I read an article that took me back to my undergraduate economic/business studies at Bentley University (College when I was there).

Well took me back to the feelings I had as an undergraduate.

Allow me to take you back.

Take you back 10+ years ago to young me sitting in my first Microeconomics class - a class that would yield my lowest grade in my academic career to date might I add. What I remember most about this course were the conversations and the breakdowns between what the book said and how we could apply in real life. I loved this course but I seriously struggled, so much so that the professor actually said I should consider a major change.

But I stuck with it. I knew, even though I didn’t always get the material at the time, that it was important to know about the incentives that motivated how firms interact with each other and how people interact with firms. Fast forward to now and I’m teaching college courses, mostly economics and finance, including designing original economics courses for business programs. Take that Freshman-Bentley-Econ-Professor-Who-Didn’t-Believe-In-Me! It’s being pragmatic in understanding what motivates people and making everyday economics a skill set that I rely on everyday. Getting to the heart of causality and creating strategies that have real impacts for people and firms.

Why did I share that with you?!

It’s because of Michael Porter. This article reaffirmed the mission that I have for myself and for Disruptive Strategy. Basically when I grow up (professionally) I want to be in a similar position to him. Porter is a strategist, economist, and professor that has done an amazing amount of work touting the benefits of competitive systems to get and keep economies moving and growing.

Reading this article made me feel like that undergraduate that had a world of possibilities in front of them. It helped me remember that the skills and the tools that I’ve been sharpening over the last decade not only have value but are needed by people and firms because it’s more than what simple Google searches and templates can provide.

One of my favorite systems of his is the Porter 5 Forces Model and I wanted to share it with you. Since its inception strategic consultants, planners, and advisors have been using this system as a basis to create strategy for firms of all sizes. The kicker is that it’s based in pretty topical economic theory - remember the things that “shift” a supply and demand curve, or how markets find equilibrium, or better still price elasticity of demand??

Yup, it all comes from there!

Here’s what you need to know about the 5 Forces Model to be a better strategist:

There are 5 Forces that drive companies in competitive markets:

- The threat of available substitutes
- Amount of buyers and their bargaining power
- Amount of sellers and their bargaining power
- Rivalry/competition within a market - number of existing players
- Barriers to enter a market

Substitutes

When bringing a product or service to market you have to consider the available substitutes. How much do they cost? How close is the experience to your product or service? What might differentiate you or how can you increase your value/perceived value? There are lots of tablets out on the market now but, why do people choose to buy an iPad? Why might someone choose Google’s Nexus 7? How can you position yourself to be perceived as a niche product or service?

Buyers

Can the buyers work together to have an affect on a market? What kind of information are you providing for your buyers? What is the collective experience of your consumer? Do you have a product or service that allows for multiple points of entry at differing price levels? Is the experience so streamlined that consumers can always expect a certain experience? Are you building stakeholders or are just banking on perceived obsolescence? Think your cable company. Odds are if you call complain and leave their prices won’t need to change because there are more than enough subscribers willing and able to pay the prices that they ask for. But, if you everyone in your town/city cut the cord and subscribed to Hulu and Netflix then the cable company might have to listen to the concerns of the consumer.

Sellers

Can you benefit from pitting sellers/vendors/distributors against each other for your business? Can you diversify the way you collect your inputs? Are there any suppliers that would help you grow your economies of scale - reducing your average costs over the long term. When you enter a market or are thinking about making your product unique it’s crucial to consider your supply chain. If there are any hiccups or if you choose cheap over value then that might have an effect on the quality or consistency of your own products.

Rivalries between existing firms

It’s important to assess where other firms are in your market. What kind of market is it? There will be big differences between how you approach an oligopolistic market vs something where there is a bit more competition. It’s also important to monitor how the market behaves. What I mean by that is keeping track of how things are marketed or how fast products/services change. An example would be Apple’s iPads and iPhones. It used to be that those were launched about annually but because technology is changing so fast it’s moved up to about a 10 month release time for new stuff or at least updates to existing stuff. When doing your branding or positioning seeing what the currents are doing will help you better utilize whatever resources you have available. Nothing worse than marketing in a place where no one is looking. So identify your markets and who consumers as well as firms identify themselves.

Barriers to entry

What will it take to enter a market or just start a business? What are the costs or investment necessary to be a competitor? Are there any obstacles as far as availability of resources to get you going? What are tax liabilities or government policies that need to be taken into consideration? Nothing worse than being in business for a while then getting slammed with a tax bill that you weren’t even close to being prepared for. Are there distribution channels available for what you are doing or do you have to create your own? You might be in business already and need some help gaining some scope on growing - so it’s important that you understand the questions to ask to get the best information to overcome barriers.

I know went over these 5 Forces really fast and it’s a lot of questions to ask or even try to answer. There's a benefit though in even starting to think about this stuff. When you start to think about these forces and answers these questions some really neat stuff happens. You start to get really clear on what sets you apart in your market. You start to see what your (real) competitive landscape looks like and you start to see how you can continue to add value to people's lives.

I just realized how long this post is going, so if you are still with me - you are awesome! Awesome and exactly the kind of person I want being part of this community. I want to do more on creating strategy and using the 5 Forces Model so if you have questions on application or making this more pragmatic please shoot them along by signing up for the Disruptive Strategy Newsletter!

