Be Cautious When Specializing in a Niche Area!

Being a pioneer in a niche service offering can help you stand out. If you were developing anti-virus software in the 1980s when the average computer user never even heard of a computer virus, then your name would be popping up on countless computer screens now, instead of John McAfee’s name.

Companies that exclusively specialize in emerging fields definitely get noticed when that specific service is required. Frequently, bid executives will pick a small business for a teaming partner, saying “this company specializes in X. It’s the only thing they do.” Having a very niche offering may make you unique, but it may also exclude you from higher volume swim lanes. This is where you must balance the number of opportunities and the number of competitors within a specific service area.?Just remember that you select the offerings that provide you the best probability of success and not the largest number of bid opportunities.

If considering a niche service area, this is where you must be careful.?You want to be on the “leading edge” of a niche field and not the “bleeding edge.” If you must educate your potential customer of their need for your service or offering, then this is the “bleeding edge.”?Keep away from these offerings! You will never obtain enough customer “face time” to educate them on your offering. Besides, “new” offerings may appear too risky to obtain from a small business. Government decision-makers are inherently risk-adverse. Nobody gets fired in the Federal Government for doing what has always been done.

Government Contracting Academy founder, Randal Wimmer, has deflated many overly ambitious technology startup founders.?When selling to the Federal Government, you will make orders of magnitude more money selling the “old” aspirin rather than the “new” cure for cancer. The “corporate culture” in much of the Federal Government contracting space is ridiculously risk adverse

The book?Misbehaving: The Making of Behavioral Economics?by Nobel laureate Richard H.?Thaler provides a great example regarding excessively risk adverse cultures. The author asked a room full of executives if they would take on a project that had a 50% chance of making a $1 Million dollars but also had a 50% chance of losing $500K. Middle school math would tell you to take that bet every time!?However, the consensus in the room was “heck no!” To them, the 50% probability of a good year-end bonus was not worth what they considered to be equal odds of being fired. The CEO of the company was dumbfounded by their answers but had nobody to blame but himself for creating such a risk-adverse corporate culture.

Bottom Line: When providing a service, you must balance the number of competitors and the number of opportunities. There’s a difference between providing a niche service and a “new” one.?Simply stated, the Federal Government is largely risk adverse and very slow to try “new” solutions.