In the World of Business, When and Where Do You Begin?Entrepreneurship Perspectives: In the World of Business, When and Where Do You Begin? Omar Ayesh “Where do we start?” is one of the most common questions I get about entrepreneurship. The answer is simple, but the application needs hard work: One must begin where others have ended. This is a surefire formula for sustainable growth not only in the world of business, but in any endeavor. Nevertheless, commercial success is all the more challenging because gathering the information needed and acting upon it effectively requires time, effort and patience. Scholarly studies have proven time and again that a startup’s early stages are the most critical for long term success. America’s National Business Capital reported a failure rate of 90% in a 2019 study with over 50% folding within the first two years. In a market where 6.5 million businesses launch every year, this is a significant number. Even venture-backed startups fail at a rate of 7.5 out of 10, so the causes cannot be attributable to inexperience alone. So, before design and development begins, planning for success requires that we study exactly when and how potential competitors reached their apex to gauge where our initiative stands compared to their product or service. The gravest error I have seen entrepreneurs and novice businessmen make is repeating the mistakes of their competitors, something that happens when one rushes to embark on a project before conducting in-depth analyses. So many pitfalls can be avoided simply by taking the time to learn what led others to miscalculate. One reason for unnecessary blunders is the belief that a project may not need an exhaustive review of the competitive landscape. When considering whether to spend six months on research or implement launch plans immediately, entrepreneurs often have such a strong belief in their idea that they perceive research to be an unnecessary luxury wasting the opportunities of earning early profits. However, if you take that time, you add the many years of experience others endured to your own learning in a short time, often no more than half a year. Companies that do this can exceed their longevity for decades. Defining & Analyzing Competitors There are few untapped sectors remaining in the modern economy, so whatever the nature, type, and size of your venture, knowing your competition is critical before setting achievable goals. Say, for example, a startup determines it has five competitors that offer products or services with similar ideas. They need not be exact, but similar enough that customers could migrate between them. If we do not understand the secrets of those five firm’s successes and failures, we will not only be in a weak competitive position, any ideas we innovate will also easily be undercut by their existing operations, undermining our project from its inception. It is imperative, therefore, that we start at the point where competitors have peaked, given that they have endured many successes and likely many more flops before settling in their market position. The first step is to study all their failures, which to them may be painful necessities but for us would be treasured experiences. We would have a duty to ourselves and our shareholders to learn without “reinventing the wheel.” I would even go so far as to say that dutiful study of competitor operations, mistakes and achievements constitutes half of all factors that determine a startup’s success. The optimal approach to this exercise is outlined in Michael Porter’s iconic business book, “Competitive Strategy: Techniques for Analyzing Industries and Competitors.” The principles he lays out have become known as Porter’s Five Forces and are essential to understanding one’s commercial environment: 1) Supplier power, how they impact one’s productivity; 2) Buyer power, how they impact costs and pricing; 3) Competitive rivalry, how many and how effective they are; 4) Threat of substitution; and 5) Threat of new entry, how easily one can be replaced. So, once we have studied our five competitors’ failures, the second stage would be to analyze the strengths of each and put them to use in one offering. The fundamentals of those strengths must become the strategy that defines how that one product or service is brought to market. This should include strategic issues such as vision, mission, objectives, and financial performance as well as operational criteria such as the availability of liquidity, the perceived quality of service provided, the stocks and inventory available, or the experience and qualifications of staff. Examining competitors thoroughly not only helps in setting your startups goals, but also understanding your niche in the market as well as the best time to launch. Airbnb is an example of a young technology firm that significantly disrupted the hospitality sector in part due to the timing of its launch. They began operations in 2007 just before economies in the United States and around the world suffered after the global financial crisis. CEO and co-founder Brian Chesky saw an opportunity, having noticed that hotels in New York City were overbooked and expensive. He surveyed the hospitality sector, then he and cofounders rented space in their apartment. When economic hardship struck in 2008, many homeowners took advantage of the opportunity Chesky & co. offered, using the platform to earn extra income. Understanding the competitive environment from the beginning is what helped the firm exceed four billion dollars in 2019 profits alone. The third step is the most important of all: Deciding what factors in your initiative will build on the strengths of all five of your competitors. What features your present and how you deliver them constitute the other fifty percent of what will make a startup a success. This is what some call a Unique Selling Proposition, and is what I consider a “distinction component,” meaning the element(s) your competition cannot replicate easily. This excellence in our new product is the sum of combining the strengths of the five competitors and adding them to our unique project in such a way as to demonstrate to customers that others have been unable to innovate as nicely. A unique product, however, will not sell itself, and so the startup’s sales and marketing strategy must be equally innovative to ensure a greater chance of success and long-term commercial viability. Once we have developed our offering, we must go to market in creative ways that the competition has underestimated or not yet recognized. This could be either in the channels we choose to communicate, the content of our message or a combination of both. When we spend a project’s early stages deep in study of the competitive market and give strategic planning its due, we can crystallize a clearer vision. It can be counterintuitive or feel like opportunities are bypassing us when investing in a slow, deliberate start; however, the long-term payoff is a potentially much more successful and sustainable proposition.
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