Tag Archives: Creativity

Competitive Edge

In his book, The Road Ahead, Bill Gates of Microsoft writes of “friction-free capitalism” made possible by developments in communications, chief among them the Internet and its World Wide Web. In this context, “friction” is everything that keeps markets from functioning as the “perfect competition” of economics textbooks. This friction can be a function of distance between buyer and seller, costs of overcoming this distance, and incomplete or incorrect information.

Friction manifests itself by causing barriers to entry for new competitors, limiting the number of outlets from which the consumer has to choose. Large companies, with multiple sales outlets, and economies of scale, have greater power to direct the marketplace.

The degree of friction in the developed world has been decreasing for some years now. Affordable air travel, overnight delivery, improved telephone and fax communications have shortened distances. Credit cards and toll-free numbers have spawned at-home shopping from sources across the country.

The Web has taken the friction in our economy down another notch. In principle, we can sell products and services to a worldwide audience as easily and effectively as our largest multi-national competitor. In principle, we can sell products and services to a worldwide audience as easily and effectively as our largest multi-national competitor. In the friction-less economy, the challenge of differentiating ourselves from the competition becomes even greater.

In the friction-less economy, the challenge of differentiating ourselves from the competition becomes even greater. Successful small businesses tend to be those who can find some competitive edge, even when their product or service is similar to those around them.

Marketing professionals often call a business’ competitive edge their “unique selling proposition”, or USP. Pinpointing and refining one’s USP, however, is not a simple matter. An approach is unique only in the context of our competitors’ marketing messages.

Some marketing messages go beyond product and service characteristics. For example, Charles Revson, founder of Revlon, insisted that he sold hope, not makeup. Similarly, United Airlines sells “friendly skies”, and Wal-Mart sells “always” the low price. Do these slogans convey how each company views their customers? Does their selling proposition appeal to your preferences?

Sharpen your USP:

  • Put yourself in your customer’s shoes; satisfy their needs, not yours.
  • Know what motivates behavior and buying decisions.
  • Find the real reasons people would buy your product instead of a competitor’s. Ask them!
  • “Shop” the competition, be open-minded about your product, and never stop looking for ways to make your product stand out.
  • Try now to recast your business idea in terms of its competitive advantage. Prepare an industry analysis (size, customers, trends, and competitiveness). Identify what you see as your specific market, and estimate the share you think you can capture.

    The Web can be a powerful research assistant. Virtually every major business puts product and service information on the Web, including business directory services and magazines.

    Search engines can help in improving your understanding of your industry, and the key success factors. Test the resources available on the Web. Visit sites of major companies in the industry, where appropriate. Search the archives of business magazines for articles that give background and statistics.

    John B. Vinturella, Ph.D. has over 40 years’ experience as a management and strategic consultant, entrepreneur, and college professor. He is a principal in the business opportunity site www.jbv.com and its associated blog. John recently released his latest book, “8 Steps to Starting a Business,” available on Amazon.

    Innovation

    Abstract: Innovation, in a business context, is generally thought of as the product or application of creativity. Peter F. Drucker suggests that innovation “is the specific instrument of entrepreneurship”.

    Mr. Drucker further suggests that there are seven sources of innovative opportunity. Four of these relate to a specific industry or service sector: the unexpected; the incongruous; process needs; and structural change. The other three relate to the human and economic environment: demographics; changes in perception, mood, and meaning; and new knowledge.

    Let us observe some of these factors at work in a coffee shop venture. The unexpected factor in the recent success of gourmet coffee shops is the willingness of the consumer to spend two or three times the cost of a generic cup of coffee for exotic, flavored or brand-name coffee. An incongruity is the popularity of fat-free desserts (“healthy” indulgence) to go with that coffee. The structural change in the industry is the emergence of franchises.

    Environmental changes have also contributed to this phenomenon. As the “baby-boomer” generation has aged, the preferred place to meet has moved from the bar to the health club to the coffee shop.

    Let us consider information about some current trends to see if we can relate them to potential opportunities in the context of Professor Drucker’s categories. For each, see if you can possibly find a niche on which to build a business:

  • The unexpected The International Association for Financial Planning is observing a rapid (to the point of unexpected) increase in calls requesting referrals for financial planners. A spokesperson for the IAFP says, “People are realizing that financial planning is not just for retirement or saving for a child’s college education; it’s for all stages of a person’s life”.
  • The incongruous Many Americans are feeling pressed for time, incongruously wishing to lead simpler, easier lives without giving up those activities that take the most time and effort. The opportunity lies in offering personal time-saving products and services that relieve these people of tasks that they find less than fulfilling, not worth the time, or unpleasant.
  • Process needs Individuals and businesses are spending unprecedented sums of money to acquire the education, training and skills necessary to remain competitive in a rapidly evolving marketplace, creating opportunities in consulting and training.
  • Structural change The health-care industry will flourish because of an aging population, myriad technological advances and people’s expectations of readily available medical care. One of the industry’s fastest growing segments is home-based health care, which is well-suited for entrepreneurs because of its ease of entry.
  • Demographics The aging population referred to possesses a combination of leisure time and discretionary funds that makes them a great market for new ventures in services relating to their comfort and recreational needs.
  • Changes in perception, mood and meaning The amount of money that citizens and businesses spend on security products and services is growing rapidly; the preferred method for many forms of purchase is increasingly becoming the Internet.
  • New knowledge In 1996, for the first time, computer sales outnumbered television sales in the United States.
  • Do any of these sources of innovative opportunity suggest an entrepreneurial niche to you?

    John B. Vinturella, Ph.D. has almost 40 years’ experience as a management and strategic consultant, entrepreneur, and college professor. He is a principal in the business
    opportunity site www.jbv.com and its associated blog. John recently released his latest book, “8 Steps to Starting a Business”, available on
    Amazon
    .