In Secrets To Dominate Your Niche we explained that it is possible to create a highly profitable niche. One of the best ways to identify a potentially profitable niche is to pay attention to existing problems in the market. The bigger the problem, the higher the potential for the niche. If you’ve ever caught yourself thinking, “If it’s up to me I’d do it differently,” then take note. You might have identified a potentially profitably niche. That way how Thomas had identified several of his profitable ventures, including the bird management project he had with the Singapore Air Force, the Timbograph and Microwave for termite detection, GermBusters and others.
That was also how Kevin Plank, founder of Under Armour, created his over US$700 million-dollar high-performance athletic gear company. While he was playing football during his university days he realised that he was not going to be good enough to “go pro”. So he thought hard about what he wanted do after school since he knew that he didn’t want to get a job. He decided to do what he knew best. As a football player, he hated the garments that he had to wear underneath his pads and uniform. The shirts and shorts were made of cotton and they absorbed so much sweat he felt like he was lugging around extra pounds. He thought it would be nice if he could find something that was stretchy, form-fitting, and that could wick away sweat. One day, he went fabric hunting in the garment district in his area and found some moisture-wicking material. He paid a tailor more than US$400 to sew several shirts for him and gave them to his friends on the team at his university. And they fell in love with the shirts. Immediately after his graduation from the university in 1996, Kevin Plank went to work to make his business a reality. With his innovation, he literally created a new niche that is growing rapidly. Now, 13 years later, Under Armour Inc. is a public-listed company and the dominant player in the athletic performance apparel industry; beating even giants like Nike, Reebok and Adidas with about 75 percent market share. And it all started with Kevin Plank identifying a problem in an area that he was familiar with.
The Green Dominator
Creating a solution to a problem can also be about offering a service. That was what one of Sant’s clients did when she spotted a problem in her industry. In the early 2000s, Susan Chong was helping to restructure her husband’s family business that dealt in industrial packaging and factory relocation services. While she was in charge of handling major relocation projects for clients like Western Digital, Seagate and other MNC companies, she discovered a problem. The clients were moving big industrial machines from Singapore back to the United States, and most of them were extremely sensitive and highly expensive equipment that required careful packing and handling. However, the packaging materials that were available on the market were mainly those standard mass-produced type of packaging. This is because packaging suppliers are normally manufacturers of a particular type of material such as cardboard boxes, wooden pallets, crates and foam padding, et cetera. So their packaging options are manufactured according to standard sizes, despite the fact that products do not come in standard sizes. Using these packaging options resulted in a lot of wastage and it was also not cost-effective for the clients. Furthermore, as an environmentally conscious person, she was dismayed with the waste generated by the inefficient use of packaging materials. Seeing the huge gap between the packaging products and services offered in the market and the needs of her clients, Susan decided to take action.
In 2002, she started Greenpac to offer innovative and environmentally friendly packaging solutions. As an independent packaging consultant, the company does not produce any of its own packaging materials but works with packaging suppliers to customise environmentally friendly packaging according to the client’s specific needs. When Susan started the company, people in the packaging industry were telling her that it was a “sunset industry”. Moreover, they were sceptical about her ability to help clients cut down on packaging waste and save money because she was using only environmentally friendly materials, which people perceived to be more expensive than normal materials. But Susan believed otherwise, “I saw that companies who are engaged in international trade were becoming more aware of the need to ‘go green’. If I could help them re-engineer their existing packaging to reduce waste, save money and switch to environmentally friendly packaging all at once, I think companies would be interested to use my services.” As it turned out, once they saw the results, they did.
For example, when Greenpac did an analysis of one client’s packaging, they found that the foam padding could be reduced by designing a customised padding using an alternative eco-friendly foam material. The company’s re-engineered packaging design cut down the usage of foam padding by half while ensuring the product remained well-protected. As a result, their client saved 25 per cent of their total packaging costs. Greenpac believes that designing efficient and cost-effective packaging is not only about cutting down on the usage of materials, but also about streamlining the delivery and storage processes to achieve cost savings. In another case, Greenpac created a material handling system-cum-crate packaging to help a client reduce packaging waste as well as eliminate professional crating costs. (Material handling refers to the activities, equipment, and procedures related to the moving, storing, protecting and controlling of materials in a system.) They designed a custom pallet (which also functioned as the bottom of the crate) that could fit onto an assembly line, where the client’s 500kg product was then assembled directly onto the pallet. Once the assembled product came off the line, the sides of the crate were then fitted on and the packaged product was ready to be transported to its destination. The previous packaging and delivery process was tedious and involved the use of a few separate pallets, crates and professionals to assemble the crates.
