Is there something that is of a primary importance for a business, no matter what, no matter when?
The business as any living creature foremost goal is to survive.
Imagine you are dropped off a helicopter in the tropical forests of Amazon. Your first concern will be how to survive in that new and hostile place with no or little equipment. This is exactly how your start up business looks but presented from a slightly different perspective. Or imagine you are send to Mars with all the equipment on earth which Red Bull could afford. That is probably more like Elon Musk taking on the automotive industry. However, the point is, before you think for any conveniences, bright vision, inspiring value statements, etc. one business should sort out its survival and existence in the first place. That might sound as something big businesses aren’t concerned with that much, but in fact no one is on safe ground. Big brand names and huge businesses fail when the disruptive power hits and changes the industry they operate in. Such disruptive powers could be seen in the form of disruptive innovations. Think of Nokia. If you remember there used to be such company, (a typical example for a sleeping giant who failed to predict what is coming). A disruptive power can also be experienced as a financial turmoil as for Lehman brothers and numerous small construction companies worldwide for instance.
Every business should be concerned with its survival. So is for a small start-up, at a smaller scale. Survival is somewhat easier if you are a start-up. In such cases you should have someone seriously interested in your existence from the very beginning. It could be your mum and dad who are reputable lawyers preferably, or stakeholders and interested groups like investors or friends. And this will do the job for a little while. But as the time passes these groups will question the purpose of your business intent. In order to survive, a business needs customers. From a behavioural point of view, a customer would spend money or time, or whatever the businesses seek in return for its product or service, because this company serves him value and he is personally interested in its existence.
The problem is you are not alone out there. There are other companies that fight for the same customers – these are your direct competitors. They will strive to offer better value, either through superior products or lower prices. Furthermore, there are likely to be substitutes of your product or completely different offerings that will also combat for the same customers. All these players will have suppliers of all kinds. Put the governmental framework of laws and taxes, plus social and environmental influence and things get pretty complex. This is the ecosystem of your business jungle. And the question that stands here is precisely How Do I Survive?
Competitors – a broader definition
Let’s explain this more vividly by introducing you to a practical everyday situation. Traditionally, the upper floor of a shopping center is usually the place where all food and entertainment businesses are located. So if you run an Italian restaurant there, you will probably have another three restaurants that offer value which is comparative to yours. These, respectfully, are your direct competitors. And since shopping centers are all about diversity, there will definitely be a bunch of fast food chains, ice-cream booth and the like, that satisfy the same need. These are your substitute product competitors. Finally there may be a playing ground and cinema – something completely different. However, some of your potential customers may actually decide to spend their money and time there rather than on ordering dinner at your Italian restaurant. Hence, how you define your competitors depends on what perspective you take to define the value for your customers.
Further reading: Defining the Industry – Revisiting Levitt’s Marketing Myopia / Defining Market
Let’s get back to our imaginary world in the jungle. You are off the helicopter, sweating and panting, feeling the gummy stink of the leaves of the local flora and a murmur: “you are not welcome”. What will you do?
Well firstly, I at least will look around. Study the landscape … trees, hills, waterfalls. See what is out there. In the business concept this is the strategic analysis of the external environment – everything outside the organization. Secondly, I will check my pockets and what I have – a knife, a lighter and other supplies that will last for couple of days. Then I might just ask myself: How do I feel? How fit I am? Can I climb a tree? How fast can I run? This is the internal analysis of my resources and capabilities. While doing the internal and external analysis, different options for my survival strategy will come up. Build a shelter on a tree, hide in a cave, or walk as much as possible every day. Once I have developed some options, I will have to evaluate each one of them in relation to the external environment and my own resources as well as capabilities. Because I will need more resources, I will have to plan how to obtain them. That will be my resource planning. I will have to put everything on a time schedule – by the end of the night, in 5 days and so on. As I keep going, I will gather more information about the environment, develop new skills and acquire more resources. Hence my current position will change, as well as my vision about the future. These basic principles of an individual survival are all applicable to companies, and are the foundation of strategy and strategic marketing. Once I have my strategy, I have clear understanding of what my position is right now and I have a vision of where I want to go, what I want to achieve and how I can achieve it. Obstacles and problems are now seen as opportunities. Everything that I do has a sense of meaning and is pointed towards achieving a particular desired goal. Once I have that solid soil beneath my feet, I can crack on with the everyday work. The hard work. These are all operational things that I need to do. In a business sense, this actually represents the work that has to be done on a daily basis and there is nothing inspirational in it. Its pure sweating, that’s all. And that work is as important for your survival as the strategy you pick. In fact, the worst decision is the decision not taken. So, for every business and person it all comes down to the question: Is it me who orchestrates the future of my business, or am I leaving it to destiny?
If you are the type of manager and person who prefers to make decisions and take action, check out our “survival kit” for achieving sustainable competitive advantage in the Strategy Category.
Levvit, T. (1960), Marketing Myopia, Harvard Business Review, July-August 1960 [Link]
Well done Nase!