The secrets to an enduring business

A reality for all businesses is a trend towards commoditisation or irrelevance.  

Whether your business is based on products or services, without ongoing work by you and your team, you will start to become less and less distinguishable from your competitors. The irony is that the more valuable your business is, and the larger your potential market, the more incentive there is for others to copy you.

Even worse than commoditisation is irrelevance. If competition doesn’t get you, changes in consumer preferences, technology, regulations or other factors probably will.

With a sound business strategy, you can reap the benefits of your business today and avoid commoditisation and irrelevance in the future.

The same creativity that goes into designing and bringing your products and services into the world should be put into building a great business model.

Counter-positioning

Most of you will have a Netflix subscription, if not you are surely aware of it. However, in 1997 Netflix was a tiny startup coming up against Blockbuster, at the time the biggest video rental chain in the world.

In Jiu-jitsu style, Netflix were able to use Blockbuster’s own business model against them. In total, Blockbuster earned 16% of its total revenue from late fees. Losing this revenue was highly unattractive to Blockbuster, and the tiny startup was let to grow with it’s zero late fee for DVDs by mail - no matter how long you keep them. By the time Blockbuster responded it was too late, and the company finally went out of business.

This is the power of counter-positioning - making your competitors take a move that is highly unattractive to them. In the short-term it may mean losing revenue, upsetting existing clients or prioritising resources in a way that doesn’t fit with the new business model.

Not bigger and better, just different

In the competitive (and often ego driven) world of business there is generally too much talk about being the best, outcompeting the competition, and other such talk. This assumes that the world is “zero-sum” with winners and losers, but this is far from the truth. In truth, this thinking is the start of the cycle of commoditisation.

Rather than striving to be better than your competitors, it’s enough just to be different. For some customers you won’t be the best - and that’s ok. For others, you will be the best as you serve their specific needs better than your competitors. These customers are more loyal, prepared to pay more money and often will advocate for your business among their friends and colleagues.

Some ideas for you to consider in your business:

• If your competitors offer a diverse range of products or services, consider focussing on a high-value niche that is underserved and focus your resources into that.
• Change your pricing structure - if your competitors are selling high-value items as an up-front payment maybe you can provide it as a service on a monthly subscription
• Change who pays - consider who benefits from your service, and change who pays (we see this all the time with tv and facebook ads)
• If you provide a service that’s highly labour intensive, consider how you can turn it into a product that your clients can self serve

The list will be as long as your imagination.

The secret for a durable business

All businesses trend towards commoditisation or irrelevance, but it doesn’t need to be this way. The strength of counter-positioning comes from the unwillingness of businesses to abandon their “cash cows”, and taking a hit in the short-term.

Some of the most enduring businesses intentionally innovate in ways that they know that will kill their existing business - they figure if it’s not them it will be someone else.

… and so it should be for you. It might feel risky to abandon a business model that has served you well and profitably for many years. However, if you see your industry trending to commoditisation or irrelevance, the most risky thing you can do is maintain the status-quo.

When it comes to business, “If it ain’t broke don’t fix it” is dangerous - by the time it’s broken, it’s already too late (just ask Blockbuster or Kodak).

This is an article for Business Blindspots Tasmania. To ensure you receive regular updates from expert business advisers across a range of areas follow our LinkedIn Group