In his book, The Road Ahead, Bill Gates of Microsoft writes of “friction-free capitalism” made possible by developments in communications, chief among them the Internet and its World Wide Web. In this context, “friction” is everything that keeps markets from functioning as the “perfect competition” of economics textbooks. This friction can be a function of distance between buyer and seller, costs of overcoming this distance, and incomplete or incorrect information.
Friction manifests itself by causing barriers to entry for new competitors, limiting the number of outlets from which the consumer has to choose. Large companies, with multiple sales outlets, and economies of scale, have greater power to direct the marketplace.
The degree of friction in the developed world has been decreasing for some years now. Affordable air travel, overnight delivery, improved telephone and fax communications have shortened distances. Credit cards and toll-free numbers have spawned at-home shopping from sources across the country.
The Web has taken the friction in our economy down another notch. In principle, we can sell products and services to a worldwide audience as easily and effectively as our largest multi-national competitor.
In the friction-less economy, the challenge of differentiating ourselves from the competition becomes even greater. Successful small businesses tend to be those who can find some competitive edge, even when their product or service is similar to those around them.
Marketing professionals often call a business’ competitive edge their “unique selling proposition, " or USP. Pinpointing and refining one's USP, however, is not a simple matter. An approach is unique only in the context of our competitors’ marketing messages.
Some marketing messages go beyond product and service characteristics. For example, Charles Revson, founder of Revlon, insisted that he sold hope, not makeup. Similarly, United Airlines sells “friendly skies, " and Wal-Mart sells “always" the low price. Do these slogans convey how each company views their customers? Does their selling proposition appeal to your preferences?
Sharpen your USP:
Try now to recast your business idea in terms of its competitive advantage. Prepare an industry analysis (size, customers, trends, and competitiveness). Identify what you see as your specific market, and estimate the share you think you can capture.
The Web can be a powerful research assistant. Virtually every major business puts product and service information on the Web, including business directory services and magazines.
Search engines can help in improving your understanding of your industry, and the key success factors. Test the resources available on the Web. Visit sites of major companies in the industry, where appropriate. Search the archives of business magazines for articles that give background and statistics.
John B.Vinturella, Ph.D. has almost 40 years experience as a management and strategic consultant, entrepreneur, author, and college professor. For 20 of those years, Dr. Vinturella was owner/president of a distribution company that he founded. He is a principal in business opportunity sites jbv.com and muddledconcept.com , and maintains business and political blogs.