Is your small business competitive? Whether you are starting a business, or running and growing a small business, you must be able to beat the competition in your selected market for your business to remain viable.

On a previous episode of The How of Business podcast, episode 532, Henry Lopez shared his thoughts on the higher-level question: Is Your Business Model Broken? How can you tell, and how do you fix it? A strong and healthy business model supports a business that is consistently profitable, can scale and remains competitive.

Then on episode 537 I focused specifically on Profitability. And on episode 539 is all about Scalability.

On this episode Henry shares additional thoughts on remaining competitive in your market or expanding and shifting into new markets in order to remain competitive.

Is Your Small Business Competitive:

While the business idea is the “what” of the business, the business model is the “how.” Your business model is how you will run your business to make a profit, have the ability grow, and remain competitive.

Staying competitive is essential for long-term growth and success of your business.

Being competitive starts with understanding your Competitive Landscape:

• Who are the competitors in your market? What is their position? Are they dominant or is there truly an opportunity to compete or displace them? If it’s a new competitor, are going to be able to leapfrog you unless you change something?
• A SWOT analysis is a great tool to help you analyze your competitive position.

What it means to be a competitive small business?

• For a small business to be competitive, it means having the ability to offer unique value, effectively meet customer needs, and sustain profitability in the face of market challenges and competition. It means that customers a choosing you for more than just having the lowest price – unless that’s your business model which is hard to sustain at a smaller scale.
• It requires remaining innovative, satisfying your customers (delivering on your value proposition), market positioning, market share.
• And it may also mean finding niche opportunities and markets that aren’t oversaturated. Which leads is to the Blue Ocean strategy.

Blue Ocean Strategy:

• Book: Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kim and Renée Mauborgne.
• Blue Ocean Strategy advocates for creating uncontested market spaces, or “blue oceans,” to achieve sustainable growth, rather than competing in oversaturated markets, or “red oceans.” The book recommends that you innovate by finding new demand, breaking away from fierce competition, and making the competition irrelevant through differentiation and low cost (not to be confused with competing in a saturated market on price!). The core idea is to shift focus from competing in existing markets to creating new market opportunities.
• Reconstruct Market Boundaries: Identify opportunities across existing industry boundaries, such as targeting non-customers or under-served segments.
• Focus on the Big Picture, Not the Numbers: Shift focus from traditional competitive benchmarking to exploring unmet customer needs and creating value innovation.
• Reach Beyond Existing Demand: Look for untapped or overlooked customer groups, including non-customers who could become part of a new market.
• “The only way to beat the competition is to stop trying to beat the competition.” This quote from the book emphasizes that small businesses should focus on creating unique value in untapped markets instead of trying to outperform competitors in crowded spaces.
• “Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.” This quote from the book highlights the importance of focusing on innovation that creates new value for customers, allowing small businesses to stand apart and thrive without direct competition.

Signs Your Business is NOT Competitive:

• Competing exclusively or primarily on price.
• Your offering has become ubiquitous.
• Your small business is losing market share.
• Poor customer retention.
• High employee turnover.
• Your revenues are stagnant or down.
• Your Gross Margins are decreasing.
• Your Net Operating Profits are decreasing.
• Your are not innovating and your offering has become stagnant.

How to help your small business remain competitive:

• Strategic Planning
• Leverage the Power of Differentiation: Refine or evolve your Unique Value Proposition: Explore ways to identify what makes your business unique. How does it help solve your customer’s problem, or help them aspire to achieve, in a unique way. What is your truly unique capability or expertise?
• If you are competing just on price you will end up losing. Your business must remain responsive to customer needs and trends and agile can keep a business competitive.
• Expand or Pivot Your Target Market. Search for the Blue Oceans.

Bottom Line – how to keep your small business competitive:

• Staying competitive isn’t just about competing—it’s about innovating, understanding your unique strengths, and focusing on your customers.
• Staying competitive in business requires offering unique value, understanding the competitive landscape, and using strategies like differentiation and the Blue Ocean Strategy. A small business can lose its competitiveness because of stagnant innovation which ultimately results in declining profits. A small business most remaining competitive, including refining a unique value proposition, exploring new markets, and continuous innovation.
• We can easily come up with excuses for why we have lost our competitive edge or advantage, but we my must avoid waiting too long to take action before it’s too late to course correct.
• We encourage you to evaluate your businesses and identify one area where you can make an immediate improvement to remain competitive.

