In this lesson, we list five remaining deadly mistakes that you should avoid.
Mistake 6: Trying to avoid competition
People tend to think that the secret to building a successful business or making a lot of money is to find a market with no competition. While there are untapped opportunities out there, it is very hard to find them, and waiting for one to appear is not an option. If there is known consumer need and a viable business model, it is very likely that some companies or people will already be trying that.
Even if you can manage to find a market with no competition (or create one as some companies do), soon afterward other companies would be jumping right into it.
If you can’t avoid competition, what should you do? Beat it! That is the whole point of playing the game, you need to beat the other players.
Perhaps the greatest misconception that leads people to want to avoid competition is the “first mover advantage” theory. This management theory states that the first company entering a certain market or niche will gain a massive market share and, thanks to the competitive advantages developed, it will also be able to defend its leadership position from new entrants, no matter what.
It is an intuitive thing, and many academics have defended this theory over the years. But is there empirical evidence to back it up? Not quite. Google was not the first search engine. Ebay was not the first online auctions website. Amazon was not the first online bookstore. MySpace and Facebook entered into the social networking market many years after the pioneer, Classmates.com.
There are few situations where the first mover advantage theory holds true, like in natural monopolies (i.e. the first company building an oil pipeline does enjoy some advantages for being the first). In most other cases, and especially on the Internet, being the first to enter into a market is not essential to succeeding.
Mistake 7: Trying to reinvent the wheel
Picasso once said: “Good artists copy; great artists steal.”
Contrary to what some people might believe, he was not encouraging fellow painters to rip off the work of other painters. What he meant was the fact that great painters need to go beyond imitation. They need to be able to identify, understand and incorporate the traits and techniques of other successful painters. After that, the painter will still need to develop his own style, obviously, but neglecting the advancements that other people introduced would be foolish.
The same is true for businesses. If you try to reinvent the wheel for every aspect of your business you will certainly have a hard time achieving success. It is essential to analyze the competition, identify what they are doing right, understand how they are doing it, and finally incorporate it into your own business.
Obviously, you will still need to innovate if you want to build a successful company, but these are complementary and not mutually exclusive strategies. In other words, successful companies incorporate best practices of their markets and innovate at the same time.
Let’s suppose that you want to build an online store to sell running shoes. You could try to develop the store layout and purchase process all from scratch. However, this would probably take a lot of time, energy, and the results would be uncertain in the end. A smarter approach would be to analyze how established online shoe stores organize their products and handle the purchase process, and then adapt it to your own requirements. This will give you a solid starting point, and you can always innovate on top of that to leap ahead of the competition.
Mistake 8: Trying to do everything yourself
One of the most difficult things for an entrepreneur is learning how to delegate work. When you do everything yourself you control every detail of the execution, including the quality and the deadlines. When you pass work to other people, however, a lot of uncertainties come into the picture.
Unfortunately, you can’t build a real business alone. There are just so many things that a single person, albeit hard working, can do. Delegating work is essential, and you should start doing it as soon as possible.
At this point, you might be asking yourself: “Are you suggesting that I need to start hiring people?” Not at all. Hopefully one day your online projects will be so big that they will require full-time employees, but until you arrive there you can still get help from freelancers and part-time contractors.
For example, even if you are just getting started with a blog you could still delegate part of the work. If you are a good writer but have no technical skills, you could hire a freelancer to set up your blog and design it for you. Sure this will cost some money, but it will save you a lot of time, time that you will be able to spend doing what you do best.
In future lessons, we cover several resources and websites that you can use to find specialized work over the Internet.
Mistake 9: Inflexibility
While having a strong and clear vision about what you want to achieve is essential, it is also important to not become inflexible regarding how you will achieve it. In other words, the vision is the what, and it should be rock solid. The how, on the other hand, are the various strategies and action plans that you will use to achieve that vision, and they should be flexible and crafted along the way.
Let’s take a look at the disk drive industry. From 1976 to 1996, about 130 companies entered into that market segment. In 1997, only 20 of them were still in business. Almost 85% of the companies had ceased to exist, most of them because they were inflexible about how they pursued their vision.
During the first years of the industry, the only disk drives available were the 14-inch ones that supported mainframe computers. The two important performance parameters for those drives were the overall capacity and the cost per megabyte. Early in the 1980s, some new companies (including Micropolis, Priam, and Quantum) developed the smaller 8-inch disk drives. They packed only 10 to 40 megabytes while the mainframes required 400 megabyte drives. The companies producing 14-inch drives, therefore, decided not to produce the 8-inch ones because it was not what their customers wanted.
Micropolis, Priam, and Quantum went on searching for potential customers for their product, and they found them in the producers of minicomputers like DEC and HP. Those manufacturers were willing to have a reduced disk capacity and a higher cost per megabyte in exchange for the reduced size.
After some years, minicomputers were dominating the market and mainframes were on the way out. By that time, it was too late for the 14-inch disk drive producers, and most went out of business.
The same pattern was observed when Seagate introduced the 5.25-inch disk drive. It’s capacity was too low to supply minicomputers, so the leading disk drive manufacturers ignored it, as their customers would never want such a product. Seagate went on searching for potential uses for its drive, and it found one on the personal computer, which could afford having a lower capacity and a higher cost per megabyte as long as the size was adequate.
Again after some years personal computers were ubiquitous while minicomputers were becoming a rarity. The leading producers of 8-inch disk drives lost their position because they were too inflexible. They were not willing to explore new uses for their existing products or new product innovations, and they were forced out of the market as a consequence.
As we mentioned before, your vision should be carved in stone, but the strategies that you will use to achieve it should be flexible. They will change over time in response to the evolution of the marketplace and to the changes in your customers.
Mistake 10: Not testing and collecting facts
Trusting your gut and using intuition is a good thing, but you need to know when to do it. Most of the time people will rely on their intuition too much (out of laziness or carelessness) when they should be testing and collecting the facts instead.
Want a simple demonstration? Take a look at the image below of two tables. Which one of the tables would be easier to get through a narrow door?
It looks like the left one is much narrower, right? That is what intuition would tell most of us. A wise person, however, would not trust this too much, and would rather get a ruler to measure the size of the two tables before giving an answer. This person would find that, surprisingly, both tables are equal in size and shape!
This is an optical illusion first proposed by Roger N. Shepard on the book Mind Sights: Original Visual Illusions, Ambiguities, and other Anomalies, and it illustrates our point quite well.
Whenever you need to make decisions for your business or to draw your strategies, evaluate if it is possible to test and collect facts forehand. It will take some work and consume time, sure, but it might also be the difference between making the right and the wrong move.
- Evaluate the competition that you will have in each of your business ideas and projects. If there is no competition for some of them, maybe it is because there is no market either.
- Remember to identify and incorporate the best practices of your market segment. Your will certainly have smart people competing with you, so learn from them before you try to beat them.
- Start delegating as soon as possible, and focus on the activities where you can create the most value.
- Remember that your vision should be rock solid, but your strategies need to be flexible and reflect the changes in the marketplace.
- Always test and collect facts before making decisions.
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