Challenger brands in professional services and B2B

Challenger brands are relatively rare in knowledge-intensive B2B and professional services – despite conditions being ripe for them. More firms could benefit from adopting a challenger brand strategy, but only if they’re willing to jump in with both feet.

Ziggers and zaggers

A challenger brand approach can be a very effective way for many ambitious professional service firms and knowledge-intensive B2B businesses to achieve strong market positions and competitive advantage against highly-entrenched incumbents.

Despite the concept’s popularity, genuine challenger brands are relatively rare in all sectors. Brands like VirginPatagonia and Uber are ubiquitous in any discussion, but beyond that, the list thins out pretty quickly. And, as we’ll see, while all these come under the challenger brand umbrella, they follow very different approaches within it.

Challenger brands are categorised by a mindset that sees they have business ambitions beyond conventional resources and an intent to bring change to an industry.

The real deal

Many brands like to consider themselves challengers but, in reality, aren’t following a challenger brand strategy – which has evolved to mean something quite specific.

The Wikipedia definition is a helpful place to start. “A challenger brand is a brand in an industry where it is neither the market leader nor a niche brand. Challenger brands are categorised by a mindset which sees they have business ambitions beyond conventional resources and an intent to bring change to an industry” (Wikipedia).

It’s useful because it raises the bar significantly higher than merely competing. Being ‘categorised by a mindset’, having ‘ambitions beyond conventional’, and coming with ‘intent to bring change’ are not everyone’s cup of tea.

It gets much more exciting and relevant to many professional service firms when you look at the various challenger brand models in the literature. It opens up many more potential routes for different kinds of firms to adopt specific challenger brand models.

Here’s a quick canter through the most relevant models for a premium professional services firm or a knowledge-intensive B2B business.

LinkedIn has already totally disrupted the low-value recruitment market

Dramatic Disruptor 

This is the Uber model (and Amazon, Airbnb, and Netflix), where a new entrant to a market adopts a radically different business model to offer a new and significantly superior product or service. For obvious reasons, these brands are always technology-led.

Stripe offers what it calls ‘financial infrastructure for the internet’ – and has been outrageously successful in carving out a space for its brand among the incumbent banks and payment systems. Being B2B focused, it’s not as well-known as Netflix, but it’s had similar levels of success as a challenger brand.

Another B2B challenger brand that exemplifies the Dramatic Disruptor model is Slack. Better known than Stripe, as it’s more visible in the workplace even if you don’t use it, Slack stole a march and jumped right into the middle of the communications infrastructure with a new product designed for a multi-device, multi-location, and broadband-enabled business environment.

In the professional services sector, many of these brands circle the premium markets, building up scale and reputation to – they hope – one day compete for the more premium parts of the market.

Xero, the accounting software, is a good example. Today it’s effectively competing with and displacing much or all of what some accountants do. In the future, they hope to displace them completely, just as Netflix once distributed other producers’ content and now competes directly with them by producing some of their own.

LinkedIn has already totally disrupted the low-value recruitment market. Firms like Axiom and Keystone have their eyes on the vast, premium legal market, even if they are a long way off denting it today.

These brands use communications rather than technology as their weapon of choice and thrive on being provocative.

Feisty Maverick 

This is the Virgin model (and BrewDogInnocent, and Red Bull), where a relative newcomer attempts to blow up a cosy market dominated by giant incumbents who – they believe – have become slow and complacent.

These brands use communications rather than technology as their weapon of choice and thrive on being provocative. One attraction of this model is that it requires relatively little investment.

The owners of these brands often tell their shareholders that they spend far less on their brand communications than the incumbents because they generate much of their exposure through PR – Richard Branson is the poster child.

However, despite the low cost of entry, it seems to be much harder to make this approach work in professional services. In the UK, Foxtons – the residential real estate company – is probably the best example.

Many professional service firms adopt a kind of ‘a little bit feisty maverick’ approach to their branding, hoping this will cut through without upsetting the client market apple cart. But it doesn’t work because it’s too timid.

They’re probably right that most professional service firm clients aren’t looking for a maverick. I advise you to avoid this model unless you’re prepared to be unpopular with the mainstream.

