Expand Your Market by Baking a Bigger Pie
Strategies for Small Business and Manufacturers
In the world of small business, especially in small-scale manufacturing, it's easy to feel like you're competing for the same slice of the market pie as everyone else. The natural instinct might be to carve out your own piece by doing things just a bit differently than the "other guys." But what if instead of fighting over a limited pie, you could make the pie bigger—or better yet, create an entirely new pie? What could that mean for your business? In this post, we'll explore strategies for expanding the market, innovating beyond the competition, and how these approaches can lead to sustainable growth. This discussion also sets the stage for our upcoming conversation about competition in Thursday’s TFT.
Are You Making the Pie Bigger?
The first step that I think is really important here is to consider what does making the pie bigger really mean? It means to add to the ecosystem that you are playing in instead of just taking market share. Yes, it is important to have customer and to gain market share. But if your pitch is just, “come to us because we are better.” That is playing in the same pie as everyone else and you will end up in a race to the bottom. Those are never easy races to win and coming in second will end your company. What you are looking at is a way to add more value to the ecosystem as a whole. Companies that introduce new products or services to create new markets can increase revenue by an average of 18% over five years compared to companies that focus solely on market share growth within existing markets (Harvard Business Review). Maybe even make a new ecosystem. Companies that create new categories or significantly expand existing ones see 30-50% higher long-term growth compared to competitors who compete for existing market share (Boston Consulting Group). Think of Netflix when they started. The goal as a better DVD rental system, that turned into a better streaming service and eventually the content creating machine that we know today. That would not have been possible if they stayed focused on DVDs, or even worse if Blockbuster had bought them and stayed focused on late fees. Netflix found a way to make the pie bigger and actually baked a couple of new pies as well. So how are you increasing the pie today?
The important questions to ask yourself here are:
Am I making the pie bigger with the work that I am doing?
Consider: According to Accenture, 62% of high-growth companies plan to invest in market expansion to drive growth over the next three years.
How am I adding value to my customers?
Consider: “Firms that engage deeply with customers grow 2.3 times faster and are 60% more profitable than those that don’t”, as per Bain & Company.
Are there things that I can do with other firms to enhance their offering?
Consider: Businesses that collaborate with others to innovate see a 20-25% increase in profit margins compared to those that don’t (McKinsey & Company).
How Do You Make the Pie Bigger?
If you are not making the pie bigger think about the ways that you might be able to add more value to the system.
What are services that you could offer?
Consider: “McKinsey research shows that companies investing in sustainable growth initiatives outperform their peers by 40% over 10 years.”
What other companies can you work with?
What are the pain points for customers today?
Consider: 66% of customers expect companies to understand their needs and expectations. Firms that focus on customer value rather than just market share are 60% more likely to be successful in expanding their market (Salesforce).
Keep in mind even if you are making the pie bigger today there is always something that you can do differently tomorrow or next year to continue to make the pie bigger. Companies that prioritize long-term innovation over short-term gains see 2.6 times higher revenue growth, according to Deloitte. The pie will always get crowded so you want to be on the front end of baking the new pies. Think about streaming services today. There are way to many, but most people have Netflix because they were the first. Be the first to create a new pie and you will gain most of the value. The first company to market in a new category typically captures 70% of the market share and 75% of the category’s profits (Category Pirates). That is a great way to start baking a new pie. Then as competition comes in and it will you can be working on the next edition of the pie to stay ahead.
Action Step
Review your business today and determine in your are making the pie bigger. If so, great keep fighting that good fight. If you are not, determine one change you can make this week to start making the pie bigger.
Additional Reading:
Niche Down - Christopher Lochhead
Play Bigger - Christopher Lochhead & Team
“Blue Ocean Strategy” by W. Chan Kim and Renée Mauborgne
“The Innovator’s Dilemma” by Clayton Christensen
“Category Creation: How to Build a Brand that Customers, Employees, and Investors Will Love” by Anthony Kennada
“Playing to Win: How Strategy Really Works” by A.G. Lafley and Roger Martin