Welcome to the second half of the Getting Your Business Back On Track series. In this post we are going to close the loop on getting your business or idea back into focus and set up so that you can really lean into growing.

If you’ve just found this post I’d encourage you to follow this link: Get Your Business Back On Track: Part 1 and find your answer to the “What am I doing?!” question. Then come right back here.

Now that you’ve found clarity let’s talk about competition and competitive advantage.

The first two questions I want to help you answer are: “How do I map my competition?” and “How much attention should I be paying them?”.

I want to start with the second question because it’s where all the context lives.

Paying attention to you competition is important but it shouldn’t be eating up any real significant part of your business building day. It makes sense to take a peek at your competitors in some kind of systematic way because it will help you validate your ideas, products and services. It will also provide insights as to how your market is reacting to certain types of calls to actions, sales and marketing efforts. Spending time to get an objective view of your competitive landscape can be really helpful when it comes to how you choose to interact with your audience or target market.

The tricky part is getting sucked into a social media creeping black hole. I know that I’m not the only one who’s time-travelled a bit because, what started off as research ended with me creeping through every Tweet, status update and Instagram post. Setting up your notes and calendar to help you manage your research time can be really helpful. And, it keeps that irrational part of your business building brain from squirrelling off into daydreams of the entrepreneurial grass being greener on the other side of your competitions monitors.

If you’re really struggling with how this works just try allocating time once a month to check in on your competitors and try to track the engagement they are getting over time. You should also note that not all engagement is created equal. You should be weighing a testimonial you’re reading from someone’s customer on Facebook very differently than the amount of likes someone’s collecting in their posts. Try to focus on the metrics that could add the most value to how you’re shaping your sales and marketing strategy efforts. Don’t forget to keep an eye out for questions that are being asked, the answers that are given and how those engaged react to both. That right there can create enormous opportunities for you!

Now onto the question of mapping your competition.

First off, yes. Yes, you do have competition. It doesn’t matter how niche your market or how specific your offer you will always battle the choice your customer’s have to make about how they spend their discretionary dollars.

Now that we are all on the same page if you plan on growing your business I’m challenging you to think about all the places your customers could spend their money to reasonably address the problem(s) that your business solves. You’re going to do this by filling in the following blanks:

1. Competitor’s Name.

2. What are the products or services they offer?

3. How are they charging for their products or services?

4. What do you think their competitive advantage is?

5. What are they key features or benefits?

6. What don’t they offer or how are they not addressing the problem you solve?

My recommendation would be to set this up in your favorite spreadsheet app so that you can start to collect lots of data and look for patterns. You can feel free to add to this list as well but I just wanted to make sure that you had a starting point. The boundary you want to stay inside of are people solving the problem you are (or that you’ve identified) having gone through the exercise in part one of this series.

After you’ve collected this information and found a few patterns it’s time to use what you’ve found to your advantage.

Your competitive advantage.

See what I did there?

Your competitive advantage is an objective measure of your ability to deliver value better (or more efficiently) than any of your competitors. Borrowing from my economics lecture notes competitive advantage is an environment where you have an edge in creating value for your customers over your competition. It’s not permanent, contrary to what some gurus might say, and can be achieved by being able to deliver greater value at a lower cost, ownership of some proprietary input or process and even the creation of a laser focused brand.

What competitive advantage is not is a generic promise to having the best customer service. It’s also not your skilled staff, outstanding team, knowledgeable sales people, list of customers on your website or being flexible and responsive. None of that makes you special because it’s expected! If you have to tell your audience that you’re great at the thing they expect as the lowest expectation they have for doing business with you then you are in trouble. Of course you should be knowledgeable and of course you should have great customer service.

If you don’t then I can promise you, you won’t be in business for very long. So, don’t boast about being good at the table stakes and focus instead on the things that make you truly unique. Remember, you may have lots of competitors like the holistic business I outlined for you in part one but you’re the only one that can do business and offer value like you.

If you’ve been really playing the home version of this game up to this point you should be really clear on what your business offers, have an idea of who your competing with, a process for checking in with your market and some guidance on figuring out what makes your business more special than your competitors. This is the place from which you should be making all your future business decisions. Using this data to make decisions around marketing, sales or even just the next piece of content you create will make those decisions exponentially more impactful. These posts were designed to stop you from continuing the spray and pray approach to growing your business. By focusing on your core value and your business’s core identity you can channel your time, money and resources into making decisions that aren’t inspired by chasing the newest marketing fads or trying to serve everyone.

Usually at the end of these blog posts I typically have a spot for you to download a content upgrade or am asking you to answer a question. I’m choosing to skip that ask this time because my real call to action is for you to take this Getting Your Business Back On Track series seriously and do this work. Build the spreadsheets, really grade your competitor’s effectiveness and do the work that’s necessary in building a clear brand that customers want to engage with.

Yes I ended that last sentence with a preposition and no I don’t care because I’m a little fired up in the writing of this conclusion.

Go do the work so you can make great things happen for your business!

Want to get ahead in 2018? Understand these Five Forces!