Ever since I wrote my Master’s Thesis on U.S. Baby Boomer expats leaving the states in search of something better (i.e. better economics or better community), I’ve had in the back of my mind the idea that I had a role to play in inspiring baby boomer entrepreneurship. So today I’ve started to launch a few social media marketing programs with the hope of building a like minded community of entrepreneurial baby boomers. If that sounds up your alley, click on over to Facebook.com/norocker and join our growing group. Our mission is to empower Baby Boomers with the knowledge they need to successfully launch their entrepreneurial pursuits.
An outstanding learning and networking event for new entrepreneurs! MSUD CFI Professor of Entrepreneurship Travis Luther is hosting an online learning event with Google at his company’s (http://www.lawfather.net) Greenwood Village, CO office in the Denver Tech Center. If you believe the internet might be a way you will find and connect with customers, this FREE event should be of significant interest to you. More Details are available here: http://www.lawfather.
Price wars as an indicator of lagging innovation.
Focusing on price can be a good indicator that your company is losing its value as an industry innovator. Innovators generally win new clients because they have found a way to do something that no other company can do – not because they focus on finding a cheaper way to do something other companies already do (though there are certainly exceptions). If you find yourself getting more calls from clients or prospects who want to talk price over offering, it probably means that you are being duplicated. Once you have been duplicated you can be replaced. This is because there is no way to be the “best” company of a handful of companies that all do the exact same thing. You will find that where you were once indispensable, you are now interchangeable. Interchangeability slows your business’s ability to grow as you compete with many more companies for the same pool of customers. And as your own customer base drops in and out of using your product or service, you are suddenly exposed to serious volatility in your cash flow. At this point your business has serious problems.
Problems are painful. We want problems to go away as soon as possible. None of us want to feel pain for too long. But what we must be careful to recognize is that often times pain motivates us to do outrageous things. Like, rather than working towards the right solution to a problem, we work towards the fastest solution to a problem. We work to end the pain as quickly as possible.
When an entrepreneur realizes that he or she is now competing with an explosion of companies that offer the exact same product or service, the fastest and most painless route to restoring competitive advantage is to lower the product price and compete on cost. This is an attractive move because it does not require any additional brainstorming, trial and error, or start-up cost. But for a true innovator, this move is outrageous.
When a company valued for innovation begins to compete on price, it sends its customers a dangerous metamessage (a metamessage is an inner or secondary message that could be inferred or implied from your primary message). This metamessage is that the company’s creative resources have just been refocused on monitoring costs and competition rather than pushing innovation. If it is important to you that your company continue to be recognized as a leader in innovation, do not rush into offering discounts or cutting prices. Do what made you successful in the first place – innovate!
Real innovation may not materialize in a moment’s notice. That is why experienced companies make innovation an ongoing part of their operations. But smaller companies and new entrepreneurs may not have this luxury. Most of their financial resources are directed towards getting their first products or services to market with little or no thought into what might be needed down the road. If you have found yourself having some success, but now the copycats are knocking at your customers’ doors, don’t panic. Just remember, innovators cannot make their primary value proposition cheaper prices…ever. Use the following three recommendations to triage the duplication trap as you put your innovation team in motion.
Three Quick Things to Do When You’re Business is Being Duplicated:
1.) Avoid creating the perception that you’re the duplicator. Do not initiate comparisons of your company to your competitors. Never send out a message to clients that says, “I am sure that some of you are aware that Acme now offers XL Widgets for $0.99. Our own $0.99 XL Widget is on the way…” Focus all of your messaging on the fact that you have a company that stands alone and that you create products and offer services because they are necessary and solve a real problem – not because your competitors offer them.
2.) Refuse to compete on price. Compete on results. Results matter. Use testimonials to build the value of your product or service. Create outreach that reminds your current customers that you have delivered what you have promised and that their relationship with your company has been valuable.
3.) If you’re being duplicated, get out of your competitors’ league. Quickly find a way to add 10% more value to your product or service. Then tell your current customers how you have added 2-3 new features that solidify your company’s position as an industry innovator – and don’t be afraid ask them to pay for it!
Last week I attended an entrepreneurship panel in downtown Denver with a focus on how to identify companies that had the best chance of success. Last night I read an article from a nationally known venture capitalist discussing the top five ways to attract venture funding. There was one prominent, important, and identical statement which overlapped both pieces of advice: Have an intimate familiarity with the industry that has the problem you wish to solve.