Blog #2: Grow With What You Know

Your business was born out of your urge to create a new or better mousetrap, the belief that you could do it as well or better than the next person. You brought your business to market, offered a persuasive value proposition and created demand at a price your target customers were willing to pay. You have satisfied your customers and created enough cash flow and profit to justify continuing to invest your resources.  And you have developed an underlying strategy and infrastructure that enable you to to maximize your effectiveness and efficiency in that one area, your unique niche, where you have a competitive edge.

Had you done otherwise, you would likely have struggled or, at worst, failed.

A “niche market”, as defined by Wikipedia, is the subset on which a particular product or service is focused. So your market niche can be defined in various ways; specific product/service features aimed at satisfying specific market needs, unique production and quality factors, and/or the specific target market characteristics your business aims to impact.

There are good reasons why most new businesses that have become successful have spent years learning how to do one thing right, exploiting their niche and growing organically and vertically in their singular area of knowledge and strength, rather than laterally into unfamiliar and uncharted fields. Many of the processes that must be developed and nurtured – product and service development, supply chain management (for products), brand building, marketing, sales and public relations – are challenging enough for just one item, category or service. In addition, developing, implementing, executing, supervising, and managing each of these processes is, more often than not, what separates success from failure. And in most cases, the business owners must not only focus on serving their market base, but must also oversee internal operations and be technologically proficient.

Should you need to outsource any of these processes, time management and quality control make a demanding job even more complex. Think of all these processes as a series of three-legged stools; one leg collapses, and the stool collapses.

Generally, most new and growing businesses are owned and managed by one or two people. So it is not difficult to visualize and understand that expanding into a new product or service area, even if viable and economically promising, is seen as overwhelming and almost impossible to manage. And the opportunity costs, the passed-over projected profits, are impossible to calculate.

So it is no accident then that almost all businesses start in a narrow niche. Starbucks first sold premium roasted coffee in one Seattle location; Ralph Lauren started with with a collection of men’s ties; hotel.com, initially The Hotel Reservations Network (HRN), originally provided hotel bookings via a toll-free phone number; Amazon was an online bookstore; ESPN began operations as a 24-hour network with satellite communications; Southwest Airlines was an intra-state service within Texas exclusively using Boeing’s 737- 200s; and the list goes on and on.

Every industry is littered with failures that did nor first solidify their foundations nor make a point of staying true to the core values of their brand before expanding and venturing into tangential categories or unrelated new businesses. At some point all these businesses were new and thriving but made some unfortunate choices.

The lesson for most small businesses is clear. Grow with what you know. Keep it simple, and less is best. The temptation to move into categories you‘re not comfortable with, even if you think the transition will help you grow faster or enable you to cover up past mistakes and flaws may lead to disaster. Rather, if you are operating a profitable and growing small business, build on that promising base to ensure long-lasting success.