Entrepreneurship. Rhonda Abrams

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СКАЧАТЬ way of ranking search results (an algorithm based on how many other pages linked to a page and their importance) that searchers found more reliable. Innovation is not limited to technology. Many successful companies innovate in low-tech, no-tech, or services industries.

      ■ Underserved or new market. Many entrepreneurial companies succeed by bringing a proven product or service to a market for which there is greater demand than competitors can currently satisfy, establishing a location that has been overlooked by competitors, or identifying a market that has not yet been served or dominated by a competitor. These can be new markets, such as introducing a product or service to a new country. At other times, markets are growing, and there just aren’t enough competitors in the same geographic location. Markets can also become underserved when large companies abandon or neglect smaller portions of their current customer base. Sometimes an innovative company leads the way and others follow once the innovators have built or created customer demand. This often leads to “me-too” businesses that can achieve remarkable success. For example, after SuperCuts built acceptance for low-cost hair services, other companies, such as Great Clips, came in and followed on that success. Great Clips now has more than twice as many locations as SuperCuts.

      REAL-WORLD RECAP

       Factors of a successful business concept

      ■ Innovation

      ■ Underserved or new market

      ■ Lower price

      ■ Higher quality

      ■ Convenience

      ■ Service

      ■ New delivery method or distribution channel

      ■ Increased integration

      ■ Lower price. Customers often are tempted by lower cost options, and being a low-cost leader is a time-honored strategy for a business concept. Unless you have some sort of strategic advantage, though, such as a unique production or distribution method, secret supply sources, or arrangements with partners that make your own costs consistently lower, this can be a strategy difficult to sustain in the long term. If your only key differentiator is that you provide a cheaper product or service, it is fairly easy for someone else to beat you at your own game. SuperCuts, for instance, was able to be profitable with low-cost hair care services because it standardized procedures, enabling the company to serve customers faster and with lower-paid stylists, thus giving it an ongoing cost advantage.

      ■ Higher quality. Often innovation comes in the form of higher, or different, quality. An entrepreneur may recognize an opportunity because of a lack of high-quality offerings in an otherwise robust market, or may notice customers expressing dissatisfaction with current options. For example, many people like the convenience and price of fast food, but often find it not terribly healthy. In 1993, Steve Ells, a culinary-taught chef working at one of the best restaurants in America, decided to open a fast food Mexican restaurant based on high-quality, often organic, ingredients. His company—Chipotle—became the forerunner of a new trend in the prepared food industry, later reaching a market value of over $10 billion.

      ■ Convenience. Making a product or service available in a more convenient way for customers can create a viable business opportunity. A neighborhood hardware store might have higher prices, say, or a mobile pet-grooming service that goes to pet owners’ homes might provide the same products or services as a storefront service but far more conveniently, thereby attracting and retaining customers. Enterprise Rent-A-Car, for example, picks up customers at their residence or place of business, for free. This added convenience sets Enterprise apart from the competition.

      ■ Service. A number of highly successful companies seized business opportunities made possible by the opportunity to provide better service than competitors. “Better service” can be defined in various ways. The obvious way is to give customers more personal attention—the department store Nordstrom, for one, has staked out a competitive advantage based on its high quality of service, particularly its return policy and its ample sales staff. Another type of better service is to take care of customers faster. FedEx founder Fred Smith pioneered a way to deliver mail and packages overnight—thus combining service with innovation.

      ■ New delivery system or distribution channel. Often, you don’t need to sell anything much better or differently than your competitors—you simply have to sell it by different methods or through different channels. Some successful companies have been founded by creating or using new sales channels. Tupperware pioneered in-home parties to sell food storage containers. One of the earliest companies to see the possibilities in the Internet as a sales channel was Amazon.com. Because wholesale book distribution companies already existed that could deliver individual copies of books to customers, Amazon did not need to buy inventory to open what it claimed to be “the world’s largest bookstore.” Amazon leveraged that operational advantage to use a new channel to reach customers.

      ■ Increased integration. Integration refers to a situation where a company controls more steps in the design, production, and sale of its product or services rather than relying on outside suppliers. This can create a competitive advantage because it gives the company more power to oversee the quality at every stage of a product’s life, and also because there may be increased profit margins. Vertical integration may be particularly useful for companies that want to gain a competitive advantage based on quality—such as Apple or Starbucks, both companies that maintain control over more stages of design, production, and sales than other electronics companies or coffee shops. Still, it is often difficult for one company to manage all the various functions well, and often vertically integrated companies do not benefit from suppliers’ ingenuity or cost-cutting methods.

       If you build it, will they come?

       One of the biggest mistakes entrepreneurs make is focusing more on their product or service than on understanding their customers. You could have what you think is the coolest new idea on the planet, but if no one is interested in buying it, then you don’t have a business.

       During the Internet boom of the late ‘90s, Webvan’s concept of delivering virtually everything to people’s homes—from groceries to prescriptions, dry cleaning, and movie rentals—seemed like a brilliant one, and it received over three-quarters of a billion dollars in funding!

       It turned out that customers were used to going to their favorite grocery store and liked picking out their own produce and meat; not enough of them were willing to pay for the convenience of delivery. The company’s demise was one of the most spectacular during the so-called “dot-com bust.”

Characteristics of highly successful businesses

      You know you have a great business idea—but does it have the potential to become highly successful? You may be satisfied with running a one-person show that provides a comfortable income. But if you have dreams of a company that will become a household name, employ thousands of well-paid workers, make an initial public offering (IPO) of company stock, and make you rich, your business should have most of the following traits:

      ■ Compelling, executable business idea. The basis for the business itself must be rock-solid. You must have a truly effective and impressive СКАЧАТЬ