This is module 1 of the Pillar 3 Your Strategic Market Position.
Introduction To Your Strategic Market Position
Willie Sutton was a famous bank robber in the USA who robbed over 100 banks and spent half his adult life in jail. A reporter asked him “Willie why do you keep robbing banks?”
He famously replied “Because that’s where the money is!”
Why should you care about the contents of Pillar 3 and spend time thinking about your strategic market position?
Well to quote Willie again…
“Because that’s where the money is.”
Choosing Your Market And How You Position The Business Within The Market
Your choice of the market you compete in and how your position yourself to attract customers away from competitors is a vital but often overlooked issue.
It makes a huge difference in whether owning a successful business becomes an easy or difficult challenge.
Some of this module is theoretical and depending on your business, it may seem overly complicated and difficult. I know you’re not General Motors, WalMart or Microsoft.
Stick with it and you will get plenty of insights into your own business, your customers and your competitors.
If you own one of the two shoe stores in a small town, this matters.
If you compete nationally with nine other similar businesses, this matters.
If you business benefits from the prosperity created by a local car plant or a similar dominant business in your local area, this matters.
If you can sell globally and want to find your own special place in the world, this matters.
Are You Attacking Or Defending?
If you haven’t reached are long term profit targets, your focus through this Pillar on Your Market Position will be on looking for profitable opportunities whilst being wary of potential setbacks.
If your business is giving you the good living you want, then this is the Pillar that helps you to discover threats early, anticipate their impact and adapt your business.
The economist Joseph Schumpeter talked about innovation as a wave of creative destruction. What was successful becomes unsuccessful as the world changes.
Technology is a big driver of this change and you can see that with recorded music products moving from long playing vinyl records to cassettes and then to CDs and now to the downloading of mp3 digital files.
Plenty of other changes can happen including the fickleness of customers. They get bored and move on to the next big thing.
Scanning for these threats and adapting is a defensive strategy. Your main concern is protecting what you’ve got rather than looking for more.
Your Strategic Market Positioning: What’s It All About?
- My business strategy training
- The Big Picture – Environment, Customers, Competitors & You – “Your Special Place”
- “Strategy is how you achieve your own objectives by winning the hearts, minds and business of customers by out-thinking and outmanoeuvring competitors.”
- Fit between external positioning and internal capabilities
- “Finding the best pots of money in the field”
In Pillar 3 we are going to tackle your business strategy which means looking at the big picture of:
- How you fit into the wider business environment and how changes are likely to affect you in the foreseeable future.
- How to match up with your customers needs, wants and desires
- How you compare to your competitors and ow you can beat them in attracting, converting and keeping the right kind of customers.
Strategic Market Positioning is a posh business school way to describe your special place in the market where you can stand out.
Talking of strategy I had better define it since you can hear the word used a lot to make something sound important – a solution doesn’t sound as important as a strategic solution.
“Strategy is how you achieve your own objectives by winning the hearts, minds and business of customers by out-thinking and outmanoeuvring competitors.”
So strategy is about you and what you want – we looked in detail at this in Pillar 2 on Your Work Life Balance and Your Goals (link)
It’s about giving your customers what they want while recognising that your competitors are out to stop you because your objectives conflict with their objectives.
Strategy is about thinking better than your competitors but it’s also about action and movement. A plan which isn’t implemented is a huge waste, even though planning in itself can be a huge learning opportunity.
Your strategy can be optimistic but it also needs to be grounded in realism with a clear understanding of where you are, where you want to be and what it’s going to take to close the gap.
In particular it’s about making sure there is a consistent fit between the internal strengths and weaknesses of the business and the external position (or market promise) you are aiming to fill.
The Hard Way Of Business
- Sell what your competitors sell in the same way your competitors use
- Products are made in the same way or bought from the same sources as competitors
- Running hard to standstill
- Trying to edge ahead by doing things a little bit better or a little bit cheaper
- Me too products self defeating – customer indifference, little loyalty, low prices & profits
There are easier and harder ways to business success and I want you to concentrate your time, energy and money on the easy ways.
It is tough to sell the same products as your competitors in the same way your competitors use.
The Music Industry – How Retail Has Given way To The Internet
I’m a classic rock nut so I have far more CDs than are good for me. I’ve loved record (CD) shops for 35 years and enjoy browsing, looking for the long deleted gem that I’ve wanted but haven’t been able to find. I live in Birmingham, the UK’s second city and in recent years I’ve seen stores close at the rate of one per year. The national chains have been reduced to HMV and there is only one independent store left in the city centre I can think of.
The basic problem is that the stores are selling exactly the same products so alternative distributions channels are easier and more convenient. Amazon and the other Internet stores can deliver the CD you want on the next day and the supermarkets have taken a lot of the top 30 traffic with low prices and low effort purchases.
If that’s too much trouble or too slow, you can buy digital music files to download immediately through Amazon.co.uk and iTunes. If you want music, you don’t even have to buy it since websites like Spotify allow you to hire your music collection for a small monthly payment.
