Making Smarter Agency Finance Decisions Part 7 – The Circle of Competence

“A Man’s Got To Know His Limitations” – Dirty Harry

We are better at some things than others. When you are not so sure what you are doing, it is riskier than when you do know.

Now that I’ve got the statements of the obvious out of the way I can make my main point. No matter how smart or experienced we are at what we do we will make mistakes when we go outside of our comfort zone; outside of our circle of competence.

The circle of competence is an investing concept used, amongst others, by Warren Buffett. He (and his investors) have got rich by investing only in companies they know really, really well in industries they know really, really well. Doesn’t it seem like a sensible approach written down like that?

Knowing what your Agency’s core competence is and who your preferred clients are, is key to decision making. It is not about refusing to go outside of your current limitations – the world changes too quickly for that. It is about acknowledging the risk and minimising it. Reading and listening (or employing) experts will work better and more often than blagging it.

I read an article about Brian O’Driscoll, the world class Irish rugby player, and he said something that resonated;  “Practise things you’re good at – Keep on top of things you’re not so good at, but be world-class at your best. Never think, I’m very good at this and that, I can leave those for a bit.”

Understanding your circle of competence, sticking within it and deciding to become the best you can at what you do is, as a core strategy, not a bad recipe for a profitable agency.

If you’re demonstrably among the best at what you do you will be more able to charge a premium which reflects the added value you can bring to your client’s business.

Venture outside your circle of competence into an area where you are just good (or worse) and you will be competing against specialists. It’s more than likely your price premium will be under pressure and there is the added risk of poor delivery affecting your reputation

Case Study

My career in marketing services started (well) before the digital age. I’m not a digital native – I started when having email was a novel and exciting thing.

Migrating an Agency, as I have helped to do, from offline to online is a challenge. You are automatically outside your circle of competence and won’t be, for some time at least, world class. Because our clients wanted us to help them and because we could see the way the world was going we ventured outside of our core competence.

We made plenty of mistakes. We tried to manage something we weren’t experts in. It turned out alright in the end but I can’t help thinking we would have approached it differently if we had recognised that this was outside our core competences. We should have been more strategic about what we could be world class at rather than taking any digital brief and then trying to figure out how to deliver it. We were too tactical and not strategic enough.


“To A Man With A Hammer, Everything Looks Like A Nail” – Mark Twain

Every time you go outside of your circle of competence you take yourself with you. Your experience, your knowledge. You will approach the problem with your particular hammer.

Sometimes this will work. Others it won’t. The risk of making a mistake will go up.

This is not a plea never to venture outside what you know. That world would be a dull place. Recognising you have gone outside of your core competence and doing something about it though, that seems like an exciting and reasonable thing to do.