Every business owner today is thinking about the best ways to compete in a given marketplace and address opportunities that will most effectively help meet growth objectives. More specifically, this strategic activity can help businesses determine the best bets and avoid the clunkers, such as adding keywords like “one day delivery” to you website to simply get traffic.
Our research has found that many companies are attracted to large markets or industries because of their magnitude of potential. What’s more difficult to spot are the opportunities underfoot that could be expanded using a niche or boutique strategic approach.
Businesses that are known for a broad range of services or products often have the most difficulty crossing into a more specialized strategy. One company we worked for had 150 products that they were quite proud of having brought to market. The large inventory in their warehouse affirmed their conviction and dedication. However, our research discovered that 15 percent of these products were driving 85 percent of the business’ revenues, and therefore we recommended retiring the products that did not have a 10 percent revenue contribution, thus effectively reducing their offerings to 20. This allowed them to sell off their raw materials at a healthy profit and create additional savings by reducing their inventory management expense.
Here are three important tips to keep in mind when designing your new strategies for 2016.
Focus on your niche, not your market potential
Thinking about winning big in a large market is exhilarating, but trying to fund effective programs to build market share in them requires enormous resources because it is such a large market with so many needs. Take the total market space of technology and consider trying to become the major player in the area such as relational database management. Given the enormous established players in this area, such as Oracle, it’s nearly always more prudent to develop a niche product, such as a companion software management program that couples with established relational databases within a particular market niche.
Establish goals beyond sales revenues
The easiest key performance indicator to track and measure is revenue, so that has become the overwhelming determinant of success or failure. However, this is often not a good indicator of the future; yet, leaders continue to use it when deciding what to fund in the coming months or years. Yes, knowing your revenues is essential and tells you what has been accomplished, but this is not the best indicator of what will happen next. Far better indicators are customer satisfaction, brand health, and number of complaints and returns. Determining what is causing success and failure is a better analytical tool than simple revenue and profit calculations.
Don’t be overwhelmed by your competition
Every buyer of any brand is constantly on the lookout for something more effective and relevant than what they are using now. The popular note-taking and productivity application Evernote reported 150 million paid premium users in 2015, up from 101 million in 2014. Obviously, Evernote didn’t invent note-taking or the concept of driving higher productivity, but what they did invent was the convergence of note-taking and storage in an interesting and creative digital environment. Evidently, when considering all of the competition that was already in this market space, Evernote concluded that a new and relevant product that simplified people’s lives would be successful in spite of the heavy competition in this space.
By remaining flexible to new ideas, you can significantly improve your business and growth curve. Often, larger organizations have the most difficult time adopting change because they have the most to lose. On the surface this sounds reasonable and logical until you consider they also have the resources to make smart bets in multiple niche markets to drive new revenue growth. Smaller organizations are often forced into a niche mentality that sometimes produces tomorrow’s leaders.