You cannot be everything to everyone. I think we all understand that. But why do so many businesses try to be just that?
They do it because they lack the certainty in their offering and a clear understanding of the needs of their targeted customer-base. They see a rival introduce a new product feature or service and they panic that this will give that rival an advantage that could take market share and customers away from them. So, they divert from their course and sometime later (months or years) they too offer the same product feature or service.
The result is that competitors in a sector end up looking like each other. In their concern to not risk losing out they emulate each other and become exactly pretty much the same. Innovation and differentiation has been washed out. Eventually, these companies end up competing on price alone.
Many companies, such as supermarkets or consumer product manufacturers, do very well competing on price from a revenue perspective, but the downside is a drop in profit margin. Electronic component distribution for example, has seen its profit margin erode dramatically over the last twenty years and global distributors achieve net profits of around 2 to 3 percent only.
Strategy gives you choice. It gives you the choice to not only create your own differentiating products and services, but to make trade-offs – to be able to choose not to do something.
A good strategy, together with the leadership qualities to make it happen, will give you the certainty and conviction to stay on the path you’re on, to focus on meeting the needs of your specific, ideal clients and to not panic and react to something a rival does.
That way you don’t have to compete on price and, possibly at the risk of missing out on some short-term revenue gains, you don’t lose out in long-term profitability.
If you need help developing a differentiating strategy then contact me to see how I can help.