Small and mid-size enterprises (SMEs) are the shoulders upon which America stands. With more than 90 percent of American businesses comprising the SME universe, it’s easy to understand why they are considered to be the backbone of the economy.
Far more people deliver goods and services – and earn their paychecks – on behalf of SMEs than they do from large enterprises. In spite of this, it’s the large corporations that make headlines in the media and wield disproportionate influence on their chosen markets. Though these headlines make it easy to believe that competition is a slug-fest between huge players in a market, the reality, it turns out, is quite different. Even despite the pandemic, many mid-market companies have maintained profitability — and are still growing.
That said, size matters much less than having a sound strategy. CEOs must have a game plan that accounts for how to best compete against other companies, regardless of size.
Meeting Customers’ Needs Through Value
On the most basic level, businesses need to meet their customers’ needs (and perhaps exceed their expectations) by delivering products and services that are considered worthy of the price paid. In other words, the value proposition needs to be attractive. In each industry, there will be several competitors trying to compete for the customer dollar. Meanwhile, customers usually do not care about which supplier is the largest; instead, they will buy from whoever has the best value proposition. This is good news for small and mid-market companies, because it means there is room for additional competitors besides those who have taken up residency on
the Fortune 500. Your challenge, as an SME CEO? Making sure that you’ve put an effective competitive strategy in place, and that products and services offered are attractive to customers.
Selecting Your Strategy
It is my hope that this eBook will help you choose the strategy that works best for your company in your target markets. Along the way, we’ll talk about how to polish your competitive advantage in a way that would be difficult for others to imitate and that holds up over time. Though my examples will mostly be industrial companies, you’ll find that the ideas and concepts are valid for any industry.
As we will see, there are three proven options when it comes to choosing a competitive strategy:
- Low-cost leadership
- Product leadership
- Customer focus
Each option requires different management systems, goal setting activity, production systems, marketing emphasis, company culture, and management style.
And, because each strategic option is distinct from the other, it is likely that more than one market leader will exist in an industry (as measured by each gauge). From a customer perspective, this means that three companies can potentially meet their needs coming at them from different angles.
On the following pages, we’ll learn how to analyze trends, evaluate the industries and markets where you want to play (or want to enter), identify key success factors, and select the right competitive approach for market leadership.
The eBook is intended as a practical guide, with tables and charts that can be put to use. It is not an academic product; instead, it is based upon decades of experience in formulating and executing strategy with industrial and B2B service companies.
Chapter 1: Understand Customer Needs
In the business-to-business (B2B) world, the purchasing process is far more complex than the journey undertaken by an individual consumer. B2B deals tend to be more concentrated, have larger value, and include more people in a higher-stakes battle for large sales.
Typically, this process will be initiated when a customer identifies a need. This can arise suddenly (for instance, if a machine part breaks or there is a flood) or as the result of a long-term budgeting and planning process (like what would be used to build a new plant or automate a production line).
In either case, the buying team will collect information about different options, evaluate them, and select a supplier that offers the best solution. Sometimes, this requires only having a single replacement part in stock for quick installation; other times, it can only be fulfilled through mastery of a complex, months-long RFP process with decision milestones.
This does not mean the largest supplier will always be selected. Rather, it is most likely that the winning bid will go to the company offering the best combination of problem-solving, lead time, quality, and price.
Different suppliers can be competitive based on a variety of dynamic factors. Think, for example, about how laptops and notebooks have replaced desktop computers in many business applications (this switch has likely been sped up by employees who need to work remotely from home during the pandemic). Another emerging example is how autonomous vehicle technology will allow trucking companies to have one driver remotely operate several electric trucks, replacing one (or two!) drivers in each conventional truck.
Regardless of which competitive strategy is selected, it needs to be based on real, identified customer needs, and offer the flexibility to respond to changing market trends and competitive pressures.