7 steps to build a disruptive niche strategy.
If everybody is doing it one way, there's a good chance you can find your niche by going exactly in the opposite direction.” - Sam Walton, Founder - Walmart
What is a niche?
Let’s start with the meaning and definition of niche. The word ‘niche’ comes from the French verb ‘nicher’, meaning ‘to make a nest’ and was first used in English to refer to a nook in a wall where you could display a statue, or a small container for decorative objects. Joseph Grinnell, an American ecologist, was the first person to develop the idea of an ecological niche focusing on the environmental factors that determined where a species could survive.
A business niche is a specialized or focused area of a broader market that your business serves. It is a has a specific target audience that has an unmet or underserved need. Factors that influence niches are price; audience profile, such as age, income, gender, geographical distribution, lifestyle, preferences; quality and durability of the product or service.
Identifying your niche is important for many reasons. It helps you be more focused and targeted, make best use of resources, reduces competition, establishes relevance and expertise, increases profitability and the chances of success. Spreading yourself too thin while trying to serve too many different audiences with a variety of products within a broad playing field is not a winning strategy. It is advantageous to accurately define your niche, audience and product/service offering at the outset.
Here are some great examples of winning niche businesses and the reasons they became so successful. Now let’s dive into ways to find your perfect business niche and how to build a winning niche strategy.
Tap into market trends
Identify unmet or underserved needs
Research your target audience’s needs
Accurately define your niche
State your unfair advantage
Develop a niche strategy
Dominate your niche
#1 Tap into market trends
Trends provide great insights into how different industries, markets and audiences are changing and subsequently opportunities that are developing in various areas of human culture and behavior. I’ve written about trends that can throw up business opportunities in a dedicated post. In summary, long term megatrends such as population, climate, urbanization etc. that develop over decades, medium term macro trends that are the direct result of the broader megatrends such as migration, sustainability and green energy, technological advancements; shorter term micro trends that tend to be reactions to macrotrends such as inflation and financial crises, new technology platforms and inventions, waste management solutions; and of there are fads that are super volatile swift waves of reactive action that rise and fall in relatively short periods of time such as fashion trends, diets and cultural shifts. All these can provide valuable insights into how humans consume goods and services and how needs change and shift over time.
#2 Identify unmet or underserved needs
Trends help identify current unmet needs and predict future needs which give rise to opportunities for new niche business ideas and solutions. Unmet needs point to problems that need solutions or prospects for disruption or differentiation. Uber disrupted traditional taxi services. Air BnB disrupted the hotel industry, Google revolutionized the way people accessed information and now Microsoft/Bing is changing the way that information becomes useful with AI. These are some of the well-known examples from the last 2 decades as are Apple, Netflix, Smarter and Amazon. These 25 disruptive brands and businesses created a demand for products that did not already exist. In other words, they identified needs or wants that their audiences did not know they had. Just as Henry Ford stated, “If I’d asked people what they wanted they would have said - a faster horse.”
#3 Research your target audience’s needs
Once you’ve identified your niche, it is critically important to understand your prospective customer and to know as much as you can about them. Depending on the industry sector, product or service your customer may or may not be the end consumer of your product or service. Your customer can’t be ‘everyone’. So, it’s important to build out an ideal customer profile or buyer persona that narrows down the focus on a specific audience. Understanding their underlying needs, their pain points and the real problems they need to solve, is not always that obvious. As the Harvard Business School’s marketing Professor Theodore Levitt’s famous quote goes, “People don’t want to buy a quarter inch drill. They need a quarter inch hole.” So the task is to understand the job the customer wants to get done, and design products and services that fill that need. Most jobs people need or want to get done have a social, functional or emotional aspect to them or a combination of all three. Understanding these dimensions, can help design a product or service that's precisely targeted to the job. So, the job, not the customer, should be the fundamental focal point of research and analysis to develop products that customers will buy. Here are 4 great examples of how this works from HBS.
#4 Accurately define your business niche
In order to accurately define your niche you need to answer three questions.
What business are you in? This must describe the industry, sector, subset or specialism; the target audience that you serve; and the job your product or service will do for that audience.
What business are you not in? It is easy to get pulled in different directions and get distracted by a variety of interesting activities that can allow you to meander off course. Getting clear on what you will not expend effort or resource on is equally important as this helps you stay focused on your core capabilities and deliver on your plans and goals.
What potential for growth is there in this niche? In order for your business to be successful, profitable and sustainable you need to be in a growing market with the potential for sustained expansion.
#5 State your unfair advantage
It is imperative to be clear on what skills, experience and expertise you have either as an individual or as a team that will fill the gap and serve the unmet needs of your consumer. There are 3 fundamental parts to creating a strong value proposition.
What is the job to be done that solves a customer need. In defining the problem clearly, you are halfway to defining the solution.
How does your product or service do the job of satisfying the customer need. Is it a painkiller or a vitamin? Is it reducing stress, discomfort and friction or is it enhancing and improving a current situation.
What are the tangible benefits that no one else is offering. What unique advantage does the customer stand to gain from the use of your solution.
Here’s mine: Monetize your superpower and become self-reliant.
And here are some examples of great value propositions.
#6 Execute your niche strategy
To execute your niche strategy you are going to need to define your business model, develop a business plan, create a roadmap and put together a pitch deck. It is useful to have a clearly articulated elevator pitch and focused statements that accurately and succinctly describe your business strategy before you get into execution. It is also important to understand the difference between a strategy and an execution plan. I will be going into detail on each of these documents in future posts. For now, let’s focus on the key pieces of information that they will include: Descriptions of you business niche, target audience, market analysis, product/service descriptions and value propositions, business goals, operational plans, revenue model, financial projections, go-to-market strategy, launch plan and timelines. A business model canvas is a very useful one-page overview of your business, the business plan provides more detail on each of the topics mentioned earlier.
#7 Dominate your niche
Blue Ocean Strategy authors Chan Kim & Renee Mauborgne coined the terms Red Ocean and Blue Ocean strategies. According to these management thinkers Red Ocean strategies involve industries where the parameters are defined, and the rules of competition are known. Players in the Red Ocean try to out compete each other, the marketplace becomes saturated, and products become commoditized. Whereas in Blue Oceans, industries are not yet in existence and the demand for something new is created rather than fought over. Getting clear on your niche, audience and differentiators will allow you to focus on building and marketing the best products or services and not worry too much about the competition. Peter Theil co-founder of PayPal in his book Zero to One describes this phenomenon and says that competition is for losers. In order to win in business, you need to find a niche, be the best at it and then double down on it so you own the market.
So in picking a business niche you need to drive a stake in the ground and leave your audience in no doubt as to what you stand for, what unfair advantage you offer and what it is worth to them.
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Wishing you success, prosperity, personal growth and positive change.
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