The Hyper-Specialization Strategy for Boutique Professional Service Firms in the Age of AI

The Hyper-Specialization Strategy for Boutique Professional Service Firms in the Age of AI

Hello, I’m Greg Alexander, and I welcome you to another edition of C54 Insights, where we delve into the latest trends and strategies for boutique professional service firms. Today, we’re going to talk about a critical shift in the professional services landscape driven by the mainstream adoption of artificial intelligence and how boutique firms can regain their competitive edge.

The Evolution of Professional Services in the Digital Age

Remember the pre-Google era when professional service firms thrived on local clientele and word-of-mouth referrals? Those days are long gone. The emergence of search engines marked a significant turning point. Suddenly, anyone, anywhere could find and compete with your firm. The geographical boundaries that once protected your local market no longer applied.

This shift forced professional services firms to adapt quickly. Those who recognized the importance of optimizing their online content for search engines gained a competitive advantage. The firms that embraced this digital transformation early on saw remarkable success compared to those who adopted a “wait and see” approach.

However, as time passed, search engines began prioritizing paid advertising over organic results. This shift favored larger firms with hefty advertising budgets, leaving boutique service firms struggling to compete. But the tide is turning once more, and small firms are poised to regain their competitive edge.

The AI Era Levels the Playing Field

Enter the era of large language models like ChatGPT. Unlike search engines, these AI models do not offer big firms the opportunity to outspend smaller ones. A simple prompt can produce results, giving boutique professional service firms a unique opportunity.

The playing field is level once again, and with the right strategy, small firms can easily be found by prospects. This strategy revolves around hyper-specialization.

The 4-Step Hyper-Specialization Strategy

I will now provide a 4 step strategy to show you how to do this. And I will use Collective 54 as the use case. The reason for using Collective 54 as the use case is you are reading the Collective 54 newsletter and are familiar with this use case.

Step 1: Specialize into a Category Begin by narrowing your focus. Instead of trying to be a generalist, define your service category. This is your starting point for differentiation.

For example, Collective 54 has specialized around the mastermind community category. There are ~400 firms in this category, out of the ~3 million B2B firms in the U.S. This makes Collective 54, a small service firm, easier to find. Prospects looking for a mastermind community are more likely to find us because of our decision to specialize in this manner.

Step 2: Specialize into an Industry Within your chosen category, delve deeper and specialize within specific industries. Understand the unique challenges, trends, and needs of these industries.

For example, Collective 54 has specialized around the professional services industry. This also makes Collective 54 easier to find. A prospect looking for a community for professional services firms is much more likely to find us because we intentionally selected an industry.

Step 3: Specialize into a Segment within that Industry Further narrow your focus by targeting specific segments within your chosen industry. Identify the most lucrative niches or underserved markets.

For example, Collective 54 has specialized around the “boutique” firm, which is defined as 10-250 billable employees. This makes finding Collective 54 easier to find. A prospect looking for a mastermind community for small boutique professional service firms will most likely find Collective 54. And we have not relied on luck. We got found because of the strategic decisions we made.

Step 4: Specialize into a Role within that Segment Finally, pinpoint a specific role or function within your chosen segment. Become the go-to expert in that area, offering tailored solutions and unmatched expertise.

For example, Collective 54 has specialized around the owners of boutique professional services firm. This is most often the founder, co-founder, CEO or managing partner. This makes it easier to find Collective 54. A prospect looking for a mastermind community for the founder of a boutique professional service firm is very likely to find Collective 54.

In fact, I would wager that Collective 54 is the only mastermind community that serves the founder of a boutique professional service firm. If not the only, certainly on a very short list. As a result, Collective 54, a small service firm like you, can be found, without having to spend advertising dollars.

By following these steps, you’ll create a hyper-specialization strategy that sets you apart from competitors. However, these four steps are not enough. Of course, you need to publish high quality content for this hyper-specialized audience. This should be books, blogs, newsletters, podcasts, videos, infographics, research reports, rankings, etc.

Large language models like ChatGPT will likely use your content when responding to prompts related to your specialized area, further establishing your authority. Large language models rely on this content to generate responses. If you are the firm providing the model the content, you will be discovered.

