We know that the most valuable skills for an individual or an organization are the differentiating skills. The skills that make you different from the competition are the ones that give you an edge in winning work and getting paid a premium. If other people can do the work then the price will be set by the person willing to accept the lowest price. Ouch.
This insight comes from Tom Nagle’s work on value-based pricing. He showed how market forces set the price of shared value drivers, no matter how important they may be. The only opportunity to get a premium is through differentiation. A simple, perhaps simplistic, mapping of skills to value drivers goes like this.
Supporting Skills are part of your costs. They do not add value. You have to have access to them but they are not core to your business.
Core skills are what you share with the next best competitive alternative. They are the table stakes. They are part of how you provide value to your customers but they are priced by market forces.
Differentiating skills are your value drivers. They are how you or your organization provides exceptional value that you can capture through higher prices.
Sounds pretty straightforward. Still, when you go and ask people or companies about their differentiating skills you often draw a blank. People find it very difficult to answer this question. Why is this?
There are three main reasons.
The most important is that differentiating skills are always relative to two things: the customer and the competitive alternative. Differentiating skills change, sometimes quite quickly, in response to competitive conditions. Core skills are much more stable. So when asked, “What are your differentiating skills?” the proper answer is “for who?” and “Compared to what?” In the TeamFit Skill Insight process, where we help companies use TeamFit to understand what skills they really have, how they are being used, and where the gaps are, we spend a lot of time understanding differentiating skills. This means we also need to understand their customers and the competition before we can say which skills are differentiating.
In many cases it is not any one, core skill that provides the differentiation but some unique combination. For example, there are many companies that can build good eLearning content. There are some companies that understand marketing strategy tools and frameworks (things like market segmentation, buying processes, stakeholder mapping, scenario planning). There are very few that combine both.
Then there is the skill lifecycle. If there is significant marketing demand, differentiating skills will often have a short life span. High margins attract competition; competitors will work hard to erase differentiation so that what was once differentiating becomes core and then eventually a supporting or even a declining skill.
How do you develop differentiating skills? Start by thinking about the different ways you create value for your clients or inside your company. Look at who else creates that value and how they do it (value has emotional and economic aspects, you generally want to consider both). What skills do you have that they do not, and what do they have that you do not. Then ask, how you can enhance the unique ways that you create value? Develop these. Communicate them. Build the supporting skills that will make them stronger. Your differentiating skills determine how successful you will be in the future.
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