Strategy - Industry Structure and have you even thought about it???

Social media has literally changed the landscape of our world today. It has altered our personal lives and our business ones as well. On LinkedIn we are inundated daily with the next big thing for our business, for our careers, and even for our personal inspirations. We are motivated and pushed to "go for it" because if you don't go for it you will regret it forever.

Not only are there "inspirational" influencers for us to follow, but also a myriad of marketing experts and coaches ready to save our businesses and careers for $3k a pop! Recently, while being cold called and spammed, I started thinking about that dynamic more closely. In some ways, business is business and so certainly if you understand marketing, sales, or growth strategies many of these will carry over into lots of industries.

But have you given any thought to your industry and its unique design? When I say this I am specifically referring to how companies compete in your business. At the heart of your marketing, sales and growth strategy is essentially the how to beat your competition. Your competitive advantage is at the core of how you grow your business...isn't it?

Or do you believe the hype that somehow intimates that we are living in this bubble world and there is enough bread for all? Even if there was why would your competition not try to get yours? Michael Porter,  one of the Grand Masters of Strategy, has defined Industry Structure as 5 competitive forces famously.

Competitive rivalry

Bargaining power of suppliers

Bargaining power of customers

Threat of new entrants

Threat of substitute products or services

When you view these 5 forces, Porter also gives 3 "generic strategies" for creating competitive advantage and fighting these forces. Cost leadership, differentiation, and focus as an adder to the first 2. Meaning you can fight for low cost or differentiation in the overall market, or use those strategies in a focused, niche market.

If we apply those basic strategies to my own industry for example, it allows a level of transparency and clarity to the fight. This is the type of analysis, in concert with a more common SWOT analysis, that I undertake in comprehending my own market share. My industry is Temperature Controls service and installation. Installation means plan/spec work type construction work.

Let's walk through it. An owner wants a new facility, say a hospital. She goes to her favorite architectural firm and hires them as a consultant perhaps on a fee basis. The architect either has in-house engineering or hires that out. Then a GC (General Contractor) gets chosen or is in the same boat as the rest of us! For this example, the GC is chosen based on past performance.

At this stage, the GC, Engineer, and Architect work up a budget for our owner. She agrees to the sum and now we're moving. The architect and engineer draw up the facility and the GC figures out how to get it built within budget. When the plans are complete the GC sends them out to Mechanical (MC) and Electrical (EC) contractors among many others.

The MC in this case would then send the RFQ (Request for Quote) to someone like me for the HVAC Controls portion of the bid. Meanwhile the EC would also send an RFQ to me for the Fire Alarm, Security System, and Lighting Controls portion of the bid.

We would review drawings, price the drawings, do risk reviews to make sure the drawings meet the prerequisite codes, define the costs and create a proposal. On bid day, a predetermined time to submit typically Tues-Thurs between 12 - 2, we would submit our bid or proposal.

It sounds like a fairly straightforward process, but is it?

I mean, its essentially a cost strategy correct? Low bid wins! However, that isn't necessarily true. There are an endless combination of factors that may come into play. The Department of Defense actually uses a number of evaluation factors in the DFARS (Defense Federal Acquisition Regulation Supplement) including past performance and price competition on a weighted scale. In the private sector, its a bit less prescriptive! That can be good or bad, depending on your...you guessed...strategy!

Even though there is a static process, prescribed, written and catalogued by the AIA (American Institute of Architects) that process does very little to derail human intervention. People will buy from people. They will buy from those they know and respect. They will seek out the lowest price which equates to the greatest value.

Our job in sales is to create the value, communicate the value, and over-ride the efforts of our competition that is doing the exact same thing. For me, choosing to be the low cost leader is akin to being Lando Calrission winning a floating city in a card game, its risky! Beyond that it takes dedication to the strategy.

I grew up and live in the land of Husker football. We gained fame as an option football team. The key to running the option is that your entire offense is built on the option. You can say the same thing about the Power I, the Wishbone or even the Spread offenses you see today.

You must commit to it. Why? Because the personnel, the skills, the type of talent you need for each is unique. The complementary abilities and how they work together is also unique. The spread doesn't need 300 lb Offensive Lineman but the Power I almost certainly does! The Generic Strategies are the same. If you are going the Lando low cost route, then it must be your identity, your DNA of doing business. You have to be efficient, productive, and finding every possible way you can to combat costs.

If you do that, and charge only a little less than your competition, you can be highly profitable. Or, you can set yourself apart with differentiation. This differentiation can be in your product or service, it can be how or what. You can set yourself apart with the greatest customer service ever, the shortest lead time, or the best warranty but whatever it is, it needs to be the best and it needs to be repeatable. If you do that and you can't be imitated, you can charge more money than your competition.

I like to think of this as the Mercedes approach. No one walks into a Mercedes dealership expecting to pay Buick prices. Mercedes has differentiated themselves with branding. Yes, social media's special superpower...BRANDING. It is a differentiator, perhaps too much so at times. 2 things about the differentiator you must understand.

1, it must actually be different and 2, people have to care or want the difference. When you think about your personal branding, are you truly accomplishing that? If you do a video telling folks how mistreated your childhood was, or how you hired the imperfect candidate, is that actually different? If you wear a clown suit in a LinkedIn video, yes it's different but do people actually care? I mean beyond your spouse and closest "friends" that are also doing clown suit videos.

Branding, although just one example, is important because your it needs to match your industry structure and competition. It needs to create a competitive advantage. If you're selling TV sets in the 1980's and you bash one with a baseball bat in a commercial. Well, that's branding and it's industry specific. It's also a differentiator all the way until it becomes a punch line in  a movie because every TV set store has a guy bashing up consoles!

Then it's not only no longer a differentiator, it has now evened the playing field. A gal in a pants suit, with a monotone voice and a fair price is now the differentiator in that market. She will come across as sane and serious and nothing like all those other con men attempting to take advantage! Get it?

Think about your Industry Structure before you embark. Think about what makes your industry and competition unique. Then figure out who is using a cost strategy or differentiation strategy against you. What is their branding? How do they represent themselves in a way that aligns with their strategy? Should you imitate it since they have taken the startup costs already or should you develop a new one?

Now you're thinking about strategy!