Join Collective 54 for In-Depth Insights

In conclusion, the need for specialization in professional services has never been more critical, especially with the rise of AI-driven solutions. Boutique firms now have a golden opportunity to shine in the digital landscape. By embracing the 4-step hyper-specialization strategy, you can regain the competitive edge you’ve been looking for.

If you’re eager to learn more about how small service firms are successfully implementing these strategies and navigating the evolving professional services landscape, I invite you to join Collective 54. Our mastermind community is filled with like-minded founders who are ready to share their experiences and help you thrive in this new era of professional services.

Don’t miss out on this opportunity to excel in the age of AI. Join Collective 54 today, and let’s pave the way to success together.

Episode 171 – Mastering the Hire: Securing the Ideal Sales Leader for Your Boutique Firm – Member Case by David Kendall

In this session, we delve into the art and science of hiring the perfect sales leader for boutique professional service firms. We discuss the unique challenges these firms face, the qualities that define a successful sales leader in this niche, and practical strategies to identify and attract top talent. Whether you’re in the early stages of building your sales team or looking to elevate your firm to the next level, join us for expert advice and real-world examples to guide you through the hiring process.

TRANSCRIPT

Greg Alexander: Hey, everybody. Welcome to the Pro Serve podcast brought to you by Collective 54, the first mastermind community for founders and leaders of boutique professional services firms. My name is Greg Alexander. I’ll be your host and on today’s episode, we’re gonna talk about hiring sales leadership in a boutique professional services firm. We’re gonna talk about two different hires. One hire is hiring somebody to build a program that doesn’t exist, think of like an architect. The other hire is to hire somebody who is gonna run a program that’s already been built. These are two very different hires, different profiles, different management structures, etc. Collective54 member with us is David Kendall, who has experience with both. David and I have recently been talking about this and I suggested to him that we make this conversation public because lots of people have the same data. So that’s why we are here today. With that, David, good to see you. Please introduce yourself and your firm to the community. 

David Kendall: Morning, Greg. David Kendall, the owner of Kai Partners. Our firm specializes in strategy and management advisory services primarily to the IT community. 

Greg Alexander: Okay, so, David, let’s start with what you and I discussed a couple of days ago. Let’s define these two terms. So, Sales Leader A is somebody who builds a program. Sales Leader B is somebody who runs the program. You’ve had experience with both, so if you would, provide your definition for each, and then maybe give us some commentary around your specific experience with the two. 

David Kendall: Yeah. I think that the challenge in our primary market, which is state government IT projects, I think of very large implementations for health and human services or EDD, DMV, things like that. It takes relationships to be built over time to sell your services. That takes some experience in delivery, some experience in the politics of it. You have to be aware of the legislation and policy that gets implemented. It’s what you would expect a really good sales leader to accomplish, right? Build your relationships, get out there, tell them the message, etc. Very different than the person I need on my leadership team to build the program. The program within our organization, or type B that you described. If I—hopefully I didn’t get those backwards—is the person who needs to actually set up a vision, identify the right people, define the process and procedures, and invest in the technology necessary to empower the whole thing so that vision can complement the great work of our service delivery group, our technology and operations group, our business services, etc. And those are definitely different personalities. 

Greg Alexander: Now, you were telling me that you have made the mistake of needing one and hiring the other, and vice versa. So tell us a little bit about that story so we can learn from it. 

David Kendall: I like to call it learning forward. The reality is that, you know, as a young company, all I could think about was I need somebody to sell our services, right? And so I looked at my background and the companies I had worked for and I went forward and hired some people who were good at selling within our market and they had been with reputable firms. They had built some relationships. The challenge was, you know, the first 90 days is such a dangerous point of hire for anybody, much less a leadership team member. How did I convince them to be invested in the company and the outcomes, etc.? You can do that through compensation, which I’m sure we’ll talk about at some point. But the reality is they have to want to participate and get people to have ownership takes time. That’s why that first 90 days is critical. So we hired initially somebody who was good at sales. They literally sat next to my business services director for the first two months and didn’t talk to them. Well, that’s not very successful in building a division within the organization. They really weren’t all that great at the marketplace either because they now had to carry the message of a small organization where before they had worked for a large organization that already had a brand and a set of reputational experiences that they could depend on. So that one didn’t work out as well as I had hoped. 

