Art & Science Archive
You are giving a new business presentation, and it seems to be going well. But suddenly a key decision-maker leans forward and asks, with sharp skepticism:
That’s all well and good. But tell us, please, what makes your firm any different from the other firms that compete in this asset class?
You can babble a few platitudes and slink back to your prepared remarks with your tail between your legs. Or you can win the business with the precision, honesty and clarity of your response.
A fundamental problem in investment marketing is that most new business presentations completely fail to answer the question, “How are you different from your competitors?”
The people who buy investment management services express poignant concern over this lack of competitive differentiation. Says one chief investment officer of a large corporate plan, “It is becoming more and more difficult for individual managers to differentiate themselves — to define why they are successful relative to others.” Says another representative of a large public pension plan, “I have begun to dislike meeting with managers because they all say the same thing.”*
Different for the Same Reasons?
These investment professionals lament not only time spent in considering a parade of predictable new business presentations. They lament how difficult it is to do their jobs. They need to justify their hiring decisions. Yet where can they find justification when all investment firms say they are different for the very same reasons: “We believe that the markets are not always efficient. We believe in bottom-up fundamental research. What differentiates us is our people. We do not time the markets. We do not invest in fads. At the end of the day, we stay the course and stick to our knitting.”
How can buyers of investment services discern the information advantage required to generate long-term alpha when investment firms make exactly the same claims using virtually identical language?
Breaking Out of the Mold
Here are a few ways to avoid sounding like clones of your competitors:
Shun the obvious. Follow this simple rule in deciding what information to include: If what you are about to say seems too obvious, it probably is. The statement that “markets are not always efficient,” for example, sits blandly on the “Philosophy” page of many active investment managers’ presentation books. (Of course you believe markets are not always efficient. You are an active manager, are you not?) This truism consumes valuable real estate on a page that should introduce beliefs linking to genuine competitive advantages.
Ask yourselves, “Who doesn’t?” Always lead with and anchor your presentation in any information that truly is different. In prioritizing the elements of your story, ask yourselves this telling question, “Who doesn’t?” As in, “Who doesn’t believe in bottom-up fundamental research?” Or, “Who doesn’t claim to have an experienced team?” Or, “Who doesn’t avoid market timing?”
Use examples. As we discuss elsewhere on this site, examples are risky. But the greater risk lies in a lifeless presentation devoid of specificity. Examples are necessary if potential buyers are to understand your strategy and why you are good at it. In his excellent book about the rise and fall of Long-Term Capital Management, When Genius Failed, Roger Lowenstein writes, “Long-Term even refused to give examples of trades, so potential investors had little idea of what the partners were proposing.” Examples not only make an investment story come alive, they generate understanding and show that you do what you say you do.
Prove it. Ask yourselves of every statement you plan to make in a presentation, “Can we prove this?” If you can offer compelling proof, doing so in itself represents a competitive advantage. If you can’t, you might want to consider deleting certain claims from your presentation.
Be consistent. In the investment business, consistency may well trump originality. A consistent story told by the same people in the same language — even a story that is not particularly new or different — might put your firm ahead of a competitor with a novel strategy communicated three different ways by three professionals who fail to agree on how best to position the firm.
Listen to the market. Insularity fosters sameness. Yet many investment firms that claim excellence in investment research rarely conduct market research about their own firm. Interviews with clients and consultants yield invaluable insights on how your firm does — or does not — stand out from the crowd. When asked to define a competitive edge, it helps if you can answer the question knowledgeably based on outside perspectives.
Your company may offer a clearly defined competitive advantage. Or your company’s competitive advantage may lie purely in consistent execution by a team of smart, motivated people. In either case, we hope this article ensures that, the next time you present, you effectively answer the question, “What makes our firm different?” before your audience feels compelled to ask.
*Based on interviews by Alpha Partners with pension plan sponsors.