It is not unusual for businesses that serve a niche market to lose their leadership and competitive edge. We experienced success in our core product of fruit syrups. But, only innovation would allow us to continue to dominate our niche market.
Lesson: Niche businesses often lose their competitive advantage.
Losing your niche happens mainly for two reasons:
1. Losing your niche happens because of a lack of innovation.
Successful niche businesses can become satisfied with their success, neglect innovation, and fall behind their competition.
Markets never stop changing. Competition in the marketplace allows others to capitalize on your niche. If you are not innovating by developing new products or services, your competition will surpass you and leave you behind. Our free enterprise system allows others to learn from and take advantage of our success. Don't let your success intoxicate you and neglect innovation.
Lesson: Successful niche businesses satisfied with their success can become "stuck."
2. Losing your niche happens because of innovation outside of your niche.
With fruit syrups booming, it seemed that chocolate syrups would be a natural complement to our products. We reasoned customers use both for ice cream.
We allowed a mentor and former boss who operates a retail store to sample our new chocolate syrup. In the heat of the South Georgia sun, the bottle exploded and ruined the interior of his Buick LeSabre.
The debacle proved we were outside of our area of competence. But, worse than that, the chocolate syrup didn't sell.
In the marketplace, the snack business was booming. So, we rolled-out cookies. They were delicious, but they didn't sell.
To keep our lead in our niche business, innovation was a must. But we were innovating outside of our niche.
Lesson: Innovation outside of your niche can kill your business.
Thom Rainer gives a framework that is helpful in determining your niche.
Clarity - Discern which product or service is selling best in your company and has promise for niche opportunity
Movement - Develop processes that will serve the buyers who will give you the most profit
Alignment - Allocate resources to your most valuable products and customers
Focus - Invest 90% of your resources in developing your core niche product/service, and customer, and the remaining 10% in building a niche for the future.
Don't lose your niche market and competitive edge by lacking innovation or innovating outside your niche.
Have you found this true for your business? Every week I enjoy hearing from entrepreneurs who want to make a profit, bless their community, and advance their purpose. I would love to hear from you. Connect with me on LinkedIn or email me at harryt@cultivatingimpact.org.
Harry T. Jones
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