I had the good fortune to grow up in a successful, entrepreneurial family. I say "good fortune" because every family dinner was like attending a Board meeting. It gave me first hand exposure to the issues facing a business as it grew.
Better yet, because neither my father nor his siblings ever attended university, let alone a business school, every decision required them to figure out and explain in everyday language the concepts I later learned – and taught – at business schools. And best of all, since family businesses do things by consensus and not decree, every decision had to consider all aspects of the decision from procurement through operations, human resources and marketing.
Probably the most valuable lessons were sourced in the distinction between a great product idea and a great vision for a company. The former may provide a short term success; the latter provides a platform for success over the long term. The former requires a business plan that often rests on being the first mover or inventive genius (ie Patent); the latter requires a corporate plan based on customer insight and an appreciation that goes beyond "what to make" to "how to make it". The former is easily duplicated by competitors; the latter a more sustainable competitive advantage that isn't necessarily related to size.
Let me use the family business to illustrate.
What Business Are You Really In?
My family's initial product offering was egg rolls. The idea came to my father when he worked as a waiter in Chinatown. He observed that despite the frequency of their purchase in restaurants, no one offered a similar product in grocery stores. Like so many entrepreneurs, his "eureka moment" came when he couldn't find a good answer to the question "I wonder why no one makes….?"
He and my aunt developed a business plan. They had a recipe and production scheme. They developed a marketing and distribution plan. Then they hit the streets and sold the product to a grocery chain on a test basis. The egg rolls took off and the rest was history…just not the kind of history you might expect.
You see, my father never set out to be an egg roll maker. While the idea of making egg rolls available was the genesis of his vision, it was only a part of a much broader vision to become a "supplier of easy to prepare Chinese food". As a result, he didn't seek growth by simply producing more and more variations of egg rolls (although he did do that). All that would have done is fragment an already small market, increase his costs and destroy his margins. Rather, over the next 55 years the business added nearly 30 different product lines and grew to be the largest producer of Chinese food in Canada.
Think about it this way. A business built on egg rolls was pretty much limited to selling appetizers and the occasions of use (which sets the size of the potential market) were limited to occasions when appetizers were needed (ie entertaining). But a business built on a Chinese food experience could sell an entire meal and every day brought at least one potential occasion of use.
But it wasn't just growth possibilities that led to this vision. Instead, it was customer insight. As my father put it, "it wasn't a matter of what we could make, it was a matter of what people wanted to buy". And, he reasoned, people really didn't, for the most part, want egg rolls...at least not alone. They wanted a Chinese food experience.
Competitive Advantage: What Makes You Special
It was a great insight. However, it was an insight that anyone could act upon if all it meant was selling an array of products of Chinese origin. Anyone could have done that and, indeed, many tried and failed. The real core of the success lay in the problem the business was built to solve: not to be just another provider of Chinese products but rather to enable people to make a Chinese meal at home.
That distinction meant that it wasn't enough to have recipes for new Chinese dishes. Rather, it meant the business needed to understand such nuances as: what kinds of products people wanted to prepare at home, which dishes they were likely to have together, their familiarity with Oriental cooking methods, their access to Oriental cooking utensils and ingredients and the like. These were the real sources of competitive advantage that they had.
Chip Wilson, the founder of Lululemon has that same vison. While Lululemon is most commonly associated with yoga gear, Mr Wilson constantly reminds his staff that they are in the business of solving the problems faced by athletes. Period. He doesn't specify that they must be yoga related nor does he limit their search to problems tied to performance, durability, fit, fashion or any other product attribute. In doing so, he constantly sets up everyone in the business to ask the question "People need this. I wonder why no one has ever….?".
Who do you think wins…a business built on one person's eureka moment or the business built on a vision that makes everyone in it an entrepreneur.?
The lesson: Don't limit your market potential and opportunities to differentiate by thinking about yourself as a one product firm or one trick pony. Think instead about the real problem that product solves for customers and then ask "how complete a solution is my product?" and "what makes my solution better?". That will establish a growth direction for your firm and an ability to never lose sight of the real keys to your success.
Kenneth B. Wong
Ken Wong is a faculty member and The Distinguished Professor of Marketing at Queen's School of Business and is also the Managing Partner, Knowledge Development for Level 5, a marketing consulting firm focused on brand strategy and execution.
As a teacher, Ken has received numerous awards for his courses in strategic planning, marketing and business strategy. Beyond Queen's, he has also taught in degree programs at Cornell, Carleton University, Radcliffe College and Harvard's Continuing Education Program and in executive programs at York University, University of Toronto, Dalhousie University and the University of Alberta.
He writes regularly for Strategy magazine, Canadian Grocer and Meetings and Incentives, and had served as a regular columnist for Marketing magazine and the National Post. He has also written for the Financial Times, Globe and Mail and the Conference Board Review. His current research focuses on enhancing "marketing productivity" and brand profitability.