Resources:

FREE DOWNLOAD: Business Model Health Checklist

Book Recommendations:

• Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kim and Renée Mauborgne

Other Podcast Episodes:

Episode 532: Is Your Business Model Broken?

Episode 537: Is Your Business Profitable?

Episode 539: Is Your Business Scalable?

You can find other episodes of The How of Business podcast, the best small business podcast, on our Archives page.

Transcript:

The following is a full transcript of this episode. This transcript was produced by an automated system and may contain some typos.

Henry Lopez (00:11):

Welcome to the How of Business Podcast. This is Henry Lopez and this episode is about competitiveness. The question I’ll address on this episode is your business competitive. Whether you’re starting a new business or running and growing an existing small business, you must be able to beat the competition on a regular basis in your selected market to remain a viable business. On a previous episode of the How a Business Podcast, episode 532, I shared my thoughts on the higher-level question related to this, which is your business model broken? How can you tell and how can you fix it? Because a strong and healthy business model supports a business that is consistently profitable, can scale and remains competitive. Then on episode 537, I focused specifically on profitability and on episode 5 39, that episode was all about scalability. So in this episode, I’m going to share some additional thoughts on remaining competitive in your market or expanding or shifting into new markets in order to remain competitive to get all of the How a business resources, including the show notes page for this episode.

Henry Lopez (01:15):

And to learn more about my coaching programs, please visit the how of business.com. I also invite you to please consider supporting this podcast on Patreon, and please subscribe wherever you might be listening so you don’t miss any new episodes. I also encourage you to download the Business Model health checklist. It’s a checklist, a document that’ll help you identify is your business model healthy, and if not, what are the things to look for to make sure that you have either that you’re planning for or that you adjust your business model so that it allows you to remain profitable and allow you to scale and remain competitive. So to define again what I mean by a business model, think of it this way. While the business idea is the what of the business, the business model is the how. Your business model is how you will run your business to make a profit, to have the ability to grow and to remain competitive.

Henry Lopez (02:08):

Staying competitive is essential for the long-term growth and success of your small business. And what do I mean by being competitive? What starts with understanding your competitive landscape in the market that you’re either planning to compete in or that you currently are in? We must know always who are the competitors in your market? What is their position in the market? Are they dominant or is there truly an opportunity to continue or to, if you’re a new business, to compete or displace them? If it’s a new competitor that has emerged, are they going to be able to leapfrog you unless you change something? Those are all important questions that you always have to ask yourself. Again, whether you’re planning for a new business or if you’re an existing business owner, a tool that really comes in handy here is a SWOT analysis. If you’re not familiar with the SWOT analysis, just do a Google search.

Henry Lopez (02:57):

You’ll find lots of different examples, but it’s a great way to analyze where you stand versus the competition. So what are your strengths and weaknesses? What are your opportunities and threats by comparison to your competition? And what does it mean to be competitive? Well, for a small business to be competitive, it typically means having the ability to offer a unique value to your customers, your clients, your patient, effectively meet those customer’s needs and sustain profitability. Even in the face of market challenges and competition, it means that customers are choosing you for more than just having the lowest price, and that’s a key point, unless as an exception, that might be your business model, but that’s really hard to sustain. To lead with price, meaning being the low price provider, that’s really hard for most small businesses at our scale, remaining competitive also requires innovation, satisfying our customers, in other words, delivering on your value proposition for your customers, establishing and maintaining your market position, and of course at least protecting, but ideally growing your market share and it might also require to remain competitive, might also require finding niche opportunities or other markets that aren’t oversaturated.

Henry Lopez (04:11):

Now, we don’t always have the flexibility to change markets if we’re in a physical location, for example, and we’re under lease pretty hard to move our operations or move our business, our retail business for example. So it becomes a bit more challenging. But even then, what we’d have to look for is how do within that same geography, how do we address perhaps a slightly different market or how do we adjust our value proposition? Which leads us to the concept of Blue Ocean strategy. If you haven’t heard of Blue Ocean Strategy, it’s based on a book called Blue Ocean Strategy, which is about how to create uncontested market space and make the competition irrelevant. That’s what the authors put forward in this book, blue Ocean Strategy. So what it advocates in the book is for creating uncontested market spaces, not an easy thing to do and not always possible, or what they refer to these uncontested market spaces as blue oceans, meaning wide blue, open oceans.

