Forces Driving Small Business
When I was in graduate school, we spent a lot of time talking about Michael Porter’s Five Forces which he use to describe the relative attractiveness of different markets. They were: Competition in the Industry, Threats of New Entrants, Threats of New Products, Power of Suppliers and Power of Customers.
At the time, we spent a lot of time talking about competition in the form of new products and new competitors. To be perfectly honest, we gave lip service to the power of our customers. While much of my work at that time was focused on larger companies, this lack of respect for the customer was prevalent in small business as well.
The internet has completely changed that! Today, the voice and power of customers really drives the market, as peer reviews outpace company messages in terms of influence on future customers. The team at Forrestor research have been studying this transition over time, and created this info graphic which shows the transition our economy as made in the last fifty years.
The authors describe the four economic ages as: Manufacturing, Distribution, Information and the Age of the Customer. In the first half of the last century competitive advantage was gained on the manufacturing floor. If you could build it faster and cheaper, you won. Things shifted and the ability to get your product to market became most critical factor in a company’s success.
In the age of information, the emphasis was on supply chain management and levering technology to reach customers. In this era we saw the rise of Amazon and the fall of Barnes and Noble.
Today, we are clearly turning the corner and entering the age of the customer. The thing I find fascinating about this latest transition: Size is not necessarily an advantage any more. Listening to and engaging your customers is something any business, of any size can do. Perhaps small business owners even have an advantage. As more nimble organizations, we can adapt to changing customer demands, as long as we are listening.
The question : Are you listening?