If you were Rolex would you be in the watch business or the jewellery business? What about if you were a mystery novel writer? Would that put you in the book business?
It may seem like the answers to such questions are obvious. However you’d be surprised how many businesses (and even professionals) are altogether unclear on what business they are really in. The result? They make the wrong plans in terms of marketing, focus on the wrong things and basically flail away in a disorganized fashion. Just imagine if you were not quite sure whether you were actually in a soccer game or in a basketball game. How would you know how to play?
In the examples I gave above, if for Rolex you said you were in the watch business, then you’d be dead wrong. Rolex is in the jewellery business. And the mystery novel writer is in the entertainment business. I will explain why in this article.
A restaurant is usually considered to be in the food service business. A restaurant that I know about has a board game theme. People come in, pick board games to play at the table and then order food and drinks to go along with that. Do you think people go to the restaurant for the food or to socialize by playing board games? I think it is the latter. Why? Well, do you think that if another restaurant served a better steak but no games, that they would prefer to go there? Not likely. That’s not what they are at this restaurant for. They are not really there for the steak. They are there to hang out.
Now what if there was a club with billiard tables not too far in the area that also served sandwiches? That club would normally be classified to be in the entertainment business. And yet it would compete with our board game restaurant because it offers games for groups who also happen to be hungry.
You may have been in business or a specific profession for a while and may think you know exactly what business you’re in. If you do, then that’s great. If you’re not sure or, if you want to check anyway, then please read on.
There are a couple of ways to test to make sure you have identified without any doubt what business you’re really in.
The first is to ask yourself, who are your competitors? Who is taking business away from you?
This is an important question to answer. If you cannot identify your true competitors then how can you fight for your market? You’d be focused on the wrong competitors and your true competitors would continue bleeding you of your customers. In our board game restaurant example, if you were to focus on competing with the steak house down the road and put all your efforts on making a better steak, rather than investing in better board games, setting up board game competitions between tables or other game related ideas, then you will exhaust your resources while the billiard parlour is siphoning off your customers.
You might argue that it is both food and games in this example. Well, not really. Obviously you cannot offer a bad steak and think that you will get away with it as long as you’re offering games. However you can get by with a reasonable steak as long as the game part is the best you can offer. As I said earlier people will come to your restaurant for the games and the socializing, not the food. They may not want to eat garbage, but they will tolerate a “just ok” steak. Will it help to have a better steak? Well, of course, but that is not your priority and that is what we are talking about here.
So now it seems clear that knowing your competitors helps you define what game you’re in. The second way to help understand what business you’re in is to ask yourself, “Who are my customers?”
Study your customers. What age are they? Are there any common characteristics that you can identify? Are they in similar businesses or do they have similar interests? A very important question to ask is “Why are they buying from you rather than someone else?”
That last question is critical. Many businesses do not know what the secret of their success really is. You need to know. That way you can work on polishing it, improving it, expanding it and making your niche even more attractive to your customers. That way you can maintain your customer base and ward off competitors.
So know thyself. Only if you know what business you’re in, will you be able to plan how to protect, maintain or expand your business.
Thanks for reading.