It’s fairly common knowledge that an effective approach to differentiate and capture market share is to focus on a niche market and serve that market’s needs better than the competition. This can be a great strategy for new entrants to the market, but as any marketer will tell you the phrase “niche market” is just another way of saying “small market.” So how can you avoid pigeonholing your business into a market with no opportunity for growth?
Focus on your core competencies.
Core competencies are what truly differentiate you from the competition and form the cornerstone of your business. It’s your special sauce that the other guy doesn’t have. Running lean, your business model may go through a handful of pivots before finding the one that sticks. But through each pivot consciously identify what your competencies are—they may even be the basis for your pivots.
According to C. K. Prahalad and Gary Hamel, the authors who coined the term, a core competency needs to fulfill three criteria:
- It should be difficult for competitors to imitate.
- It should be reusable both with new products and new markets.
- It should directly contribute to the user experience.
Companies that effectively develop core competencies go on to create core products. A core product may be a component of another product, or it may be the base product of a product line. Your core product might be your minimum viable product. Develop your core product with future products and markets in mind. In the software world, this means making your products modular so components can be added, removed, or reused.
Leverage core products to enter new markets.
Very few opportunities are unique to a single market. By focusing on core competencies and core products rather than the opportunity specific to the niche market you’re currently targeting you can open up to the broader opportunities common across markets. This often results in a better product design for your niche market as well. After identifying the broader opportunity that exists across markets you can lay out a roadmap for incrementally expanding to new markets as you mature. Like any good roadmap, this will be a living document that will evolve as you grow.
I have found the most successful expansions out of a niche market are into other niche markets. Medical supply chain software can be repurposed to serve the supply chains needs of the food service industry, for example. A dating website’s relationship-matching algorithms could be used to help people find roommates or cofounders. If your core competency is the foundation on what makes your business unique that unique advantage will travel with you to new markets.
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