blair: All right, we should just pull the pin.

David: Thank you, Blair.

Blair: Thanks, David.