Greg Alexander: Yeah. And then in this attempt to hire this sales leader who’s gonna own this division within your company, how many times have you tried to make this hire, and what have you learned through that process? 

David Kendall: Four. I hired two people from the outside, large system integrator companies, and hired two people inside. The insiders weren’t brave and courageous enough and didn’t have the relationships to go out to the field. So they were focused on the internal part. The problem was that the baggage that they brought with them was that they were focused on a narrow version of business development. And so they didn’t really build out a program. They built out a thing or they implemented a tool or they identified a role. And it took a long time for them to integrate all those pieces together. So those four experiences really taught me about what I wanted from this position. To be honest with you, the best thing I’ve done is I didn’t hire the next person and I’ve been doing the job because now I’ve been able to take those experiences and what I expect from it and put it into practice. 

Greg Alexander: Right. You’re right. I mean, sometimes that is the best thing, when trying to figure out what is required to be successful in a position. There tends to be no better teacher than actually doing the position yourself and seeing what the day-to-day looks like and then backing into some type of job spec that you could hire into. So, how long have you been doing this sales leadership position, and what have you learned? 

David Kendall: Yeah, since December of last year. You know, the first month was to make sure everybody keeps their feet on the ground and doesn’t freak out that we now are missing a leadership position. Then it was to start to build the coalition. I talked about building coalitions a lot. I was doing this internally. I was taking the people who were uninspired and weren’t really led very well, and I was giving them some things that they could start to chew on—actual activities that were leading in a direction, a discussion every week about how we were applying those tactics to get our message together. A whole new look at marketing, a whole new look at our materials. Not a wholesale change, but just building them into how we approached the business development dynamic in a way that started to get their interest. And I took them back to the beginning. I just want to say this: like most small company owners, I’m sure within our membership, sometimes you have to go learn from the beginning. And I truly believe there’s value in going back to the beginning and challenging all your assumptions, and learning from some people who have been successful at it so that you can apply it in a way that works for you. I’ve now got a group—and I get chills when I say this—that is bringing me more opportunities than I know what to do with. We don’t have the time because you can’t just go talk to people. You have to get informed. You got to do research. You’ve got to take the time to make it valuable for that customer from the very first time you get to talk to them. 

Greg Alexander: Leadership matters, right? So obviously it’s working, you know, what you’re doing. So I’ve got to ask the question. I mean, at some point, you got to have the courage to try it again for number five. Are you going to? 

David Kendall: We’re getting close. What I’m gonna have that’s gonna be different is I’m not gonna ask somebody to come and build it. I’m gonna hand them an operating system and their responsibility for the first 90 days. And by the way, our company culture is we set up a 30-60-90 day plan for everyone. From the very first day, you have goals that you have to accomplish. Their 30-60-90 day plan is gonna be very different than the previous ones. They’re not gonna have to build something. They’re gonna have to understand it. They’re gonna have to apply their skills and experiences in a way that is productive and they’re gonna be able to measure that because we are adamant about making sure that our KPIs matter. We talk about them from leadership all the way down through the organization. And I’m excited about the next hire. But I’m also gonna take a different approach to how that person gets hired as well, which I’m sure we’ll talk about here in a minute. 

Greg Alexander: Well, let’s go there. What’s the different approach? 

David Kendall: Well, as my newly found friend Greg Alexander suggested, I might look at a book written by one of his network of professionals called “Who”. And what I’ve gotten out of that so far is to make sure that I’m approaching it like I would any of my technical people—make sure that I’m doing a full psychographic, demographic, and skills-based analysis of who is a candidate for this. The other thing I’m gonna do differently is I’m gonna stop looking outside. I’m gonna give people within the company a chance to step up because I’ve got some people who have some exciting ideas. They might not be ready yet, but that might lend itself to maybe a fractional hire that then allows the permanent hire to grow into the position. Still working on that strategy, but I’m excited about all of those approaches. 

