Small Business for Dummies. Veechi Curtis
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In this section, I help you to apply the concept of strategic advantage to your business. If you’re struggling to come up with anything that’s special about your business — maybe you haven’t stumbled on that winning idea quite yet — please do persist. The process of identifying your strategic advantage is even more important for you.
Uncovering your inner mojo
One good way to broaden your sense of where your strategic advantage may lie is to look at your existing customers and their buying patterns. (Or, if you haven’t started your business yet, imagine what these answers might be.) Ask yourself these questions:
When customers come to me, why is that?
When potential customers go to my competitors instead, why is that?
When potential customers make an enquiry but end up not purchasing my goods or services, why is that?
Are the benefits I offer (or intend to offer) to my customers unique?
I like asking these questions because getting the answers usually means engaging in some market research. This naturally crosses over with competitor analysis, which I talk about later in this chapter.
Asking three key questions
For a strategic advantage to be really worth something — in terms of the goodwill of your business or your likely financial success — this advantage has to be something that you can sustain over the long term.
I like to think that any really strong strategic advantage should have three attributes:
The advantage can’t be easily copied by others. The ideal strategic advantage is one that’s really tricky for your competition to copy. Examples are a winning recipe or flavour (think Coca-Cola), a unique synergy of skills within your organisation, or expert knowledge that few others have.
The advantage is important to customers. Think of the farmers who switched to growing organic produce in the early 1990s, before organics became more mainstream. Many of these farmers did really well because organics were so important to particular customers. (And although the advantage was relatively easy to copy, many authorities required a seven-year lead time with no chemicals before a farm could be officially certified.)
The advantage can be constantly improved. If you can identify the thing that gives you an edge and constantly work this advantage, you have a strategic advantage that is potentially sustainable in the long term.
Growing your advantages over time
Sometimes your strategic advantage isn’t something that’s blindingly clear from the moment you set out in business, but instead grows over time. Your skills grow as you develop in business, and your understanding of how you’re different from the competition consolidates as well.
From time to time, you can review your strategic advantage by asking yourself these questions:
What am I naturally good at? (Or what is my team good at?) Where do I feel I have been particularly successful in my business?
What do I offer to my customers that’s either cheaper than my competitors, better value or unique in some way?
Does a point exist where what I’m naturally good at connects with what I do better than my competitors? If so, how can I build and develop this?
Making sure a demand really exists
One common mistake people make when starting a new business is that they’re overly optimistic about the demand or interest in their product or services. A sunhat with a solar-powered fan on top may seem a good idea, but is anyone going to be seen dead wearing such a thing? In the ideal world, find a way to test the demand for your business idea before you invest too much capital or time in its development.
Understanding How Risk Relates to Gain
In most situations, the business with the highest potential strategic advantage is going to be the business that requires the most capital or involves the most risk of failure. For example, in Table 2-1 earlier in this chapter, the business with the highest number of yeses in the strategic column is the toddler safety business. This business has the advantages of being a new idea, and something that clearly adds value for customers, but involves fairly substantial risks. Because this is a new service, people aren’t going