In Outliers, Malcolm Gladwell asserts that one needs to invest 10,000 hours in an activity in order to become an expert. I take solace in knowing that I am evidently both an expert in Strategic Planning, and overcoming the drama induced by teenage daughters.
The rapid escalation of global competition has brought about a new round of hyper-specialization. The concept of specialization is nothing new; the division of labor has been a key tenant of economics since the birth of capitalism. Yet sites such as Guru or eLance, have propelled specialization to a new art form, where one can access dozens of specialists from around the world in any conceivable competency in a matter of minutes.
Specialties that do not require any special education (other than what is readily available on the internet) such as graphic arts have quickly commoditized. You can hire a graphic artist online for $15 an hour. In cases where greater technical aptitude is required, specialists still out-earn generalists. The median Internist in the U.S. earns $176K per year, while Cardiologists earn a median of $403K (some make $800K or more). [i] If you had a heart attack, which would you see?
Perhaps the most common strategic blunder I observe within entrepreneurial companies is a penchant for addressing overly broad targets. Marketers, seeking the largest audience cast too wide a net. In their need to satisfy the largest number of prospects, they become de facto generalists. That is, instead of addressing a niche market with specific solutions, they try to satisfy a larger audience with a multitude of products and services. At some point, the value they can provide suffers from diminishing returns.
The more crowded a space, the more difficult it is to differentiate, and the greater the need for expertise. Before its bankruptcy filing, GM attempted to sell within every segment, from sub-compact to Hummer. GM experienced what is often referred to as the peanut butter effect; the wider you spread something, the thinner it gets. GM’s branding was diluted and ability to control quality constrained.
Many small businesses may employ generalists because of their lack of talent depth. To have one IT professional manage a network, build the company website, select an ERP package and fix all the desktops is an archaic paradigm worthy of recalculation.
The reason that specialists are worth more than generalists is that they have a deeper subject matter expertise that drives:[ii]
Quality-Processes replicated over time promote less deviation, less defects and fewer errors. The specialist thinks deeply about an area of expertise in which they have experience and are less likely to make mistakes.
Speed- Specialists do not need to reinvent things. Cycle times on proposals and product delivery is faster. If a company offers 50 stock products instead of 500, they can manage less inventory and ship items quicker. For every new project outside the boundaries of a company’s expertise there is resource draining learning curve that costs time and money.
Relationships-As the specialist is highly respected, their opinions are sought after by the media and people who want to know them, hire them and refer them to others.
The realities of outsourcing and off-shoring are driven by these phenomena. It is inherently inefficient to participate in activities that are not within a firm’s core competency and do not directly contribute to the bottom line. Thus, the migration of labor (outsourcing) will rise at a fervent rate.
In fact, the entire concept of the corporation, with its multiple functional departments (such as accounting, sales and marketing, design, operations, engineering, manufacturing, etc.) is under some attack. Social norms around what constitutes a working environment are shifting quickly and enabling greater specialization. Collaboration tools make the world of work far more virtual, which will continue to feed the frenzy.
Think about how to specialize as to optimize your revenue, margin and profit.
[i] American Medical Group Association Survey
[ii] Adapted from The Age of Hyper Specialization by Thomas Malone, Robert Laubacher, and Tammy Johns HBR July 2011