Business is often compared to sports. You hear of someone hitting it out of the park or the slam-dunk opportunity. When you need to get back to the basics, it is often blocking and tackling. And who hasn’t had to develop a game plan for the upcoming budget year. But one thing that sports has that business doesn’t always is a clear opponent. Sports are all about the competition. Business, too, is about competition, but the opponents are often hidden.
Often, I have read business plans where the entrepreneur states that there is no competition for his particular venture’s product or service. If I am judging a business plan competition (there’s that word again), I automatically downgrade a couple of points. If, I am a mentor to said entrepreneur, that begins a longer conversation about the business.
My friend Jeff, the marketing strategist, likes companies to develop “Only” statements. As in, the widget is the only product that will wash your floors and leave your mouth minty fresh. I’m kidding, but Jeff is serious. In marketingland, it is critical to explain why your product is the only way to get things done. But from the other side of the fence, we understand that while we are the “only” X, our prospective customers also get to decide what is important to them and there are others out there who have something to say about their products.
Let’s face it, there is always competition. A few examples…
What about Microsoft, back when it was a tiny company? There is the oft told tale of how Gary Kildall, founder of Digital Research was a strong competitor to Bill Gates’ early efforts at Microsoft and lost out on the original IBM PC operating system contract because he wasn’t willing to sign the IBM non-disclosure documents. Had Gary Kildall signed the contracts, no one would have heard of Bill Gates or Microsoft. Instead of Windows, we might be using GEM.
But, really, when Henry Ford started making cars, he had no competition. Not so fast. Henry Ford had lots of competition. Besides the other automakers who were building cars on a custom basis, there was always the horse and buggy. People did not really need the automobile. Remember that “do nothing” is always a competitor in the minds of your potential customers. What Henry Ford did was change a manufacturing process for a product that had already been in the market.
OK, then, how about Segway. Dean Kaman built a product that no one had ever thought of. It was an entirely new product and how could there be any competition? Ah, but the competition was there, it was just disguised. Let’s see, people could walk (buy nothing), purchase a bike, hybrid car, roller blades, scooters. It depends on how they were looking at the problem. In actuality, the competition was what led to a less than successful introduction for the Segway and why they are still looked upon as curiosities, rather than a mainstream transportation choice for consumers.
I believe that you have to be honest with yourself when you look at your business. There is always competition and you have to be ready to confront it. Don’t forget about “Do Nothing” as a competitor. Look at alternative uses of other products and how your product may be viewed in the marketplace. In fact, if you can honestly say that there is no competition for your product, I would question the value that the marketplace has for your product.
So, if we can agree that in order for you to be successful, there will be competition, then how can we develop strategies that will further your business idea?
First, we need to realize that competition is good. In a way, competition validates the marketplace. If others are selling into the consumer base, then we know that the consumers are able to purchase to solve their needs. This gives you an idea that people may also buy your products, if they are marketed, produced and delivered with care.
Second, competition will force you to raise the level of your game. You have to understand the marketplace and react to it on a regular basis. This will hone your product offerings to be as good as they can be.
The one thing that I would emphasize to companies facing direct competition is, don’t play the other guy’s game. Change the game and make him play by a new set of rules, if at all possible. Going back to the Henry Ford story, this is his true genius. He was able to change his manufacturing process to lower the cost of the first mass produced automobile. The consumer really didn’t much care that it was mass produced, but suddenly the price for an automobile was not a stumbling block and Ford was able to literally change the world.
For you, look for ways to change the game as well. Maybe there is something that you can bring to the table that doesn’t cost you much, but the other guy hasn’t cottoned on to. Put your emphasis here. Go to your customers and let them know about that extra special feature and try to get it written into specs. Understand what is important to your purchasers. Is it value, couture, large portions, safety from lawsuits? Whatever it is, if you can provide it and your competitor cannot, you have a better than even chance of (sports metaphor coming…) landing the big one.
But, if you are successful, be aware that the circle has a way of coming back. Look at Microsoft and Google today. It’s all part of the game of business. Real entrepreneurs don’t shy away from the competition, they look for ways to compete on the playing field.
In the blogosphere, there is a large hue and cry about the death of newspapers. And it’s true. Newspapers are losing advertisers, subscribers and relevance. There are a lot of reasons for this.
- It used to be that only the newspapers had the printing press. Therefore they owned the news manufacturing (reporting) and distribution (printing and delivering) of the news. The advertisers were looking to get to the subscribers and this was the only way to do so on a local basis.
- Journalists were proud of their independence and their political slants. They were proud of the investigative reporting and in-depth stories that were difficult to tell in other formats. People wanted and were willing to pay for the news. Because this was the way that the stories were told, people did not even look outside the news box for other alternatives. Publishers made fortunes — ever been to San Simeon, home of William Randolph Hearst?
