Why do small and mid-sized companies fail?
A small or a mid-sized company (I will keep referring to it only as “company” throughout the article) starts failing when it lets its competitors influence its own agenda. They focus on what their competitors do, and diversify their investments in the areas where their competitors operate. Generally, despite the fact that it seems logical at first glance, this strategy turns out to be a fatal mistake.
The moment a company starts to make business decisions based on the movements of its competitors, it inevitably lets those competitors direct its vision. This results in the problem of loss of focus and inefficiency in the recently invested areas.
A company does not dominate a market by trying to do things “better” than its competitors. A company also does not take a significant amount of market share by competing. Any strategy to make things better than the competitors inevitably forces the company to compete, and this is what we do not want. Competition will eventually swallow the profits.
We should want to keep our business different. This “difference” does not occur by lowering the price. It also does not occur from “know-how”. Referring the business as “one in the blue ocean” does not help either.
Competing in the current global economy is what amateurs do. Why is it “amateur”? Because it is easy to replicate an already existing product, make some “adjustments” to make it appear as a brand different product, and market it to the same customers that are already using the initial product? Despite the fact that it seems less risky, this strategy is riskier. It is riskier because it focuses on dividing the pie.
We should focus on growing the pie. The pie does not grow by replicating a product. It also does not grow by simply lowering the price. The amateur approach focuses on the manipulated “reality” as what the competing company wants to see. The professional approach focuses on what is true. Only after realizing what is true, can we grow the pie.
If what we serve is similar to others, we do not have any real business advantage in reality. If we price our product depending on the product price of competitors, we do not have any real business advantage in reality. If we add more features to our product to differentiate, we are not playing the game right.
The company fails if it:
- Focuses on what competitors do and acts based on that
- Invests in accordance to the investments of the competitors
- Creates products that are replicated from the products of the competitors
- Keeps adding features to its products to “differentiate”
- Prices products based on the prices of the competitors
