High Performing Business – Strategy – Competitive Forces
Michelle LaBrosse, CCPM, PMP, PMI-ACP, RYT
I absolutely love competition as it makes me sharper, hones my attention, and helps me see new ways of delivering value. When working on a new project, I use a technique we teach in our course Project Breakthrough to evaluate our competitive positioning. I look at it through the lens of Michael Porter’s Competitive Strategies work to see where we can differentiate our offering.
In Porter’s work on Competitive Strategy: Techniques for Analyzing Industries and Competitors, he identifies five forces that increase people’s abilities to be competitive in a market.
Barriers to Entry – this is how hard is it for you and for others to enter into a market.
Bargaining Power of Customers – to be more competitive, it helps if you are creating a unique niche that is underserved by others. It is far harder to get into a market that is already well served by many others.
Threat of Substitutes – this is how unique is the solution to solve a particular problem. If the problem can be solved many other ways, the solution is not as good.
Rivalry – this is how strong is the base of competitors in the market. It is based on the number of competitors, the opportunities for growth, the stability of the industry, how easy is it for you to differentiate yourself, the ability to scale to meet demand, and the investment people have to keep making to stick around in the industry.
Strength of Suppliers – this is how much power the suppliers wield over companies who are creating services and/or products in the market. It’s based on how many suppliers are in the market and how big of a role can you play in getting price breaks based on the volume of business you can give a supplier (which changes as the economy changes).
When I look at what we are creating with the Cheetah Micro Green program to help people easily and inexpensively grow their own food year round, the five force analysis helped us develop our strategies:
- Barriers to Entry – The know how to develop a small scale indoor vertical hydroponic system, the logistics support system to coordinate multiple vendors and support product shipment nationwide, the ability to create curriculum that enables people to quickly develop and apply the required skills to have success with growing micro greens, and an existing marketing base eager to expand their options for a healthier existence. It’s a special mix of infrastructure and capbilities our team has that creates a significant barrier to entry.
- Bargaining Powers of Customers – We’ve heard from a few people that say they can just create this system on their own. To them we say “good luck.” When you purchase the Cheetah Micro Green program, in less than a month you are fully operational and growing your own micro greens. By going it alone, it takes people several years to get to the levels of success Cheetah students have in one month. Plus for those doing it as a micro business, they start generating income within a month and can expand their business faster, then the person who wants to take a couple years to figure all this out on their own.
- Threat of Substitutes – We started this in rural Alaska. The substitute is greens that are past their shelf life before they even show up on the store shelves. Growing things on your own, you are completely in control every step of the way – and in the case of rural Alaska, you actually have a produce that his high quality year round. In grocery stores in more populated areas, we have seen packaged micro greens that have a very short shelf life. Other greens from commercial farms are implicated in food borne illness breakouts throughout the year. The capability to grow your own food year round brings a sense of security, peace, fulfillment, well being, and connection that cannot be replaced by just purchasing greens shipped from far away at your local grocery store.
- Rivalry – in food “deserts” – that is in areas where it is difficult to grow your own food year round, there are not significant rivals for home based year round food growing solutions. There are few companies with the ability to truly teach others how to become more capable with their own year round food production. There are agricultural extension services through local colleges but they are more focused on larger scale and conventional operations done during growing seasons. Very few focus on small scale climatically controlled agriculture. Scaling to meet demand with the way we have created our systems is fairly simple (addressed in strength of the suppliers). There are hydroponic equipment suppliers who need to invest in maintaining their inventory – but the way we design our programs, we manage it by just in time (JIT) inventory management. The one company that makes a high end micro green system, has to make significant investment in ordering large quantities of expensive applicances and distributing them to a far flung world wide distribution base.
- Strength of Suppliers – we have created every element of the Cheetah Micro Green system with simple off the shelf components that are easily purchased from a wide range of suppliers. We can and have easily substituted out parts when something we had been using is no longer available.
It literally pays to do this level of analysis BEFORE you make commitments to one specific strategy over another. It helps you hone your competitive strategy and evolve it as market conditions evolve.