How to avoid competition in the global market and not only

If you are developing an international expansion strategy or are already operating in a new market and are looking for ways to improve your current strategy, then expanding your market offering is a possible solution for growing a company in a new geography.

The strategy is suitable for companies at the following stages:

• Startup | a round of Pre-Seed or Seed. There is the first version of the product and single sales. What to do to show growth and attract the first round?

• Startup | round A. There is a product, repeat sales, but ends with an audience of early adopters. What to do to become big and attract a new round?

• Mature company. The market is close to saturation, the profit margin is falling, the company has stopped growing. What can be done to keep growing?

Jeffrey Moore’s Technology Adoption Life Cycle Model is appropriate to visualize these stages.

The principles of expanding the market offer do not change from the stage of development of the company. The difference is only in the tools and processes.

Synchronization

Before getting to the point, I will talk about the terms and models that I will use.

1

The expansion of the market offer contains two possible goals in one strategy:

• Create a new way to meet an existing need

• Redefine, find or create a new need – create a new category.

Since the second goal is often a continuation of the first, I will use the general term for this strategy – category design.

Category design is a strategy for expanding the market offer.

2

The three elements of each industry are category, product or offer, company or brand. The categories shape the industry, but two scenarios are distinguished at the levels below.

The first scenario is more common. When we open a new company, we think in terms of the existing category – from top to bottom. First, we explore the category, then we come up with an offer to make to the market and, as a result, we create a company or brand.

This approach seems safe, but there is a problem. It leads to the creation of old products, which create old companies, which ultimately leads to market saturation and perfect competition.

The second scenario is the exact opposite of the first. We start at the company level, knowledge and processes that create value and deliver as a product to customers. When an enabling environment is created, this product creates a new category.

This approach leads to the creation of new products and categories, which leads to an expansion of the market supply and creates the opportunity for monopolistic competition.

3

Traction Gap can be used to determine the position of a startup that has chosen a strategy for expanding its market offer. The model helps to select the right tools for the job.

This venture fund model wild cat. They interpret the concept of MVP in their own way and add milestones that a startup will pass before becoming a company.

The task of a startup is to get to MVT. This point means the company has crossed the chasm and is ready to raise a B round to scale.

Three Principles of Category Design

Look at this picture for 10 seconds. What is shown on it?

If you couldn’t, then let’s start in order to understand what kind of rorschach spots.

Category design is based on three principles:

• Understand value creation technology

• Expand the market offer

• Avoid competition in people’s minds

The principles are interconnected, so like any strategy, category design is an iterative process, not a linear one.

Understand value creation technology

To understand what technology is, let’s understand where technology lives. The company creates value within the same logic:

• Value chain

• Value Creation Workshop

• Value Network

The value chain as a strategic tool was proposed by Michael Porter in his book “Competitive advantage”. Two other logics added CB Stabell and Ø. D. Fjeldstad in 1998.

Each logic consists of separate links. The value creation technology lives in one of the links. To better understand what is at stake, let’s take the value chain as an example.

Technology is not distributed among the links in the same proportion.

In this case, it is impossible to create a sustainable advantage and a barrier to entry into the category. Most of the value is created in one link, and the rest perform a supporting function.

Consider VkusVill, Perekrestok and Samokat from the point of view of value creation technology to see the difference.

• VkusVill creates value in “inbound logistics”because it works with unique suppliers.

• Crossroad focuses on “operations” and operational efficiency, as the company earns through economies of scale.

• The scooter works with “outbound logistics” and creates value by locating darkstores in the best locations.

Expand the market offer

The market offer consists of the customer’s need, the solution that the company offers and the result that the customer will receive.

Each of these elements ranges from the obvious to the non-obvious. The non-obvious takes many forms and more often it is not secret knowledge, but a part of reality that no one notices or that is perceived as the status quo.

There are four possible options for the market offer. Being obvious is easier, which is why every day we see companies and offerings from the most obvious quadrant.

Companies that have taken a different path and expanded their market offer are also known. The only difference between them is the non-obviousness of the element.

Schematic layout of the company and its proposal in relation to the category. When a company decides unobvious needit creates a new category.

Avoid competition in people’s minds

The principles are partly based on classical marketing management. But if there is a lot of talk about creating value and new products, then this one is limited to positioning and branding.

The positioning problem is the question “Are we positioning in relation to who or what?”. The company links to products in an existing category rather than creating a new one.

Branding, on the other hand, often creates only imaginary benefits in the mind of the consumer. Even if this is not the case, the company continues to live in the space of the existing category.

Positioning and branding is a good start, but in the long run the company stays in the same category and competes for existing demand. Saturation of the market and the desire for perfect competition does not go anywhere.

Three mechanisms that help create new categories and avoid competition, because competition lives only in our head.

1. People construct social reality

This mechanism is responsible for recognizing the value of an abstract phenomenon between people. Money and laws are the most popular social constructs.

The social construct is tied to the material world by attributes. For money – colored paper, for the law – judges. The same attributes are present in religion, love, or other constructs that we ourselves have come up with.

2. People think in categories

This mechanism is responsible for saving brain energy for unnecessary calculations.

Think supermarket. Products are listed there by category, not by brand or packaging, for example. It does not require a lot of brain resources, which makes it easier to navigate the store and leaves the energy to buy anything you don’t need.

The same happens with other products. The company’s customers associate the product with a particular category in their head. The only question is who created this category, your company or you follow others who determine the rules of the game.

One more example. You wanted to cook a strudel or charlotte. What kind of apples to choose for this?

If you are a professional cook, then you know which varieties are suitable for baking. But most likely, your knowledge about apples is limited to the fact that apples are green and red. This is wrong.

Now you have two new categories in your head. When you want to bake a dessert with apples, go back to the article to remember the varieties.

3. People live in a simulation

This mechanism is responsible for creating images in the brain. Our past experiences shape the meaning of our future experiences.

My thesis is a conclusion from the research of Dr. L. F. Barrett, Professor of Psychology at Northeastern University in Boston. Details of the study can be found in her books. “How emotions are born” And “Seven and a half lessons about the brain”. Let’s go back to the picture from the beginning of the article.

Look at it for 10 seconds, open the next picture behind the spoiler for 10 seconds, and then return to the first one.

hidden text

Just now, you have constructed a new image of yourself, whereas at the beginning you saw only a strange image.

So that this does not look like an accident, let’s try again. The rule is the same, look at the first picture for 10 seconds, open the next picture behind the spoiler for 10 seconds, and then return to the first one.

hidden text

Strive to avoid competition

On the desire to avoid competition speaks Peter Thiel, writing to Youngmee Moon in “Leave the Crowd” and Naval Ravikant How to get rich. Chapter translation “Avoid Competition with Authenticity” from How to get rich on Vanya Zamesin’s website.

If our clients get a new experience – simulationwe explain why our offer is different – new category and give the attributes that support our proposal − proof of a new categorythen we avoid competition, expand the market offer and take most of the new category for ourselves.