- First to take some of the local advertising dollar from the newspaper was local cable tv and radio. Now the options of advertisers become a little more open. You could focus your advertisement more closely geographically, ethnically, demographically and politically, in ways that you could not with newspapers.
- Then the internet was born. The internet changed all of the rules. Craigslist was the first to take on a profitable piece of newspaper turf, classified advertising. Then CareerBuilder and Monster.com took on the employment section. Coupons became available on-line. Blogs on every conceivable (and some not conceivable) topics were started by people with a passion. There was more variety, because more people were adding to the mix. And all of it (well, most of it anyway) was free. The newspapers had nothing to counter these new offerings.
- So, the papers tried to find alternative ways to bring in revenue and lower costs. They reduced foreign bureaus and they furloughed editors and reporters. The big guys started to syndicate their reporting to smaller papers in hopes of getting some revenue boost. Now, the same NY Times story was being reprinted in the Orlando Sun or the Topeka Capital-Journal. The big papers put in paywalls, where a consumer would have to pay a subscription fee to view their content, but since folks in Topeka or Orlando already saw the content and it was available free, people had an easy way to Google their way to the same content that was behind the paywall.
- Then Google came up with Google News and culled news sources from around the globe and presented the news to viewers for free. Newspapers no longer had any loyalty from their readers when you could read multiple articles from different viewpoints on the same topic with only a click. Of course, the newspapers blamed Google for taking away their business, but in reality, they had not changed their business model in over 100 years and had not kept up with the changes in their customer base. And their old consumers were loving the new world with more choice and more information, in a more usable format.
Folks like Jeff Jarvis think about the news world all of the time and are trying to figure out what the next big thing is. He is running a project at City University of New York’s Graduate School of Journalism that explores new business models for news. But not all of the good ideas come out of New York.
Here in Chicago, a couple of friends of mine, Jeff Leitner and Jim Jacoby at Manifest Digital have been working on what could be a game changer for the news business — or rather, the vacuum created by failing news businesses. Jeff and Jim are teaming up with another Chicago company to produce something they call a private label news service.
In short, they create legitimate news outlets for their clients — professional reporters, professional editors, straight news. Watch this — it’s a minute and a half and pretty damn entertaining.
The point of this is that one of the things that newspapers have always provided is a third party objective view of a story. The best news stories are not a press release sent out by companies, but real stories reported by real reporters. For example, the US Chamber of Commerce was interested in delivering news about the state attorneys general, so they created Legal News Line. Real news on a regular basis reported by credentialed journalists through their own news portal, but also delivered to places like Google News.
I’m not sure that I believe that this is the future of news, but it is darn interesting.
Entrepreneurship: A few start-up related posts. First the twenty things that I wished I had known before I started my business. (Hat Tip: JL) Then, from a genuine internet star, Jessica Hagy, The Start-Up Checklist. Are you an entrepreneur or a hobbyist? Lastly, not exactly start-up specific, Seth has a good pithy blog post on Jello.
Normally, this blog wouldn’t be the first place to go for sales advice. But, Jeff Leitner wrote this a while back and I have been thinking about it recently as I work with one of my consulting companies. It is a classic.
Step 1 in sales, determine the prospect’s stomach for change.
No matter what he says, there’s a significant cost to changing.
Even if what he’s changing is no product/service.
Figure out what the financial cost, the psychic cost, the emotional cost of change.
And only then do you turn your attention to step 2.
Step 2 is to change the game.
If you’re competing against an existing product/service, there’s little chance he’s changing vendors.
Instead, you have to craft and then sell something very different than the incumbent sells.
You can’t sell better or more or enhanced or even cheaper (commodities aside).
You have to sell something substantively different, that solves a qualitatively different problem than the incumbent is solving.
Men don’t leave their wives for prettier girls.
Men leave their wives for substantively different, qualitatively different things that they can’t get from their wives.
Prospects are the same.
If you can’t put together a substantively different offer, you can’t win.
Even if you’re competing against no product/service.
Or an ugly wife.
Jeff Leitner writes about the questions that you should be asking when you start your business. They include: What is the pain that you are trying to relieve? and What one thing are you trying to sell?. Both of these are great questions, but I would like to add another to your list. It is, at once more basic and for some of us, it is a no brainer. But be careful, the answers might surprise you.
The question is Who is your customer? Yes, who are you trying to make your products or services for. The reason it is important is that if you truly know who your customer is, you can design the company’s products and processes to support that customer to the best extent. Let’s take a look at some examples to see where this could go.
Pharmaceutical companies – The customer is the patient who needs the medication, right? Well, if that is the case then why do they sell to the doctors, who do not buy the product, but authorize (through prescriptions) others to purchase the drugs. I’d have to say that the doctors are the customers. They pharmaceutical companies do everything they can to influence the doctors and dabble in consumer education, hoping that the patient will be able to demand a certain drug from the doctor. But the doctor is still the customer, because the buying power remains with them.
