Check out this discussion of business strategy and market position!
VIDEO SUMMARY
We are going to talk about business strategy in this video, and I have been making a number of videos lately on business strategy. In fact, I have a separate video series on this YouTube channel about business strategy. The reason why I talk about strategy, is that it is very important to accounting. I do not believe you should do accounting just for the sake of doing accounting. That is a little bit of a waste. If you can design your accounting systems so they are aligned with your organization’s strategic goals, the results can be very powerful. If you can identify the strategic priorities of your business, that tells you what accounting metrics to focus on. So let us jump into this conversation on business strategy.
I am going to focus on the concept of “market position.” Market position is clearly defining the customer need your organization fills in the market place. You can also describe this as finding your market niche, or specialization. I made a video a couple of months ago on the idea of “Focus,” and I talked about why focus is so important in business. Now I am taking that video a step further. It is not enough just to focus on one area; You need to focus on an area that meets a customer need. That is what market position is about.
The concept of market position is very interesting, because when you look at the literature out there on business strategy, market position is not the most discussed idea. When you look at how most people respond to the question, “how do you become successful in business,” they tend to fall in two different camps.
- Hard work. This is the idea that in order to be successful, the most important thing is to work long and hard hours.
- This is the idea that in order to be successful, the most important thing is to work smart. Work more productively with fewer hours.
You have one group of people saying “work hard.” You have another group of people saying “Work smart.” What I am suggesting here is there is a third option, which is to choose the right problem to work on in the first place. What is interesting here, is if you compare these three strategic approaches (working hard, working efficiently, or market position), market position as a strategy beats the other two every time. It is not even close. Because what market position is saying, is that you are going to be at the right place at the right time to meet a customer need. And if you are at the right place at the right time, it does not matter if you work hard or efficiently. You will still make money. Now I am not saying that hard work is not important, or that efficient work is not important. I have even made videos on these topics. What I am saying, is that it is useful to acknowledge how important it is to be at the right place at the right time, and that is based upon your market position.
If you watch my videos, there is a theme that runs through all my videos. I try to encourage people to be very “thoughtful” about business. Be thoughtful about where you spend your time. Be thoughtful about what problems you are tackling. Because if you are not thoughtful, you can end up working hard or working efficiently on a problem where there is no need in the marketplace. You want to perform all that work, but be very thoughtful about where you are putting in that effort.
All of these are pretty straightforward ideas. So why am I talking about this? I think it is very revealing that people spend so much time talking about “working hard” and “working efficiently” as business strategies. These are both really attractive ideas compared with “market position.” Why is that? Market position requires you to become vulnerable. Market position is based on your choices, and your choices can be right… or they can be wrong. This is the greatest fear in business. In business there is very real economic consequences for being wrong. You can lose money. You can be fired. So it can be scary. You are putting yourself out there, and stating for the record your market position and where you think is the best place to add value to your customers. Choosing a market position can be uncomfortable, which is why people gravitate to these other strategies of hard work and efficient work. You can work hard without having to worry about being right or wrong, because you can just point to all this hard work you are doing. So there is much less at stake.
My point is that if you have the courage to think through a strong market position, it can be a very powerful strategy. It can be more effective than people who are not willing to do that. Being at the right place at the right time beats every other strategy. But it takes a lot of thought, and a lot of time thinking through your choices. The cool thing is Finance and Accounting can help you with this. Finance is a set of tools that helps you look at your data and make educated decisions about the future. Accounting gives you an understanding of your economic activity so you can spot trends on where your business is going. So to recap, there are three main approaches to business strategies: 1) work hard 2) work efficiently and 3) choose a market position. I think all three are important, but the most effective is choosing a market position, and accounting and finance can help you do that.
In the next video, I am going to talk about how you can start breaking down these big business decisions so stay tuned for that. Not everyone agrees with me on this topic, so if you agree or disagree on whether market position is important, leave a comment down below. The best way to supercharge a business is through accounting and corporate finance, and I release a new video every week so come back and check out next week’s video.
Leave a comment down below letting me know what you think!
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Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.