Greg Alexander: Yeah. You know, so in my time when I was in your seat as a boutique founder, my company was called SPI, and we were hired to build sales programs. We were a consulting firm specialized in sales effectiveness. And almost always we would enter an environment like the one that you’re talking about where there have been some attempts before and it didn’t work. And they had an epiphany that they needed to hire a builder. But a builder by definition eventually works him or herself out of a job. You know, the home is built. So now you have to move on and go build another home. And then somebody moves into the home and lives in the home to use a home analogy. That’s why I think the fractional approach for the builder is such a good strategy for many of our members because they can come in and they not gonna have domain expertise in the tribal knowledge that a full-time employee would have. But what they’re bringing to the table is a set of competencies that don’t exist inside the firm. And it’s one plus one that equals three there. Not to do cliché, but it really does. And then that internal person is watching the house get built while it’s getting built. So that when the keys get handed over, you don’t miss a beat because, you know, it was almost a co-creation process, a blend of external and internal, and that tends to work really well. Last piece of advice that I would offer—and then I got a couple more questions for you, David—is that it’s very rare. In fact, in my 30 years of doing this, I’ve only seen it a handful of times where one person can do both. It’s like finding a needle in the haystack. And I don’t know why that is. I’m not an organizational psychologist. I wish I could tell you why that is, but it’s very rare that they can do both. Somebody is either a creator or an operator, and the path of the highest probability of success is the founder does the creation and then hands it over to an operator and the operator runs it. It’s much more successful when it’s done that way. So my advice there just to sum that up is not to try to hire both. Okay. Let’s talk about leveraging your hiring success in other departments with this structured selection process that you just mentioned and applying it to the sales role. So, my first question would be, you know how to do this, you’ve done it successfully with other jobs. Why haven’t you done that with this job? 

David Kendall: Right. My very first reason is because I want to make sure that our culture stays intact. You know, the statement “culture eats strategy for breakfast” is not a small statement. And I believe it, right? Bringing a leadership team member on is disruptive at multiple levels, no matter how you execute the process. I do believe in my ability to pick a leadership team member to fit into the leadership team. What I have learned is I need to pick a leadership team member that fits into the organization. And that sounds almost trite given my statement about culture, but the reality is that I want some other voices involved. The way that we do this across the company is I always have multiple interviews get done and I’ve done that with every sales leader I’ve looked to as well because I can have a bad day, right? Someone can be bad, and I might meet the greatest person in the world and just write it off as not important. But this time I’m gonna have not just leadership team members involved. I’m also gonna have some key staff members involved who can ask their own questions and go through the process a little bit differently. I think leadership team members, it’s critical that you do a fairly robust evaluation of them and multiple days should be involved, right? It should describe why, what, and how the company runs. It should be an interrogation of their past experience and how it applies. You should be able to understand their motivations. Motives are critical in the business development leader for so many different reasons because you want somebody hungry out in the field, but you want them to be hungry for you, not for their next opportunity. 

Greg Alexander: Yeah, you’re right. I mean, in the boutique professional services world, in particular, I mean, I think the statement that culture eats strategy for breakfast is so accurate because when there’s a small number of people, you know, one bad egg can cause, you know, devastating impacts because it can ripple. And also one fantastic piece of human capital can elevate the entire team, and re-energize everybody. So it’s such a critical hire and therefore, it’s worthy of multiple days. 

David Kendall: It’s actually why we got into organizational change management. We provide that service to our customers because it is not just about changing. It is about changing in an environment that people want to work in. And that is such a critical part to every hire, to every time you get together as a group, to build that coalition I mentioned earlier. 

Greg Alexander: Yeah, yeah, you’re right. Good points. All right. Well, listen, these podcasts are supposed to be short. We’re at our window here. David is going to be hosting a private member Q&A session that’ll be an hour in length as opposed to 15 minutes and will give members a chance to ask questions of him. But a very hot topic, you know, the hiring of a sales leader, the different types, how to go about it, what works, what doesn’t work, etc. But David, we appreciate you coming on the podcast and contributing to our collective very much. Thank you. All right. For those that are listening, like I said, if you’re a member, come to the Q&A session, you’ll get a meeting invite. If you’re not a member and you think you might want to be one, go to collective54.com, fill out an application and we’ll get in contact with you. And if you’re not ready for either of those two things, you just want to learn more, I would point you to my book “The Boutique: How to Start, Scale, and Sell a Professional Services Firm”, which you can find on Amazon. But until next time, I wish you the best of luck as you try to grow, scale, and someday exit your firm.