Market share comes at the expense of competitors. Someone wins the business, someone loses it. This is a fundamental business reality. Hewlett Packard (NYSE: HPQ), for instance, developed a growth strategy based on three Cs: customers, competitors and contribution.
The key to this company's differentiation strategy was to first fully understand the needs of its target customers, separating them into qualifiers and differentiators. Qualifiers are the factors that everyone must have to succeed in the game. For example, a furniture retailer must have adequate selection, a competitive price and a showroom. The reality, though, clearly indicates that rarely does a company compete successfully in the marketplace solely on the strength of its qualifiers. Only one company can be the low price leader, and aiming for that position can be quite risky to the bottom line.
It's important to define differentiators by thoroughly understanding the target customers' pains and frustrations with the products and industry, as well as the fear about switching providers of products and services, the real obstacle to winning the business. The first challenge, then, is to intimately learn your target customers' needs, pains and frustrations, and fears of switching.
The second critical component in developing a successful growth strategy is competitive analysis. An organization must honestly address a series of strategic questions. These include who you compete with regularly; their strengths and weaknesses at addressing your audience's needs, pains, frustrations and fears of switching; the key factors you possess that make you, your product or service unique in the industry. Typically, companies with revenues under $100 million invest far too little in assessing their own strengths and weakness and identifying key growth opportunities, in spite of a significant short- and long-term payback.
The third "C" is contribution, the competitive advantage that you are going to develop, the contribution that you are going to make to your customers that will truly differentiate and distinguish you. Again, an accurate appraisal of your strengths and weaknesses will help develop a strategic approach. For example, what is it about you, your product, service and organization that distinguishes you from your competitors? Equally importantly, how will you articulate this in a compelling manner? How will you communicate your advantage? An easy way to test how well you do this is to compare your company's brochure and Web site message with that of your competitors. Do you have a true competitive advantage? What is it that you say that your competitors cannot say? Is there any real difference between your message and theirs?
Jerome's Furniture is a prime example of positioning an organization based on a combination of the three "Cs." Most furniture retailers advertise quality, selection and price. Jerome's recognized that, over the past several years, delivery proved to be a consistent frustration that often drove consumers from one vendor to another. The problem was simple: You can never get what you want when you want it! Jerome's recognized this frustration as an opportunity, and set about to offer "same day delivery." Obviously, there were a lot of details to work out. To achieve its market advantage in this one key area, the company built a huge new warehouse and integrated systems to manage daily logistics. To punctuate its strong position, Jerome's changed its ad message from "quality, selection and price" to "same day delivery." It aired commercials about the amount of inventory they had on-hand, the square footage and central location of their warehouse and fleet of trucks, all things difficult for a competitor to match.
One strategy that can be particularly helpful for the micro-business to establish effective strategic partnerships. It's difficult for the micro-business owner to win against its larger competitors; offering a low-ball price without the requisite efficiencies may win the business, but not achieve profitably.
The Carlsbad Chamber of Commerce promotes a concept called "netweaving." Simply stated, this promotes the attitude of connections; looking for ways to connect solution providers and potential partners to prospects with a need, without worrying about what's in it for you. Using this concept, a mixture of chamber members with compatible skill sets were joined together. The combined team included a landscape architect who does work for the Hotel Del Coronado and La Costa Resort & Spa, a high-end wall treatment artist/designer, a high-end iron sculptor and a general contractor who specializes in high-quality remodels. Creating a strategic alliance allowed these four businesses to look for both residential and commercial projects for each other and as a team, compete with larger home and office design companies, and leverage their business development activities, all toward the end of gaining market share.
In the most fundamental terms, a winning competitive growth strategy fits companies of all sizes. It has worked with mid-size general contractors, a concrete and roofing company, and several manufacturing and professional services companies. It's even been successful with growth-oriented small businesses with revenues under $1 million. It should not be overlooked, however, that executing on the target strategy is often more challenging than developing it; but without the execution, the benefits never materialize.
Sando was formerly strategic planner for Hewlett Packard, and worked at other high-tech companies developing domestic and international growth strategies, including acquisitions. He currently is a principal at Strategic Results Group, working with small to mid-sized enterprises on developing and executing growth strategies.