“There is always competition. Whatever you do, there will be competition, and you have to decide how you’re going to play. For me, I had to be the very best. I had to be the very best. Because, if I was not the very best, I would end up being number two.” — Debbi Fields
SME’s Chat with Philip Chichoni
When Colonel Sanders started building KFC in the 1930s, he did not envisage that the company would grow to become a global brand.
After all he had only started by selling fried chicken by the roadside, as he did not initially own any restaurant until a decade later.
After perfecting his chicken recipe, Sanders was able to franchise the restaurant in 1952. The franchises were successful and quickly grew in numbers and sales, beating many other competing restaurants which were also selling chicken. What made KFC different?
It was a secret recipe. The Sanders “original recipe” of 11 herbs and spices, together with the pressure fried chicken gave a unique and inimitable taste. Customers flocked in because of that secret sauce, which many of us have been missing ever since the KFC Zimbabwe franchise closed some years ago.
Wherever KFC chicken is sold, customers know that the product will feel and taste the same, and no-one has succeeded in making something quite similar.
McDonald’s followed a similar pattern, with a secret sauce in its burgers which was different from the usual mustard and tomato sauce.
The secret sauce was never revealed, but it surely gave its burgers a unique taste. The secret recipe is not just on the taste.
Another American food company, Domino’s Pizza, pioneered the unique proposition of “You get fresh, hot pizza delivered to your door in 30 minutes or less — or it’s free.”
Many companies succeed despite competition because of their unique “secret recipe”. In contrast, too many small businesses offer very similar products.
Go to ordinary restaurants and you will find most of them selling the same usual meals. There is very little distinction or uniqueness but the usual sadza/rice with beef or chicken.
If you want to start a business, I urge you to think carefully about how you are going to distinguish your offering.
If you are already in business, seriously work on developing that secret sauce that will distinguish your business from your competitors.
Today I will touch on the main reasons why you need your own secret sauce, and then next week I will explain ways you can use your secret sauce to actually develop a unique competitive advantage.
Why you need a secret sauce
A secret sauce is a unique proposition that distinguishes your products and services from your competitors. It keeps customers coming again and again for a long time.
The business environment today is naked; new competitors are coming in all the time, such that if you are not prepared and protected you can easily lose market share.
Most industries have low barriers to entry. Anyone with capital and basic business skills can set up a clothing store, a supermarket or a transport business.
You don’t need industry specific technical skills to start a business. You can employ skilled people in the business while you set its strategic direction.
This is true for most businesses except where the law sets restrictions, like in medical and pharmaceutical practices.
Patents can provide protection against competitors imitating your products, but only for a short time. Most patents expire after 20 years.
However the process of applying for a patent is complicated and too expensive for most small business owners.
Besides, patents mostly apply to unique inventions, while trademarks do not fully offer protection against competitors eager to imitate your concept; look at how Innscor has failed to stop Chicken Slice from following an almost similar concept to its Chicken Inn franchise.
A business without a unique and sustainable competitive advantage will compete over price with others selling similar commodity-type products. Because the prices of commodities are determined by customer demand, your margins are at the mercy of the market.
If one supplier reduces prices, you will be forced to follow suit or risk losing customers. Firms that are unable to reduce costs will suffer badly.
If the price wars continue, profits will fall to unsustainably low levels and businesses will go under.
Don’t miss the April BusinessLink networking breakfast this week, February 12; you will find the details on my website. Best wishes in growing your business.
Businesses that operate in the flooded commodities market will struggle to grow because low margins don’t leave much cash aside for research and product development.
There will also be little room for giving great customer service. If your business is not a leader in its market, or at least among the leaders, it will be difficult to achieve the success that makes entrepreneurship worthwhile.
If the profits generated will not allow you to retire comfortably, then you would have wasted a lot of time and effort building the business.
Phillip Chichoni is a business planning consultant who works with entrepreneurs and SMEs. You may contact him by email: firstname.lastname@example.org, or visit http://smebusinesslink.com.