Entrepreneurs who are starting a small business could definitely use the approach of Value Engineering or VE that has essential success dimensions. Even if you don’t go in for a formal VE exercise, the approach involved can provide success guidelines.
VE involves evaluating the importance of the different features you offer in your product. To you, all these features might seem important. However, do the customers who use the product feel the same way?
Start with a clear idea of how customers are using the product now. Develop this clear idea by talking to your marketing people in contact with the customers. It might be worthwhile even to conduct a special field research to understand how customers use your product.
With this clear idea, evaluate each feature of the product. Is each one of them necessary to use the product as customers use them?
You might find that many of these are unimportant. Customers might not be using some of the built-in functions. Or they might not be all that impressed with certain superficial features.
Pare down the list of features to those absolutely necessary. However, don’t discard those features that provide definite sales appeal, even if these do not help any function.
Having identified the essential functions, examine the technical implications. Would it be possible to eliminate the unimportant functions without serious problems?
Also use the opportunity to examine whether the important functions and features could be provided at a lesser cost. Say by using less expensive raw materials. Or a simpler processing method.
VE thus has marketing, technical and cost dimensions. Get the people attending to these functions involved in the VE exercise.
You might end up with a product that provides better value to customers at a lower price! The only remaining problem (but a quite serious problem) could be implementing the change. People get accustomed to existing ways of doing things and you need to conduct a special campaign to get them change existing ways.
Niche Marketing and Innovation
Niche marketing leads to market success and innovation could help you reach a niche. Perhaps we should get the terms, niche and innovation, clear first.
Niches are underserved segments of a market. Meeting the unique needs of customers in these segments is a one quick way to market success.
Innovation means something new. It might consist of doing things in a new way or developing a new or modified product.
Finding niches and developing something new both require an inquisitive mind and creating thinking. If you have these traits, or could hire someone with these traits, you have the potential to build a highly successful small business.
Note the use of the word ‘potential’. To tap the potential, you need to get down to the mundane world of business – into the practical world of planning & organizing, of money, government regulations, working effectively with people and tackling many problems. The many articles and essays of this Web site deal with these practical things.
For now, let us focus on niches and innovations.
Innovations could have dramatic impacts on the way we live, as Internet did. It could also make things far more affordable, as in the case of the transistor radio or the personal computer.
Innovations occur in a creative environment free of bureaucratic constraints. The best research organizations consciously seek to create such an environment for their scientists. In the world of business, it is small businesses that could provide such an environment. Large corporations and governments tend to be bureaucratic and generally constrain innovations.
Innovations acquire business potential when they
- Provide new products or services that meet an unmet or under-met need,
- Or create performance or cost advantages over existing products.
Innovations could result simply from reconfiguring existing components. As earlier mentioned, you can look critically at each feature of a product and each process as it exists now. The result could be a design for lower cost or better quality product.
The IBM PC, for example, was the result of such a reconfiguration.
New ways of doing things could also produce dramatic results. Amazon and EBay have become huge successes by developing effective ways for selling and auctions on the Internet. Both the products that Amazon sold and the business of auctions were already in existence. The innovations consisted of enabling customers access these.
Consumers could now buy (or bid at auctions) from the convenience of their homes. More importantly, different degrees of “instantaneous gratification” was now possible. And when these advantages came with lower costs, there was no stopping the new development.
Innovations need not be so dramatic. The small businessperson in his or her small town could find new ways to get customers. This could be through greater convenience (home delivery where that is not the practice) or a new publicity method (free lunch on opening day to all comers) or an unheard of price (by becoming the franchisee of a nationwide chain that purchases merchandise direct from manufacturers or packers and distributes these to franchisees at low margins).
Look around for possibilities. The key is to offer something that is presently not available and that also appeals to customers. That is what niche marketing means.