Every business today is thinking about the best ways to compete in their marketplace and addressing opportunities that will most effectively help them meet their growth objectives. More specifically, this strategic activity can help companies determine their best bets and avoid the clunkers.
Our research has found that many companies are attracted to large markets or industries because of their magnitude of potential found there. What’s more difficult to spot are the opportunities that may be underfoot that could be expanded more effectively using a niche or boutique strategic approach.
Businesses who 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. Their large inventory of these products in their warehouse affirmed their conviction and dedication to them. However, our research discovered that 15% of these products were driving 85% of the business’ revenues and therefore we recommended retiring the products that did not have a 10% 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 is nearly always far 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. This is often not a good indicator of the future however, and 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 you have accomplished, but this is not the best indicator of what will happen next. Far better indicators can be employed such as customer satisfaction, brand health, and number of complaints and returns. Determining what is causing success and failure is a far better analysis 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 storing them 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 thinking and 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.