Henry Lopez (05:06):

And this allows us then to achieve sustainable growth rather than trying to compete in an oversaturated market. So this is important to think about either as I’m entering a market, is it oversaturated already? Or it could be that we’ve been in a market and then it became oversaturated and they refer to those oversaturated markets in the book as red oceans, the opposite, if you will, metaphorically of a blue ocean. What comes to mind for me is when my partner and I started our first frozen yogurt self-serve frozen yogurt business in Colorado Springs, we were literally the first to open a self-serve frozen yogurt restaurant in Colorado Springs in 2011, I believe it was so untapped market, right? Blue Ocean. The problem was of course that two years later there were literally, I think I counted 14 competitors in addition to our second location oversaturated market.

Henry Lopez (05:59):

Now the market has since collapsed back down to what is more reasonable for that market, what it can sustain, but part of it was the barrier to entry was relatively low, and so it was a trend that everybody jumped on. So what we had to do is we had to continue to innovate and remain competitive in what became an oversaturated market, but it’s not that we could lift up our operations and move it to another town that didn’t have one of these locations. We had to continue to reinvent ourselves to some extent within that same market, and that’s what we did. Blue Ocean strategy, the book puts forward a couple of different ways to accomplish this. One is to reconstruct your market boundary. So identify opportunities across existing industry boundaries, let’s say such as targeting non-customers or underserved segments. So a different segment like for example, we might’ve tried to go after corporate accounts or private events, let’s say instead of just serving the retail public, that might’ve been an example.

Henry Lopez (06:58):

It also suggests reaching beyond existing demand. Look for untapped and overlooked customer groups, including non-customers. Again, customers you’re not serving now who could become part of the new market. So expand that market or reach a market that didn’t before. Think they might use your services or haven’t used them before, but you’re uncovering that opportunity. Here’s a quote from the book that I think is relevant to this quote. The only way to beat the competition is to stop trying to beat the competition. So what this quote emphasizes is that small businesses should focus on creating unique value in untapped markets or segments instead of trying to outperform competitors in crowded spaces. Now, I don’t completely agree with that. I think part of it is that we do need to overdeliver the challenge here, and I think what it’s speaking to is I often hear people say, well, we’re just going to have better customer service, and the problem is that that’s a me too, probably everybody else can say that, and is there really going to be perceived value in that in what you’re offering?

Henry Lopez (07:56):

Here’s another quote from the book, blue Ocean Strategy quote, value innovation is the cornerstone of the blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space. So that quote highlights the importance of focusing on innovation that creates new value for customers, allowing small businesses to stand apart or continue to stand apart or to again, differentiate and thrive without directly competing. You’re changing the rules of the game. It relates to the point I made earlier. If you don’t do that or if you’re not ready to do that, your competition is going to do that. They’re going to leap frog you by focusing on innovation and figuring out how they get a competitive advantage against you.

Henry Lopez (08:49):

So what are some signs that your business may not be as competitive as it once was or that you might think it is? And some of these may be very obvious, but let’s just go through this list for you to think about. First on my list is competing exclusively, primarily on price. So I mentioned this already, but it’s so important. It is almost impossible for us as small business owners with our limited resources to compete on price for very long. You may have a model that proves me wrong, so fantastic, but you’re not going to out Walmart. Walmart, you don’t have the scale, you don’t have the buying power, you don’t have the economies of scale. And so it’s going to be pretty hard on most of these, especially ubiquitous items to be able to beat the competition and it’s also a downward spiral and related to that, as I mentioned, if your product or your offering has become ubiquitous, everybody has it.

Henry Lopez (09:41):

It’s a me too. Well, in a commodity market, it’s all about price. That’s what people are going to look for. Or if you’re not effectively communicating the differentiator, the value of what you offer, then you’re competing on a commodity, a me too, and the buyer is going to compare you against other competitors rated as equal as far as functionality or value, and then it becomes all about price. Another thing to look at is are you losing market share? That’s a little harder to measure, especially for us as business owners. But a lot of it has to do with are you losing customers? How is your customer retention? And then indirectly related to that is how is your employee turnover? How are you retaining your star performers, your quality employees? That could be an indication that they’re getting either picked off by the competition or they’re seeing the writing on the wall, at least their perception of it that your business is on a downward spiral.

