Competitive forces in any market constantly change and adapt. Clients' expectations change over time, and their buying decision processes change. Successful firms constantly seek ways of gaining competitive advantage by adopting distinctive ways of working with clients. In turn, this shifts client expectations and poses a challenge to competitors – and so the process continues.

Building and sustaining a competitive capability in today's professional service firm is an ongoing process, not a one-off event.

The market for professional services is, by and large, mature. Across a large part of the market, buyers of services are reasonably sophisticated and base their buying decisions on selection criteria designed to produce the 'right firm for the job'. They assess firms against their selection criteria, then decide which best meets them from a short list of apparently suitable candidates. Increasingly, they are applying the same approach to existing suppliers: revising their selection criteria regularly and reassessing incumbents, often alongside other potential suppliers.

The implications

There are two crucial implications for the competitiveness of professional firms.

The first is that the competition for work is increasingly between firms with similar capabilities, at least as perceived by prospective clients. In developing a short list of candidates, clients exclude those who appear to not have the capabilities to do the work, or do the work at the level required. This selection is based on the firm's reputation in a particular area and any marketing materials that a client might have seen. As a result, the shortlist is of peer-group firms, or those that appear to be a peer group in terms of general capability.

The second implication follows from this: certain characteristics of a firm which might be considered competitive advantages in the general market place become basic requirements once a firm joins a shortlist of peer group firms. Shortlisted firms will all have some capabilities and characteristics that distinguish them from those not on the shortlist – but which do not differentiate them significantly from the other shortlisted candidates.

Interviews with buyers of professional services show a common set of attributes that they seek from their supplier. These include:

• known technical capability, at the required level, in the particular service required,
• a competitive depth of experience and knowledge,
• reputation for excellent service delivery,
• industry knowledge in specific situations,
• at times, geographical capability,
• and naturally, price.

Clients also speak of the need for knowledge of the business, a commercial approach (providing business rather than technical solutions), effective project management skills and so on. These are subsumed above in service delivery.

The shortlist - and beyond

The critical point is that these attributes tend to influence the selection of a shortlist. Once the shortlist is finalised, selection criteria differ. Technical capability, depth of experience and industry knowledge become necessities ('givens') among shortlisted firms: without them, a firm will not make it onto the shortlist. Hence, the shortlist candidates tend to be a peer group of firms, all with similar tangible capabilities.

The issues that then separate the shortlist candidates are more focused on the interaction between the client and the professional firm in the selection process. Of course, discussions with the candidates might reveal that some shortlist candidates are stronger on certain tangible criteria than others, but generally selection from the shortlist is made more on intangibles. Various interactions between a prospective client and shortlist firms start to give reassurance (or lack of it) that a firm is likely to deliver its service effectively and that the firm's people will be easy to work with. Hence, amongst peer group firms, competitive advantage comes more through intangible attributes than the tangible. Tangible attributes can be acquired, but the intangibles are much more a result of how the whole organisation is managed and the qualities of the people in the firm.

No clients expect a new advisor to have complete understanding of their business on day one, nor to have a complete grasp of exactly how they want a service delivered, along with all its attendant nuances. However from day one, they do expect that key contacts in the firm seek to understand these aspects and to communicate them effectively to everyone involved with the client. A firm that fails to understand this on its first engagement is unlikely to receive any further instructions.

This is where an effective client relationship management process becomes an essential piece of armoury in a firm's competitive advantage. Firms with such a process apply it from their very first interaction with a prospective client. They seek to understand the client and the intangible expectations that the client has of professional advisors. These then translate back into every interaction a prospective client has with a firm; as a result, evidence of the firm¹s capabilities is built up in the client's mind even before the firm is hired.

Because it is understood that the client's expectations of its advisors will change over time, this process continues once the firm is hired. It is vital, therefore, that the client relationship process constantly develops and evolves, rather than becoming a fixed, unchanging service 'template'.

Designing the relationship

Effective client relationship processes do not just happen: they need to be designed. People need training, education and coaching, and a number of systems (including information) will be required to support the relationship. Hence, these must be embedded within a firm's structure – with clear role definitions, responsibilities and reporting lines into the firm's senior management. Too often, we see firms with client relationship processes unconnected to the formal organisation structure and therefore tending to operate in an ad hoc, ineffectual way.

An effective client relationship process is the only basis for a firm to ensure that its service delivery processes are geared precisely to the needs of its clients, and to monitor that its practitioners are meeting those needs in every interaction. This requires a means for sharing, updating and communicating information about a specific client's expectations and regular feedback from the client on whether the firm is achieving (or even exceeding) them.

(There are many firms who picked up the management fad of a few years back about "delighting clients". Yet many had no way of knowing if they were even meeting the expectations of their clients – let alone delighting them.)

Who's buying? Who's selling?

Finally, it is critical to understand what a client is actually buying: in most cases what is being 'sold' is not what is being bought. What should be sold is a means of achieving what the buyer wants. As Charles Revlon once said, "We sell cosmetics; but what the customer is buying is hope". Black & Decker see it as, "We sell ½-inch bits; the customer is buying ½-inch holes".

It is this understanding of what a client is really buying, in addition to all the other service delivery issues, that can enable a professional firm to constantly produce businesslike solutions that exceed a client's expectations. And it is only through a well structured, well managed client relationship programme that this understanding can be built amongst everyone who has contact with the client. It is one of the most critical parts of any professional firm's competitive capabilities.

"Too many professional advisors don't listen to what my problem really is. As soon as I try and explain the business issue their minds click onto the technical issues involved. I want someone I can work with, who hears me out, and then goes away to work out the best way to resolve my issues".