Physicians – While we are on the topic of medicine, who are your typical physician’s customers? It seems you have two choices, either the patient or the insurance companies. Based upon the way that most doctor’s offices are run, it is obvious that the insurance companies are their main customer. Everything that the physicians do is designed to make sure that the insurance company gets what it needs. The patient is the one who allows the doctor to get paid, but the gatekeeper is the insurance company. Concierge care (I love that description) has started to catch on in wealthy areas. Basically, the doctor does not take insurance and charges an annual membership fee to his or her patient base. Does this exclude people who must use insurance to cover their health needs? Yes, of course. But it allows the doctor to change the customer relationship from the insurance carriers to the patient.
Google – Who is Google’s customer? Good question. Google sold over $22 Billion worth of services in the last 12 months. Most of that came from advertising. So, of course, Google’s customer would be the advertisers who pay for the services. Not so fast. I would venture that the users, not the advertisers are Google’s customers. Most of the new things that Google rolls out are enhancements to the user experience and they are focused on making the world’s information available to everyone. If they added an additional advertising service, they might increase revenues a little, but if they stopped providing excellent search (and other) services, the advertising would dry up very quickly.
This is all critical as you are building your business. If you design your business around the wrong customer, you will never see the full benefits that you could be getting. Think through this question (and Jeff’s above) as you start to build your business plan. There are significant benefits for not taking the easy road and just picking the customer that everyone expects. You may be able to garner a much more substantial or lucrative (see physicians above) customer base from a group of folks who are not supported by other organizations.
I would love to hear about more cases where you believe that the customer is not exactly the end user. Contribute in the comments.
Philanthropy: Trendwatching.com writes about Generation G, the generation not of Greed (see Gordon Gekko of Wall Street fame), but of Giving. In these troubled economic times, it is interesting to see that the generation coming of age now seems to be more interested in the G for giving.
Just this week, a group I am affiliated with held a fundraising breakfast. This year’s total amount pledged was 40% more than last year and the official I spoke with said that she is seeing this trend at many of the breakfasts she hosts.
Lastly, my favorite Generation G story relates to Adam Carter. Adam is the son of a good friend of mine. Adam spends about 7 months each year providing funds and manual labor on humanitarian missions in Latin America, the Middle East, Africa and Southeast Asia as a part of a group called 100 Friends. The other 5 months of the year, Adam earns his traveling money as a beer vendor at Wrigley Field and US Cellular Field. He maintains a blog with his current exploits (including a video about his visit to Senegal).
Marketing: Brand Execution. I have a friend who likes to say “It’s all about me.” In her case, it usually is :). But when it comes to your business, it can’t be all about you. It has to be about the business. Jeff Leitner has brought this point together with a short riff on American Idol.
I don’t know if you watch American Idol, but every now and then the judges ask the kids why they chose to sing a particular song.
And the kids ALWAYS say it’s because the song means a lot to them.
And, of course, that’s the wrong move.
Sing a song that best shows off your vocals – whether you’ve got a big voice, small voice, high range, low range, big range, whether you can do runs or are particularly good or bad at expressing the lyrics.
I see the same dynamic in business all the time.
Business owners choose locations, hire people, design logos and launch products because they like those locations, people, logos and products. That’s fine that they have taste, but they should leave the taste at home. Choose locations, people, logos and products that will make you successful in your business.
If you have thought through your business and made the vision tight, you can’t afford to bring in extraneous items just because you like them. If your concept is a classic French bistro, you can’t hang Chicago Cubs paraphernalia from the walls, just because you are a die-hard Cubs fan. You can bleed Cubbie blue in the comfort of your home. But unless you are opening a sports bar in Wrigleyville, the Cubs stuff needs to stay at home. Utrillo prints, maybe. In a dark corner.
Entrepreneurship: On Tuesday, I posted about the Open Source Challenge that Mark Cuban had started. Today, Seth Godin talked about it and helps provide future entrepreneurs with some ideas to get started.
Security: Bruce Schneier pointed me to this article on Facebook security. Note than on that page, there is a link to a free Facebook security e-book to pass along to others.
Big Picture: In a post earlier this week, I pointed to a discussion with Amory Lovins where he posited that electric generators will soon be microsized and distributed into a giant web. Kevin Kelly has also broached the same general topic in his article “The Surest Way to Smartness is through Massive Dumbness”.
The future of business is distributed systems. Look at Google. Google could not serve its customers with mainframe systems; they use an extraordinary number of cheap, custom processors. Kevin Kelly’s article highlighted a most basic industry – cement delivery – and how distributed systems (computers, GPS, authority) created a competitive advantage for one company. How can you take advantage of this trend in your business?