Differentiate Or Perish It's Easier To Compete As A Monopoly In A Niche Than Chase 'The Action'

If you chase the action, you end up with more competition. It’s simple supply-and-demand economics.

There are a few bits of advice we cannot overstate: having a niche, or Unique Sales Proposition, that effectively makes you a monopoly, is one such bit of advice.

If you’re doing what everybody else is, and don’t think you need a specialization because you’re that much better, guess what? Being that much better is a kind of niche. 

In any case, you want a monopoly. You want to be the only company that offers what you do. 

What Forms Does A ‘Niche’ Come In?

  • Being ‘the only’ product or service provider, in any significant, sense.
  • Being first to market, whether that market is known.
  • ‘First In, Best Dressed’. 
  • Only provider in a region. 

Price and even design are not substantial differentiators, to our thinking. They’re not different enough to make you a monopoly. Too often, companies want to go to where the action is, to do what seems to be working. But that’s where the competition is. 

Hollywood films can copy what worked before, because those films aren’t in the theater when the imitators release their version. If there are 10 ‘stylish, high-tech’ vacuum makers with the bright idea to enter the market and compete simultaneously with Dysan, they’re going to have a bad time – even if they ‘win’ part of that market, which is nigh impossible from a dead start.

Hollywood films can copy what worked before, because those films aren’t in the theater when the imitators release their copy. If there are 10 ‘stylish, high-tech’ vacuum makers with the bright idea to enter the market and compete simultaneously with Dysan, they’re going to have a bad time – even if they ‘win’ part of that market, which is nigh impossible from a dead start.

In business, with companies having lifespans that last for years, undifferentiated entrants will be forced to split wins with companies already there, at considerable cost, swimming ‘upstream’ to win-over consumers already loyal to other companies. Even with a large war chest, it’s almost impossible to make this profitable.

Won’t I Limit My Demographic By Being Different?

  1. Yes, but in all likelihood, your initial estimate of your market was greedy and too big, in the first place. Would you rather have 30% of nothing (a market you failed to capture), or 100% of the 5% the market that actually wants what you’re offering?
  2. The Internet is effectively a ‘black box’ database: you can’t see the totality of your market, in most cases (in some cases you can). 
  3. Startups and companies also tend to overlook opportunities for repeat sales, side-sells, and growing their markets with innovation and the appeal of their offering.

Think of it like this: you want to open a fast food joint. There are three burger joints in town already, and they do well. If you matched their quality and price exactly, you should not expect 1/3 of the business. They’re established and have recognition and some customer loyalty. 

Now, what happens if people like their burgers more? You’re done. 

On the other hand, if you sell tacos, if you create a fast food option with no specific competition – selling another kind of food – you’ve got a monopoly in that footprint. Your changes are orders of magnitude better, most especially if your tacos are amazing

Differentiation isn’t a guarantee you’ll succeed, but imitating makes it somewhat-to-very likely you’ll fail.

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