Whilst this challenger brand model can be potent, if it’s not 100% authentic, it will quickly be exposed

Passionate Missionary

This is the Patagonia model (and Tony’s Chocolate and Riverford Organics), where a brand proudly and loudly wears its purpose on its sleeve. This is the classic ‘we want to make the world a better place’ model and can be tremendously effective and appealing if your business model is fully aligned with it.

The UK law firm Leigh Day has earned a strong reputation for representing the Davids against the Goliaths in legal disputes. In the world of executive search – where companies are highly focused on improving their diversity and inclusion – Audeliss has made its almost zealous commitment to DE&I the central theme of its brand.

While this challenger brand model can be potent, if it’s not 100% authentic it will quickly be exposed, so tread carefully and ensure your board is fully aligned.

This model takes the idea of a specialist brand and turbo-charges it with a massive passion and enthusiasm

Enthusiastic Specialist

This challenger model is followed by brands like Sonos, Mini, and Rapha (cycling, not the tennis player). This model takes the idea of a specialist brand and turbo-charges it with a massive passion and enthusiasm for what it does and the market it serves.

However, it’s easy to be enthusiastic about Bonsai trees if you only sell Bonsai trees and only ever will. The difficulty in adopting this model is finding a way of defining your specialism coherently but not immediately constraining in terms of growth. The strategic skill is in finding a mass niche that can grow with you and provide tons of stretch without breaking.

UiPath has done this by focusing on ‘robotic process automation’ or RPA and making itself successful by telling a complex, technical story in a relatively accessible way and never losing sight of the benefits of its product vs the features. Remember the business process outsourcing revolution in the 90s? UiPath is the web 3.0 version of that.

In law, firms like Quinn Emanuel and Stewarts have achieved this balance by focusing on litigation (as opposed to transactional work), and others like Cooley have exploited the mass niche of technology.

Many firms could successfully adopt the Enthusiastic Specialist approach to being a challenger brand, but it requires the strategic discipline to stick to your knitting as you grow.

Radical innovation around a traditional service to take on the incumbents directly

Next Generation 

This is the Tesla model (and also brands like OatlyImpossible Foods, and Monzo), where the challenger uses radical innovation around a traditional service to take on the incumbents directly. Not by disrupting their business model but by competing, customer-by-customer, with a ‘next generation’ product or service that makes the market leaders seem outmoded.

Arm, the leading brand in microchips that doesn’t make a single chip, has put Next Generation thinking at the core of its brand from day one. Arm sidestepped the risky, capital-intensive business of manufacturing semiconductors by focusing single-mindedly on the design part of the process – and within that, focusing on mobile tech. Referring to itself as the R&D department of the entire semiconductor sector, Arm has become the market-leading brand and is found in almost every premium mobile device you can name.

It can be harder for existing firms to pull off the Next Generation brand in professional services and B2B, but those who can have seen impressive results. A good example is True Search, the executive search firm that has come from nowhere to become the 6th largest firm in the US (behind the five so-called Shrek firms that have dominated the market for many years).

PA Consulting has had great success competing head-to-head with incumbents such as Accenture, Deloitte, and McKinsey by developing a next-generation brand proposition around ‘bringing ingenuity to life’.

The law firm Shillings, unleashed by changes in legislation in the last decade, acquired firms offering complementary services such as cyber security and investigations experts and remodeled themselves as a next-generation brand.

Firms with big ambitions should take a serious look at the opportunities

Informed choice

The value is that you can look at these models and think a bit harder about which might be most relevant to your firm’s strategy.

The models give you a framework to discuss the pros and cons of adopting one wholeheartedly and determinedly and not just dabbling around the edges with elements of different models.

Firms with big ambitions, facing strong and entrenched market leaders, should consider the opportunities presented by adopting a challenger brand strategy.

Many firms will take a look and decide that, for various reasons, the implications are beyond them, but others will see a path open up that could be transformational.

Ian Stephens

CEO and Founder of Principia, Ian is the trusted advisor on branding to leaders of many of the world’s most prestigious international professional service firms and knowledge-intensive B2B businesses across a range of sectors including law, consulting, strategy, technology, engineering, and innovation.