By providing a holistic solution encompasses the various aspects of the packaging process, from the packaging design to the handling and delivery process and even to the storage conditions, Greenpac has helped clients achieve an average of 30 to more than 50 per cent cost savings. And in the first year of the company’s start-up, Greenpac generated more than $1 million in revenue. In line with Susan’s vision of creating environmentally friendly packaging solutions, Greenpac created the Revolutionary Systems Concept Packaging (RSCP™)—a range of nail-free packaging products that include pallets, crates, boxes and skids. Greenpac has acquired two international patents and various design awards for their RSCP™ innovation. Today, Greenpac is the market leader for environmentally friendly packaging solutions in Asia, serving Fortune 500 companies. And it all started with Susan Chong spotting a problem in an industry she was familiar with.
Strive To Be The Leader
Once you have identified your niche, you must think about how you can become the leader in that niche. This is because any business can benefit hugely just by being the leader in their niche. That is basically the Holy Grail position that every business should strive for. When you are the leader in your niche, you will enjoy better brand recognition and brand retention. What is the first brand that comes to your mind for a software company? How about a premium airline? And how about an MP3 player? It’s very likely that you would have answered Microsoft, Singapore Airlines and iPod, which if you notice, are all leaders in their niches. By being the leader in a niche, they get to set the standard by which the competitors are measured against. This is a huge advantage. Another benefit of being the leader is that often the leading brand is able to charge a premium compared to their competitors. That’s certainly true for the above mentioned brands. Yet, interestingly, in spite of the premium prices, the majority of the consumers still prefer to buy from the leading brand compared to the competitors. This is what is known as the consumer inertia, where the consumers tend to stick to brands that they are familiar with. And one of the biggest benefits of being the leader is having better economies of scale that will help in increasing profits.
On the same token, because PestBusters is the leading pest control brand in the premium hospitality and healthcare niche, it enjoys strong brand recognition. It is able to charge a premium price for delivering unmatched, high-standard services and at the same time, prospective clients have been known to wait for up to six months for available slots. And because of the economies of scale, PestBusters is able to continually invest in state-of-the-art technologies and trainings to further improve themselves. Indeed, they are enjoying the plethora of benefits of being the leader in their niche. But they didn’t start out as the market leader. In fact, when Thomas was building PestBusters, there were already very established multinational pest control companies dominating the market. In this chapter, we will share with you some strategies on how you can enter an established market, gain market share and become the leader.
Can A Latecomer Become A Niche Dominator?
Let’s do a quick quiz. Which company started the first fast food chain?
Which company started the first online bookstore?
Which company first invented and sold the safety razor for shaving?
If you answered McDonald’s, Amazon and Gillette then you’re wrong! There is the common misconception that the first entrant into the market will have the first-mover advantage and become the leader. The first-mover advantage is the advantage that the first entrant of a niche gets by getting early control of the market share, resources, distribution channels, et cetera. Generally, people have the deep-rooted belief in the first-mover advantage because when we were growing up we learnt idioms like, “The early bird catches the worm” and “He who hesitates is lost”. In reality, the leader, in most cases, is not the first mover. While there are potential advantages of being the first, there are also higher risks involved. On the other hand, latecomers have advantages such as being able to learn from the first movers and have a better understanding of the market as it grows and matures. For example, if you’re a first mover, you might not know whether what you are offering will be accepted in the market. However, a latecomer will enjoy some level of certainty that what they offer has a ready market.
Let’s take the fast food industry for example. One of the earliest and arguably the first fast food restaurant was White Castle. It was founded by Billy Ingram and Walter Anderson in 1921 in Kansas, United States. At that time hamburgers were not popular as they were considered poor quality and unhygienic. But the founders of White Castle managed to change the public perception of the industry by keeping high hygiene standards in their restaurant. They also started many of the concepts and conventions that are still being used in the fast food industry today. White Castle was also credited to be the first fast food restaurant to implement the “kitchen assembly line” and having chain-wide standardized methods.
Brothers, Dick and Mac McDonald, only started the McDonald’s restaurant in 1940 in California, United States, almost 20 years after White Castle was founded. They further innovated the fast food concept by coming up with their “Speedee Service System” which was focused on offering fast, clean, inexpensive food, ordered from a simple menu that included hamburgers, fries and milkshakes. Orders were served in 60 seconds. In fact, their original mascot was a character called Speedee, to emphasise their focus on speed, before being replaced by Ronald McDonald. Ray Kroc, who was a milkshake machine salesman, was interested to find out more about the restaurant when they ordered eight milkshake machines when other restaurants normally ordered just one or two. When he visited the restaurant in 1945 he was very impressed with their concept and the efficiency of their operation. He started working with the McDonald brothers to sell the franchise of the restaurant and later on he bought them out for $2.7 million. As the fast food industry grew at an accelerating pace, many other competitors joined the foray including Carl’s Jr., Burger King and Wendy’s. However, McDonald’s raced to the leading position and continues to dominate its industry because it continuously innovates, implements great marketing and stays committed to its vision.
