Successful, well-managed companies are excellent at developing and improving their products and services, so that they perform exactly according to the customers’ needs. These companies listen carefully to their customers and everything that may not please the customer is rejected.
Professional market research, good business planning and proper execution of the plan are cornerstones of good management.
Successful companies grow continually to maintain their share prices and to create new opportunities for their employees. To maintain that growth the focus is on large markets that promise a maximum of revenue.
Sounds good! Doesn’t it? There is only one problem. Large and well-managed companies are often good in developing and improving products that already exist. This can be for example a recliner with even more motion functionality or a softer rug or faster closing window shades.
But what about products that are new on the market or not even invented yet. What about products that are currently only sold in niche markets? What about products that provide a lower margin than the mainstream products? For example a recliner with integrated butler to operate the TV remote and provide drinks; a self-cleaning carpet or grocery bags that dissolve into air after 48 hours of use.
It turns out that big companies are often only good with sustaining technologies, meaning already existing products. Regarding new or different products these companies often fail. The reason for that is, that the same management practices that made these companies to industry leaders also make it extremely difficult for them to work with disruptive technologies. This is the conclusion of Professor Clayton Christensen in his book The Innovator’s Dilemma.
So, What’s the Big Deal?
Although in the beginning disruptive technologies can be used only in small markets, at some point they become competitive in mainstream markets. Sometimes technological progress happens faster than the customer wants. Sometimes there is no bigger, faster, softer and so on. Sometimes then other products that offer other benefits regarding reliability, convenience or price become competitive in the mainstream market. This opens new markets. The big companies are competing directly with these new products, but they are not able to develop them themselves.
This is exactly where young and small companies have their advantages. The hour of the underdog:
- Small companies don’t need to focus on the mainstream market to obtain growth and high-margin targets. Small companies successfully can serve niche markets. Eventually that niche goes mainstream.
- Small companies can operate on lower budgets and therefore depend less on high cash-flow.
- Small companies often have more leverage to try out new markets. Big companies often need quantification of market size and financial returns before they can enter a new market (which often does not exist), due to the high risk. The financial and economical risks of small companies are often much lower.
According to different news channels, there will be around 3000 retail stores closing in the USA in 2017. I think that opens great opportunities for small innovative organizations to establish market share. Jazzy Jobber is only one of these organizations that benefits from its size and flexibility and will find its path in the future.