My favourite blogger Seth Godin talks about competing on price as being a race to the bottom. I couldn’t agree more. Yet, it can be a valid business strategy, and here is the only time when competing on price is a smart thing to do:
When everything the customer does not see is focused on price.
If you want to compete on price, then the price tag itself is the least important part of the ‘low pricing strategy’. It’s the back end, and every single thought and action in your business needs to be about efficiency and reducing cost, all day, everyday.
If we can manage to do this, then we can win on price. But we should always remember a price sensitive customer is always the least loyal.
You should totally read my book – The Great Fragmentation.
The two ways to grow your startup are the same two ways to grow any business no matter how established or formative it is.
- Same product sold to wider range of customers.
- New products sold to the current customer base.
Either of these two options provide a simple strategy for growth. In addition they provide a succinct feedback loop of where our problems and opportunities are. They inform us of our Product – Market fit and tells us if it is right. The most important thing to remember though, is that it is pretty hard to do both at the same time. Trying both will just confuse us as to what is working and what isn’t.
You should totally read my book – The Great Fragmentation.
It was recently the 50th birthday of that favourite chocolate spread we sometimes convince ourselves is ok to eat between two piece of bread. Nutella.
What a lot of people don’t realise is that Nutella is what it is because they couldn’t afford to make it the way they wanted to. Originally Nutella was a pure chocolate spread, but during the post WW2 era, a time of heavy rationing in Italy, they bulked up the ingredients with hazelnuts. They did this because hazelnuts were plentiful in the local area and much cheaper than cocoa per kilogram. The presence of mind to turn to the woodchips, in this case hazelnuts, and remarket the brand was very clever indeed. The branding was adapted to talk up the nut credentials and make people believe it was actually a hazelnut spread.
In fact it only has 13% hazelnuts and a whopping 52% sugar by volume – ironically about the same amount as the white label on the jar. While I’ll leave the moral discussion on the marketing of Nutella for another blog post, the question it poses for all of us is this:
How do we turn necessary cost cuts or lack of availability of inputs into brand advantage?
Evolution itself does not have a strategy. It just lets what wins, win. If anything, it is the accumulation of a lot of in market testing. Traits, (or tactics) are tested for advantage, and those that work, keep on happening through natural selection. Nature tries everything. Nature lets things that don’t work die.
We too can help our business evolve. We just need to do what nature does. That is to not pretend to know what will work. Instead we should try everything and find out what does. The good news of course, is that it’s so cheap to try so much in a low cost technology world.
The blog posts which I write that have a ‘How to’ element in them get infinitely more traffic and attention than those that are philosophical. It seems people want to know about more about the method than they do the reason. But what we need to understand is that methods are often temporary, when reason can be timeless. If we have the an over riding philosophy, then we wont get caught short once the tactics we employ expire in effectiveness.
Or is it?
Whenever a person or a company succeeds there is no shortage of post analysis on why the strategy was so clever. Why what they did worked, and how clever the people behind it were. And I’d say most time the people behind it are clever. But what I’m wondering is how much of it was planned, on strategy and predictable before any of it happened.
If we look at the history of science, very few of our discoveries started on paper, or in the lab. What was far more common was something actually happened which surprised and delighted. The people behind the discovery, or even those around it, then re-tested what happened to build a theory to describe it – or in business terms, a story that described what happened in the form of a strategy.
I’m pretty sure this is most often the case in business. For every new company, or game changing innovation there are probably a thousand or more failures of others trying to do the same thing. But these failures rarely get written about, only the success stories. And these success stories are always told post success – who wants to hear about failures anyway?
This tells us much about startup strategy. And what it tells us is that strategy is often an illusion. It’s a post rationalisation of what happened – the reverse engineering of business enlightenment. Where the real value is unlocked in business, is entering a realm where value needs to be created, and implementing a set of behaviours that lead to momentum and serendipity. This is a more accurate description of how a “pre success” strategy is landed upon.
In a world of rapid change we are better off letting events shape the opportunity, rather than trying to shoe horn our idea into a perceived market trajectory.
No, we shouldn’t do that. It’s such a big thing with no clear way to start, and no clear way to end. There’s a really big chance we could waste a significant amount of financial, temporal and emotional resources on it. It’s too uncertain and adds a whole lot of life complications to it, it takes a lot of organising, registrations, financing, commitment to something for which a future which is unproven.
Here’ a better idea. We should do a project instead. Projects are superior to businesses. Superior because they tell us more about the future. It can sample our predicted future reality and test it for truth. In addition to that it has a number of micro benefits which add up to something significant.
- A project helps us get over our inertia. It’s only a project.
- A project can be bootstrapped more heavily, as we don’t need to build in any scale.
- A project allows us to do a minimum viable product, but actually mean it, and actually do it.
- A project is not a life long commitment. We can close it off any time for any reason we choose.
- A project tells our circle and the market that this is temporary, but worth trying.
- A project doesn’t need huge resources, only enough to cover one cycle.
- A project is likely maintain momentum and energy as the finish line is in sight from the start.
- A project let’s us test our assumptions, but in the real world – the market place.
- A project can lead to a better conceived project.
- A project can lead to important collaborations and discoveries.
- A project can lead to something bigger… maybe even a business.
- A project….
In fact, when we really think about it, business is simply a project which worked well and got bigger. Or we could say that a business is a number of separate yet continuous projects linked together in perpetuity, performed by the same people and infrastructure.
And so, it’s pretty clear if we just start with a project or tow, we might be lucky enough to end up with a business.