Most people think that Amazon was the first online bookstore. After all, they were the ones who introduced the online bookstore concept, weren’t they? Not exactly. Amazon was founded in 1994 and launched online in 1995. But three years before that, in 1991 Charles Stack, an Ohio-based book seller, had already come up with the online bookstore idea. In the same year, Computer Literacy bookstore, a successful retail chain registered the domain name clbooks.com and began taking book orders from customers worldwide.
Similarly, a lot of people mistakenly think that Gillette, founded by King C. Gillette in 1895, was the inventor of the safety razor. However, before Gillette came onto the scene, there were many other safety razor brands in the market. In fact, the safety razors were patented and readily made available decades before, with one design proposed more than a century before Gillette. While all the other brands didn’t last, Gillette managed to dominate the industry because of their commitment to innovation. While they were not the first to introduce the safety razor, they introduced many improvements to the design of their razors to maintain their leadership in the marketplace. Among their innovations, they introduced Trac II: the first two-blade razor; Atra: the first razor with pivoting head; Sensor: the first razor with spring-loaded blade for a closer shave and to prevent cuts; Mach3: the first three-bladed razor; Fusion: the first five-bladed razor, and many others. While most companies won’t risk introducing something that might cannibalise their established products, Gillette has made a habit of doing just that to stay ahead of the competition.
And if you think that the three examples above are the exceptions rather than the rule, think again. There are many more examples of latecomers grabbing the leadership position and dominating their niches. Google wasn’t the first Internet search engine. The first Internet search engine was Aliweb, created in 1993. And since then, many others popped up including WebCrawler, Infoseek, Lycos, AltaVista, Excite, Hotbot, Yahoo! and Ask Jeeves, which were all formed between 1994 and 1996. Google only entered the scene in 1998.
iPhone wasn’t the first touch screen mobile phone. Many other brands including HTC, Nokia, Sony Ericsson, LG, O2, Dopod and others have introduced their versions of touch screen mobile phones. Interestingly Steve Jobs once said, “Picasso had a saying, ‘Good artists copy. Great artists steal.’ We have always been shameless about stealing great ideas.” (Picasso’s saying was widely interpreted to mean good artists copy from others, but great ones copy and add their own style to make it their own. This gives you an insight into Steve Jobs’ philosophy of taking an interesting idea, improving upon it and making it their own; like what Apple did with iPod and iPhone.)
Microsoft didn’t invent or pioneer most of their software. A lot of the younger generation think that the Internet Explorer was the first web browser. It wasn’t. Remember Netscape or Mosaic? There were many others too.
YouTube wasn’t the first online video sharing site. ShareYourWorld.com, founded in 1997, was (they are no longer around).
IBM wasn’t the first one that introduced personal computers. MITS did with their machine, Altair 8800.
eBay wasn’t the first online auction site. Pampers wasn’t the first brand of disposable diapers. And closer to home, BreadTalk wasn’t the first bakery. Charles & Keith was also not the first home-grown women’s shoe brand.
So what does this mean? Well, it means great news for you if you’re a latecomer in an established industry. This also means that there are ways for you to enter an industry, create a niche and dominate it and become the leader. There are several ways to do this. The following are three strategies you can use: Be different. Continuous innovation. Implement better marketing.
When running for president of the United States in 2008, Barack Obama differentiated himself by running on the platform of “Change”. It was a brilliant strategic move as he knew he was much younger than the other serious contenders. John McCain was born in 1936 and was 72 years old. Hilary Clinton was born in 1947 and was 61 years old. Barack Obama was only 47 years old then. The average age of past presidents was about 55 years old. His competitors were quick to use his youth against him. However, Barack Obama turned his weak point into his strength by suggesting that his youth meant that he was not going to do things the same old way Washington always did. He knew that the public was jaded about Washington’s status quo and he used that to his advantage. His campaign was also much more innovative and better marketed compared to his competitors. He did what others traditionally didn’t do. On top of the normal live rallies, television, radio and print advertising, his campaign also used other new media such as the social media sites Facebook and MySpace, text messaging, email, et cetera. Furthermore, he appeared on several popular talk shows, a practice that was highly unconventional of a candidate for presidency. Of course there were many other factors behind his win, but you can summarise them as being different, having an innovative approach and having better marketing.