My years spent representing and advising businesses has taught me there are two types of businesses in this world—those that compete and those that dominate.
Businesses that compete are by definition on a race to the bottom. They are constantly forced to slash prices and services to undercut competitors. This leads to diminished quality and innovation as well as the business teetering on the edge of bankruptcy. The consumer is left with an imaginary lower cost product or service that fails to deliver anything new or better than before coupled with a sub-par experience that is not worth the perceived savings. In this scenario, everyone loses.
A good example of this is the airline industry in the United States. The airlines fiercely compete with each other by slashing prices and services for slim profit margins with the end result being many airlines going bankrupt or merging with competitors. These merged airlines start the cycle of competing with remaining competitors anew, and this vicious cycle repeats itself indefinitely. The end result to the consumer is an imaginary lower cost service that fails to deliver anything new or better than before coupled with a sub-par experience that is not worth the perceived savings (e.g. smaller seats, paying extra fees to check or carry on bags, reclining seats, snacks and beverages, poor service, etc.).
This begs the question, how can a business that competes reinvent itself to become a business that dominates? To answer this, let’s define a business that dominates as a business that does what other businesses cannot or will not do. The next logical question becomes, how to identify what other businesses cannot or will not do? What are the opportunities that dominating business visionaries see that their competitors do not?
Visionaries are among other things, innovators that exploit changes that already happened but have yet to have full impact on their market. So by looking at indicators in a particular market such as demographics, macro and micro trends, etc., along with adjusting their business plan (including assembling the right team with the core competencies needed to achieve these goals), these businesses are properly positioned to dominate rather than compete. Once these market changes have been exploited, the next prudent move is to dominate a small market that has few or no competitors. Once that small market is dominated, then expand into closely related markets, and then repeat the cycle.
A good example of this strategy is Facebook, which started with a very small market consisting of Harvard students seeking to interact with each other online. They quickly dominated this market and then expanded to other small markets that were likewise quickly dominated, eventually expanding into what we see today. This is not to say that Facebook did not have competitors along the way, they did. However, what Facebook was able to accomplish that their competitors were not was sensing what the public wanted before the public did. In other words, they exploited changes that already happened whose full impact on the market was yet to be felt.
To create a business that dominates requires vision. This leads to what I believe to be the most common mistake made by businesses that compete—failing to “see reality.” When asked to define reality, most believe reality is self evident, that it is right before us. I completely and utterly disagree with this statement. The truth is, reality is one of the most difficult things to assess. In fact, very few of us actually “see” the reality we are in. Those that see reality tend to be visionary innovators that dominate their markets. Those that do not are condemned to compete.
*Attorney Neil E. Colmenares serves as general counsel and strategic advisor to a diverse nationwide business clientele. Attorney Colmenares maintains offices in both New York and Nevada and can be reached via his website, www.NECESQ.com.