What is the shelf-life of your business strategy?
Headlines in today’s WSJ “Wal-Mart Era Wanes Amid Big Shifts in Retail” followed by an op-ed piece “The Cheap Revolution” about why Apple stumbled with the iPhone. These are two smart and nimble companies, but they have and are making mistakes. So, if these wonderful businesses are capable of strategic error because they didn’t call the turn properly, how’s a little operation like yours supposed to keep up?
Primarily, you have to assume that your business plan has a limited shelf-life. At some point your world will change and you will have a negative economic impact. Just think of all those condo speculators in Florida. Be prepared to play defense.
Next, don’t be greedy. If you try to get you money out of an investment at the very top you risk selling after the bust. Like stocks, set milestones of success on your business. One of them should be when to cash out.
Keep in mind that pioneers get arrows in their shirts. Translated it means a early adopters reward is commensurate with their risk. Early adopters of the iPhone have “no bitch” that Apple dropped the price ahead of their normal practice. Early adopters accept risk. That is why they are in the market early.
Big companies want to be second into a market. They seldom want to be first. They want the venture capitalists to take the leap. The big guys will follow quickly and ruthlessly.
Don’t be third into a market. The third gas station at the intersection. By the time the third station arrives the market size is set. The third will only lower the profits of the other two and put them all at subsistence level operations.
If you get wind of the third guy coming into the market, sell out or make a major change in strategy. If a fourth one comes in, sell out.
How fast will all this happen? Much faster than you would like. Just about the time you get comfortable with your current strategy. If you are feeling really good about the way your business is operating be assured that someone else sees that also and is looking to cash in at your expense. Monopolies are very difficult to maintain in the US market. It’s a law of business physics. As nature abhors a vacuum, so does the market abhor excess profit.
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POSTED IN: Business Plan, Starting Up
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