The ferocity of competitors depends on a number of factors. Are we in a commodity market where price and supply capacity determine all and it is a race to the bottom? Are we in a narrow band market where there are few suppliers and market share is hard to expand? Is our business exposed to currency swings? Are technological breakthroughs by rivals either going to deeply wound us or even drive us to the wall? Would a regulatory change up end our business relative to our competitors? Are deep pockets the key to winning in the market? If our rival poached our key people, would it be a disaster from which we may not be able to recover?
In most cases in business, we have tons of competitors and we have to duke it out in the market. Usually in these cases though there are also tons of potential buyers too. Usually, we are limited in our ability to access those buyers, relative to our competitor’s capacities. Your sales team of twenty is dwarfed by the rival’s ranks of hundreds of people able to fan out and meet more clients. New competitors are also often happy to enter into price destruction to buy market share. You have diligently worked the price up over many years and suddenly all of that effort is out the window, because Deep Pockets is undercutting you.
It is all a zero sum game of winners and losers and not much grey in the middle. What can we do. We need to build moats around our castle to help us withstand attack from outside. Now here is the irony. We need to be doing this before we have a problem. This is problematic because mentally we are thinking everything is fine. We are making money and doing well. In fact, we are pretty busy just keeping up with the demands from buyers. No moat construction spare capacity available.
That situation well describes my business in 2018-2019. We were surging, money was coming in like never before and life was looking pretty peachy, until January 10th, 2020. Japan’s first case of Covid-19 triggered cancellation after cancellation of scheduled training by our clients and things were suddenly looking grim. No moat either.
They say to never waste a good crisis, so we did that. For the last two and half years we have been working on building that moat, because now we have the time. A lot of time. We looked at how can we get out of the apple to apple comparisons and create a situation where it is a musk melon to apple comparison. For everyone based outside of Japan, musk melons are prohibitively expensive here and considered high value, warranting the yen required to buy one.
Maybe you have suddenly found some excess capacity thanks to Covid trying to destroy your industry. Don’t worry if you missed making the most of a good crisis, there will plenty coming down the pike in the future for you to work on. Even better, if you can actually get some moat building going on even if things looking pretty good. Remember, the good times roll, but they don’t keep rolling and one day you will need that moat. We had been doing virtual training delivery in Dale Carnegie since 2010. We toyed with the idea for Japan but the big bug bears were the money to translate the curriculum and the time and effort to train instructors and producers to do it. Guess what? We found the money and time to rectify that situation pretty snappily once we released we had to switch across to delivery online to save the business. In retrospect we should have done that whole online thing before Covid but there was no pressing urgency, so we dawdled.
What do you make the moat out of? Value is the obvious answer. Often though, we think we are already giving sufficient value. What more could we do? Because the life and death urgency isn’t upon us, we may need to do dedicate the time and do some serious brainstorming to identify where we can bring impact to our buyers, beyond the current configurations. It may mean adding value which has a cost and you don’t get directly compensated for it. Moats are expensive and that is the point. If they were cheap, you wouldn’t have a moat, because it would be easy for your rival to replicate what you are doing. There are internal costs which you can bear, in order to pass on some economic advantage to your buyers. Find them.
Musk melons at apple prices or slightly higher than apple prices is a serious moat. What is the equivalent in your business? What extras can you bring to the party? What services can you attach to physical items and vice versa? Where can you save the buyer money and time sustained at a high quality point, because they are usually the key things they are concerned about. Start the search now and get busy building that moat, because you can guarantee you will need it and generally the correlation of need and urgency is at the worst possible timing too.
