Element 1: Doing Business in a New Way

Lets start at the beginning with Market or Niche Dominance – Element 1: Doing Business in a New Way as a series of photos. Just like trying to understand what a building looks like, one photo will not do, we need multiple photos and assemble it to create a mosaic. I will present the major topics as 4 photos.

Photo #1: Competitive Advantage

What are the features in this photo?

• Target Market – where is the competitive advantage? Is it creating an entirely new market, something that does exist? Is it redefining the current market? Is it optimizing (bring new elements together) the current market? Or is it offering a substitution for what is currently offered?

Photo #2: Customers

What are the features in the photo?

• What trends are affecting the customers competitive advantage (B2B) or the customers lifestyle (B2C)? What trends are affecting their buying decisions?, What trends are affecting how they distribute and sell their products and services(B2B)? And what trends are affecting their business model – how they do business?

Photo #3: Higher Order Benefits

• When the customer uses the product or service you sell (or intend to sell), is it a simple sale – they are buying just the item? Or is it complex – a product wrapped in services driven by the entire buying, using, and supporting the sale?

Photo #4: Competitors

• What factors are your competitors competing on? What factors are they investing in?

Now you have the photos, lets post them on the wall and see what story it tells. The way to pull it all together is to create a matrix and plot your competitors with their competitive and investment factors at the bottom – the x axis. Now on the vertical or y axis write high, moderate, and low. Once you have built this simple chart – using different colors, plot how all of the identified competitors rank on each factor. Make sure your company is included if you are currently in the game.

What are you looking for? It is called a value plot and it should indicate where each player ranks on the factors. The first revelation will be how different or how much alike are the players. My guess – after doing this over many years – everyone is bunched up on most of the items and the market leader does it better or they are doing one or two things different.

As you look at the wall, your strength and weakness will be apparent. Now what?

Well, time for some decisions. Reviewing photos 1, 2, and 3 – what is everyone missing? If you were to change your ranking from high to low, or low to high, or the elimination of moderate, how could you immediately distinguish your company from the pack and over take the leader?

There, you have a value plot of competitors! You have identified the what of Doing it in a New Way, what is next is how. See you tomorrow.

Zero to Big, Zero to Dominance – A Business Strategy

Just finished a repeat/rebroadcast of our radio show on the characteristics of dominant companies – what made their strategy a major reason for success. we conducted this research several years ago – and it still fits the new global economic reality. Hit us back with ideas or comments – we plan to expand on the list over the remainder of the week.

Element 1: Do Business in a New Way. Competitive advantage starts with Who and What; Who = industries/companies/customers with unmet or under met needs with high financial returns, What = the specific product and/or service you offer that address those needs. So far a snore because everyone is trying to achieve these ends, the difference is in How = a new business model that reduces costs and increases margins while being perceived as new and distinctive. Example: JetBlue – “bringing humanity back to air travel”

Element 2: Attack Low Cost – High Margin Opportunities. Only possible if you have a new and distinctive business model – a new HOW. Otherwise the market is crowded and competitive advantage is based on price. It is about understanding where the industry is competing and investing, and then offering something different. Example: Casella Wines – YellowTail – “make fun and nontraditional wine that is easy to drink.”

Element 3: Take Monumental Risks. Understand risks – bold in strategy, change the odds tactically – it is competing in advance – going to where the puck will be, not where it is. This protects you from the greater risk, offering the same thing as everyone else and competing on price – how safe is that? Example: Toyota and the development of Prius before there was a market; FedEx and development of overnight delivery when nobody asked for it!

Element 4: Exponential Returns. View your company as a stock broker or financial advisor – How well do they utilize rare resources – money? How well do they maximize its return? What are the returns from sales, on margin, invested capital? It is one thing to identify those opportunities, it is another to produce it. Example: Cisco has averaged a ROIC (Return on Invested Capital) of 35% for years regardless of the economy.

Element 5: Thrive on Deals, Partnerships, Alliances. It is about getting on the map, becoming seen and known, it is about building brand association with known entities. By associating with the best customers (marquee), best suppliers, subject matter experts/thought leaders you can rise with their tide. It is about building deep relationships with a limited number of high value partners. Example: Ascend Communications beat Cisco for WalMart’s business by bring it’s engineering and software teams inside the account. They leveraged the relationship to drive highly profitable sales and led to their purchase by Lucent for $24 billion.

Element 6: OutManage the Competition. It is about understanding and managing the demands of each growth stage to create a market dominating company. The long list of business failures has no shortage of brilliant ideas, it is about managing to nurture and develop those ideas to fruition that is the difference. Example: eBay – the inside/outside, present/future balance of the founders that allowed them to anticipate the puck while obsessing on execution right now.

Happy 4th +1

Most of the country is off today, except entrepreneurs and smaller businesses. Given who is working,  today would be a great start for a new series of articles on the economy and forecasting business activity. First my disclaimer, I am not an economist and have learned economics the hard way – 30 years as an executive and entrepreneur. Our rationale for this series? The professional services industry is severely affected by the economy because our products and services are not deemed essential during times of crisis. There are some organizations that do understand what we can bring, however the sale is uphill in the vast majority of businesses in North America. So here is our focus:

First, it is to upgrade our members knowledge of economics so they can understand what impact current trends will have on their offer. And..

Second it is to upgrade our member’s offer to maximize the impact their products and services will have on current and future accounts.

Enjoy your day off – if you are taking it, or enjoy the quiet to get on track for QTR 3. See you tomorrow with an overview of  the “Professional Services Economics” series.