Henry Lopez (10:33):

Are your revenues of course, are your revenues stagnant or trending down, especially year over year? We can all have an off year. There are things that are unpredictable things that can happen, but I think if we’re honest with ourselves, we can identify a trend more detailed than that. What are our gross margins looking like? Are those decreasing? Are of course your net operating profits decreasing? And then are you stagnant from an innovation perspective? You’ve been offering the same thing, the same pitch, the same product for whatever length of time now you’re getting stagnant. So those are some things to think about and to ask yourself to help you determine, am I losing my competitive? Is my small business losing its competitive edge? If I can help you with starting or growing your business, including this component of becoming or remaining competitive, I invite you to schedule a free coaching consultation with me during that free coaching consultation.

Henry Lopez (11:27):

There’s no obligation, but we’ll talk about what your current challenge is. I’ll give you some initial guidance and then I’ll share with you my coaching programs and we can determine if it might be a fit. So I invite you there. If you’re interested and you’re looking for help, go to the How a business website, click on the button at the top of the screen to schedule a free coaching consultation with me. I look forward to chatting with you soon about how I might be able to help you with starting and growing your small business. Alright, so let’s talk about now how do I remain competitive? What are some of the aspects of that? I think strategic planning comes into play. So having on an annual basis at least, or out for a three to five year period, what is your plan? And that plan should include beyond the obvious metrics of what we’re planning to do from a revenue perspective and so forth.

Henry Lopez (12:12):

What are those initiatives? How are we going to continue to innovate? How are we going to continue to defend our market share against the competition? We have to stay on top of that and stay ahead of that in order to remain competitive. It’s all about the power of differentiation, and that involves refining and changing your unique value proposition as the market demands. You can’t expect that what was working five years ago or even maybe a year ago is still going to work for you today because markets change whether we like it or not, people’s perceptions change how they buy change. So we have to continuously explore ways to identify what makes your business unique, how does it help solve your customer’s problem or help them with achieving their aspirations in a unique way that only ideally you can offer. The question is, what is your truly unique capability or expertise that you offer?

Henry Lopez (13:07):

And again, if you’re competing just on price, you will end up losing in the long term. Your business has to remain responsive to customer needs. So you have to keep your finger on the pulse of what people are responding to what they want, and also trends and remain agile and keep the business aligned and competitive. And in a lot of cases, what we have to do is we have to pivot. I know that’s an overused cliche term, but it expresses it the best. We must either expand or pivot sometimes our market or how we sell to that market. That’s that search for the blue oceans. We have to make sure that our business stands out that it’s offering unique products and services and of course, exceptional customer experiences. A classic example of a business that successfully pivoted to adapt to a highly competitive market is Netflix, which transitioned some of you might remember from a mail order, DVD rental service to a streaming platform, allowing them to stay relevant as DVDs went out of favor and in the face of changing consumer habits, which was shifting to what became available, which was the digital technology, the streaming capabilities.

Henry Lopez (14:18):

And so they had to make a hard decision. I remember when that happened, thinking this might be the end of Netflix, but it was the right gamble, and sometimes that’s what it takes. It takes a bold move, but that’s what they had to do. Otherwise they’d be out of business today very likely. So pivots can be a shift in target customers, a segment or going after a new segment. As I mentioned earlier, different distribution channels, certainly pricing concepts, overall business strategy, and maybe even switching industries if your business or business model allows for that. The bottom line is this, on competitiveness, staying competitive isn’t just about competing. It’s about innovating and understanding your unique strengths and continuing to develop those. And with a focus on your customers, what do they want? What do they need? This is why it’s so critical as a business owner to be very attuned to what your customers are buying from you.

Henry Lopez (15:12):

Why are they buying from you? How are they buying from you? It’s important to listen to that, and that is why the closer we are to the customer, the more valuable that information is for us to help us make these types of decisions. Staying competitive in business requires offering a unique value, understanding the competitive landscape on an ongoing basis, and using strategies like differentiation and the Blue Ocean strategy. We can easily come up with excuses or continue to wait and see for why we have lost our competitive edge or advantage. But we must avoid waiting too long to take action before then it becomes too late to correct the course of your business. Here’s an action item for you. I encourage you to evaluate your business and identify at least one area where you can make an immediate improvement to remain competitive. Maybe it’s in the area of innovating, maybe it’s looking for new market segments, untapped market segments, bringing in a complimentary product or solution. Continuously look for those opportunities so that you don’t become stagnant and it doesn’t become too late to adjust and remain competitive.