Steve Shaheen, CEO and founder, DTG.
Any Business 101 class worth its academic credentials will teach the same basic market strategy principle: Establish a beachhead first. Prove your theory and pursue some level of market penetration in an initial target industry before spreading yourself and your resources too thin by trying to “boil the ocean,” as I’ve heard it aptly described.
It’s the same story told a million times in a million different ways. You’ve achieved success in your initial target market through extensive research, informed product design, laser-focused development and flawless execution, followed by a series of successful pilot projects.
What’s next? How do you ensure continued growth for your company?
Diversifying Into New Markets
For many companies, the idea of expanding into new market sectors is a tempting strategy. For others, it’s like wading into treacherous, unknown waters. Either way, diversifying into new markets can be a successful growth strategy if you do your homework, execute with precision and are open to strategic iterations along the way. You should also be aware of the fact that new market opportunities may not present themselves as obvious opportunities.
That was the situation with my firm back in 2017. Prior to that time, we were primarily selling our mobilized power workstations to hospitals but knew they had so much more potential. We created a prototype of a workstation for industrialized markets since we were learning that there was a big need for reducing motion waste and boosting productivity in warehouses and fulfillment centers.
We began exploring those markets but didn’t think too much of it. A few months later, we received a call from one of the world’s largest e-commerce providers, who saw the prototype and was interested. Today, they have more than 40,000 of our workstations in 800 fulfillment centers, and we drastically pivoted to embrace the warehousing/3PL marketplace. The lesson here is that market expansion is not always a planned, targeted effort. Sometimes you need to be open to an opportunity that subtly knocks on your door.
Do Your Homework
Another unplanned market opportunity for our company arose from an unforeseen source: the pandemic. Borne out of necessity during the pandemic, colleges and universities needed to change the traditional brick-and-mortar notion of dining halls and bring their food and beverage services to wherever they were needed across campus. Our solutions helped them do that. From there, we expanded our focus to an even larger opportunity: stadium concessions.
One of the most important lessons we learned from these opportunities was to do your homework. When considering a move into a new market, ask yourself these five questions:
• What are the key challenges facing customers in this market? Find well-informed sources, ask questions and learn your customers’ pain points.
• How are customers currently meeting their needs? Have they developed a “homegrown” solution to solve a problem or meet a need? Is there a solution in place that is addressing only part of a challenge?
• How would your solutions meet those needs and why are they better? Answer this question for yourself and proactively share those insights with your prospect.
• Who is your competition? Are there other companies that have come to the same conclusion you have? How are they approaching it? Why is your solution better?
• What is the buying process in this market? Understand the steps in the decision-making process for your prospect in this new market. What are the pricing thresholds? Proactively anticipate the questions you will be asked.
Mitigating Risk
Expanding your reach into new markets can certainly increase your exposure; however, market diversification can also help mitigate risk. Markets fluctuate and unforeseen occurrences, like global pandemics, happen. Industries ebb and flow—a challenge impacting one industry, such as cost-cutting measures in health care, may not be impacting other markets.
Entering new markets can also help you expand your ecosystem. A successful pilot program for a company in a new market can teach you a lot about their industry, its hidden challenges and the broader environment in which it operates—the partners, suppliers and customers that may have similar needs that your solutions could address.
Overlooked Steps
Through both unforeseen missteps as well as insightful strategic planning, we’ve learned a lot about expanding into new markets. Here are a few often overlooked steps when considering expanding, or pivoting entirely, to a new market:
- Identify leaders in the market and establish cooperative partnerships.
- Identify the industry experts and market evangelists, and educate them on your approach to the market and your solutions.
- Run a pilot program and communicate ROI as proof points for your solutions.
- Iterate and refine your solutions and processes for success in the market.
- Immerse yourself by walking a day in the life of your customers: Meet with your prospects, view their operations and see them in process.
A well-researched, planned and executed entry into new markets can have a profound positive impact on your business, minimize economic risk and bring innovative solutions to new markets that need them. The key, however, is to remember companies that try to be all things to all people are more likely to fail.
Make sure your company is meeting a real need and communicating the real value of your solution. Instead of trying to boil the ocean, strategically ride the waves of opportunity.
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