Often products not only look the same but are produced in virtually identical ways or even bought from the same suppliers. There is no marketing story to tell to help differentiate them from price sensitive commodities.
These businesses have no choice but to run hard to stand still. Their only options are to edge ahead slowly – a little better, a little cheaper – but it’s often to little effect.
The customers see no difference between products and sell me-too [products becomes self defeating. Customers are indifferent to your relationship so there is little loyalty unless you offer the lowest price.
Hard Choices For Success
- Strategy is about hard choices and eliminating inconsistencies
- What to do – and what not to do
- Who for – and who not for
- How to do it in a way that avoids, beats or survives competition.
- General rule “Compromise weakens strategy”
- A foot in both camps and commitment to neither
Our job is to make sure you avoid the tough way of business by making some intelligent decisions based on what is happening in your market. It means there will be some hard choices about what you are going to do and what you won’t do.
And who you will target as customers and who you won’t.
But it’s necessary to find your advantage to avoid, beat or survive competition.
Beware of anything that feels or looks like a compromise. As a general rule compromises weaken your strategy as you try to be different things to different groups of customers. If you’re not very careful, you’ll create a mishmash which suits neither one or the other.
Why Strategy Is Important
- Provides an overall direction and coordinates activities
- Insights into how to win and innovation to create extra value for customers & business
- Changes in the competitive environment mean new opportunities and threats
- Change isn’t an option for survival – you either do it pro-actively or reactively
One of my most popular blogs read by hundreds of people each month explains why strategy is important.
Basically it is your way to set an overall direction for your business and coordinate activities to make sure everything you do moves you closer and doesn’t do the “one- step forward, two steps back shuffle”.
The exercises give you insights into what is happening in your market based on changes already happening and what might happen in the future. You’ll see how customer needs are changing so you can predict ahead and learn how to win if you innovate.
Assessing the external environment will open up your eyes to external threats and opportunities, giving you the chance to be the most prepared for what might happen. Sometimes a few extra months thinking time is essential and gives you the chance to be proactive about change and not caught in a reactive cycle where you constantly have to respond.
The Big Questions
- Where are you? (Pillar 1)
- Where do you want to go? (Pillar 2)
- How do you get there? (Pillars 3 to 8 )
There are only these three big questions in business.
Pillar 3 on Your Strategic Market Position affects everything you will be doing in Pillars 4 to 8 which are the more tactical training sessions.
“How can you know what your goals or strategies should be if you don’t have a clear picture of the environment you’re working in or what your customers want?” Jan Carlzon in “Moments of Truth”
What Is In Pillar 3?
- The external environment
- The attractiveness of the industry
- Customers and competitors
- Building unique customer value
- Your USP and irresistible offer
- Your positioning determines whether you make success easier or harder for yourself.
What Is Strategy?
A short video from one of my business heroes – Harvard professor Michael Porter
Who Moved My Cheese?
Professor Porter is a heavyweight strategy expert who has consulted with and influenced many of the biggest companies in the world.
A more down to earth approach to the issues of environmental change which we look at in the next two modules in Pillar 3 is provided by the fable told by Spencer Johnson in the book “Who Moved My Cheese?
The story has four characters; two mice, “Sniff” and “Scurry,” and two littlepeople, “Hem” and “Haw.”
They all live in a maze, which represents the environment, and look for cheese, (the equivalent of money, happiness and success).
Initially the mice and humans travel through the corridors of the maze searching for cheese. One day both groups find a cheese-filled corridor in “Cheese Station C”. Day after day they find cheese in station C but the littlepeople get complacent.
One day the cheese has gone and the two mice immediately go searching for cheese in other locations.
The two littlepeople get angry that someone has taken the cheese and believe they are being victimised. They go home hungry and the same happens the next day. They get to Cheese station C and still no cheese.
It may seem a silly video – and especially as a cartoon – but it does make an important point.
Changes are always happening around us but if we live day to day, we don’t notice until it’s too late.
The Nasty Weed In The Village Pond
A similar story about environmental change is of the nasty weed growing in the pond that the village relied on for water and fish.
One day, perhaps dropped by a bird, a seed germinated and each day the weed doubled in size, taking the oxygen out of the water and killing anything it came into contact with.
Nobody noticed on day 1, day 2 or day 3.
In fact nobody noticed until three days before the pond was totally covered by the weed which happened on day 30.
Let’s have a look at the impact of this doubling in size each day and work backwards and I’ve put an imaginary comment from the village leader.
Day 30 – 100%
Day 29 – 50% “What are we going to do? Our pond is being taken over by the weed.”
Day 28 – 25% “That weed is growing quickly and it might become a problem. I think we should get everyone together to talk about. Let’s have a meeting tomorrow.”
Day 27 – 12.5% “Looks like we have some weed growing over in the far corner of the pond.”
Day 26 – 6.2%
Day 25 – 3.1%
Day 24 – 1.6%
Doubling in size each day is a particularly virulent attack. Elsewhere we use exponential growth to our advantage in growing faster than would seem possible.
The pond story shows that the compounding effect can work against us.