Six Tips To Build A Successful Business

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1.0 TARGET NICHE MARKET

Most of us dream of building a company that would be called the next Amazon or Apple. However, we have to realize that Amazon or Apple started small before becoming influential in its field.

  • Macintosh began its business by targeting a Niche customer base(Graphic Artists/Designers) and went on to dominate the market.
  • Documentum introduced the ‘Electronic Document Management System(EDMS)’ in 1993 by targeting a niche — Regulatory affairs department in Fortune 500 pharmaceutical companies(Where the User pain is high — They need to file a minimum of 250,000 to 500,000 documents).
  • Sam Walton, initially, started Walmart in small towns that had a population not more than 5000.

Amazon’s Earlier Niche

In 1994, Jeff Bezos, after being jolted by Internet’s 2300 percent annual growth rate, began to think about building a true ‘everything store’ online. But he knew that developing such a store is impractical, at least in the beginning. So, to position his service in people’s minds, he had to focus on a niche.

  • Books were a $10 billion industry in the united states in the year 1994. A considerable percentage of people had already been buying books through mail order or postal services — A potential customer base with a need for convenience and also familiar with mail order deliveries.
  • Generally, most of us would have a “Fear Of Failure” while trying out any new things. Consumers at that time had little exposure to online buying. They had this fear of buying goods of unknown quality. But books were pure commodities. A copy of a book in one store was identical to the same item in any other store. So, the customers had no Fear of Unknown. They knew what they would be getting.
  • At that time, two distributors were the primary suppliers of all the books & this would help Bezos not to waste time approaching individual publishers.
  • Millions of books were in print worldwide that even a bigger retail store cannot stock — too many SKUs — a potential advantage for an online store since it had no such limitations. Though Jeff Bezos could not build ‘Everything store’ in the beginning, he could catch the essence of the possibility of ‘unlimited selection’ in the books category.

2.0 BRAND POSITIONING & VALUE PROPOSITIONS

The next step to build a business is to ponder how to occupy space inside the mind of a consumer, which is called Brand Positioning. In other words, it is how a consumer perceives a brand in lieu of competing brands.

  • If you ask a consumer to name a cola drink, Coke’s name will spurt out.
  • If you ask a consumer about a toothpaste that comes immediately to the mind, then, most probably, Colgate’s name would pop out.
  • If you ask about a photocopying brand, Xerox’s name will burst out.
  • If you ask them the name of an energy drink, the red bull name will rush out.
  • Coke is the first cooldrink to enter the consumer’s mind under the Cola category.
  • Seven-up is the first cooldrink under the Un-cola category.
  • Redbull is the first cooldrink under the ‘energy drink’ category.
  • Xerox is the first brand under the ‘photocopying’ category.

BRAND POSITIONING OF WALMART

In the early 1960s, Sam Walton was running a chain of independent variety stores in smaller towns. He observed that the discounting store concept was gaining traction and felt that it would soon disrupt the variety stores business. To survive, he realized that he had to close the variety store business and open a discounting store as early as possible.

  • No or little competition/weak competing forces
  • It should match with our core strengths and values.
  • Always Lowest Price — Most of the small-town customers preferred to buy products from a place where it would be priced lower than other sites.
  • At that time, retailers were selling products with higher margin — A retailer would sell a product costing 80 cents for $1.20. Sam Walton, during one of his research work, found out that by pricing the product at $1.00, a retailer could sell three times the volume & the profits would be much higher.

3.0 UNDERSTANDING YOUR CUSTOMERS

One of the reasons behind Walmart’s success was Sam Walton’s knowledge of customer’s needs, desires, wants, and pains. He learned so much because he lived among his customers as one of them.

OBSERVING CUSTOMERS -STARBUCKS

Jerry, Siegel, and Gordon, the founders of Starbucks, were so knowledgeable and passionate about coffee beans, the wide-variety taste palettes, and the roasting process. They were one of the coffee connoisseurs. Through coffee interests, they often met other coffee lovers and interacted with them. They loved spending time in discussing coffee.

OBSERVING CUSTOMERS -USAA

The USAA offers banking, investing, and insurance to people and families who serve or served in the U.S Military. One of the reasons for the organization’s success is its employees and their culture. The company has asked every employee to walk in the customer’s shoes, think everything from the customer’s perspective, and empathize with them.

4.0 HIRE RIGHT PEOPLE

“If you have the right people, then the problem of how to motivate and how to manage people properly goes away” -Jim Collins.

NETFLIX

“Building the muscle to hire great people is a huge competitive advantage.” -Patty McCord.

  • Mitch Lowe(One of the earlier hires) had spent thousands of hours observing consumers. He ran a ten store rental chain and built websites for video rental stores before joining the Netflix team.
  • Eric Meyer(the designer of the first Netflix website) was extremely passionate about his work.
  • Ted Sarandos(Netflix’s chief content officer) helped turn Netflix into an entertainment powerhouse. He was a college dropout. He had in-depth knowledge about movies as he had worked in video stores for years before joining the Netflix.

5.0 ACTIVITIES & THE STRATEGIC FIT

Now, the next crucial part -For your new business venture, you have chosen a niche market, hired the right people, and discovered brand position & value proposition.

6.0 TRADE-OFFS

“A product for everybody is a product for nobody”

McDonald's

McDonald’s earliest core value proposition is to deliver a Quality Hamburger as quickly as possible and at a lower price. The company avoided any activity that would affect its core values.

CONCLUSION

If you are planning to start a business, hire right people, find a niche market with the maximum pain, develop a deeper understanding of your customers, discover their needs that would match your business’ strengths & core values, position your brand inside a consumer’s mind by defining the value proposition distinctively, design & develop activities to create a strategic fit, and avoid activities that wouldn’t enhance the value proposition.

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