In the fourth day of our Australia’s niche champions series, Stephen Tomisich discusses following a global niche strategy.
Being a little fish in a big pond is a life characterised by anxiety. What will tomorrow bring? How much further must I swim to reach the other side? Will I get into a fight with another little fish over some tasty algae? Worse still, will I be lunch for a bigger fish?
Despite all of those fears I am often in the audience of aspiring entrepreneurs pitching a new product or technology with a final slide that somehow concludes that if their new product/technology can capture just a small share of an enormous market then they will be successful. They aspire to be little fish in big ponds.
So why not aspire then to be a big fish in a big pond? Nice aspiration but then be ready to fight it out with really big fish who will out-scale you, out-spend you, and overwhelm you to protect their pot of gold. Probably not the smartest strategy, especially if you’re an Australian based SME manufacturer.
There is another way. Find a small pond, a niche. What do I hear you say? Niches equal small dollars? Not necessarily. It is surprising how large the most specialised of niches can be on a global scale. Electronic implants to address hearing disabilities, or specialised products to help those with sleeping disorders are hardly massive mainstream consumer markets, but look at the scale of companies like Cochlear or ResMed. Both are extremely successful Australian exporting manufacturers with dominant shares of niche markets. Our strategy at Trajan is similar. Our thought process is also global and vertical. None of us would reach scale with a niche strategy if solely focussed on the relatively small Australian market.
So what characterises a successful niche manufacturing strategy? In my view four key factors stand out:
- It addresses a global market need that instills passion in you and your organisation. The vision of having impact in the space should inspire and motivate you and your team. Helping the deaf to hear, enabling a good night’s sleep, pursuing impactful science that tangibly benefits people are all missions that deliver purpose and cohesion to an organisation. I remain a firm believer that first and foremost every great business is driven by a meaningful purpose. What’s yours?
- There’s an understanding of how the ultimate customer values your product or technology. That becomes a guiding light for refining the product design, its utility, and the customer experience. Sometimes as manufacturers we can become too removed from the ultimate use of our products, especially in big ponds. But in a niche segment small changes can make a big difference. The secret recipe might reside in what materials you use, how you process them, or how you assemble or package them. It’s about the refinements you can make that will ultimately change the customer experience in a valuable way. In a niche strategy defining that customer, their experience, in some ways is easier; it is contained and very specific. The more you know, the deeper you can go and the more value you can add.
- Operations is used as a competitive weapon. By scaling new processes and techniques in ways that deliver enhanced customer value, Operations can become a strategic advantage that underpins sustainable, higher- value revenue streams. Development of specialised production infrastructure can also create barriers to entry for would-be new players; it becomes too specialised, too difficult and not financially attractive for a would-be competitor to start from scratch. The more specialised and scaled you become, the more difficult, or IP-protected, the techniques you introduce (that deliver enhanced customer value), the more sustainable your position.
- The company profile in the niche delivers a meaningful reduction in cost of sales. Niches typically contain industry participants, influencers, specialists in their field, and the niche market itself is often characterised by well-known communication channels, customers who share the same problems or passions. Once you emerge as best practice in the niche, achieving recognition that your company is one that leads the way, that advances the field, the market will build your presence for you. They want you to succeed. Compare that to the incredibly costly approaches of promoting and selling products to a large generalist or consumer market to gain a small share.
At Trajan we have been following a global niche strategy with some success over the past nine years. It isn’t for everyone, but I do notice that many of the Australian export and manufacturing success stories tend to fit this profile. The risk of course is always to be on the lookout for what change or revolution, could make the niche redundant.
One of my favourite authors is Geoffrey Moore, and especially his landmark work, “Crossing the Chasm”. In that publication he dives more deeply into market segmentation and targeted or niche strategic pathways. I often refer to it and pick out those elements that work for us at Trajan. It’s a great reference tool if you’re considering a niche strategic approach.
(Geoffrey Moore, “Crossing the Chasm”, Harper Business Essentials, 1991, ISBN 0-06-051712-3)
@AuManufacturing’s Australia’s niche champions series is brought to you with the support of the Innovative Manufacturing Cooperative Research Centre, and SMC Corporation.
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