The Dangerous Trap of Differentiation in Business

Hello, this is Tiger Strategist.

Today, I will talk about the "dangerous trap of differentiation" that individual businesses and small-to-medium enterprises often fall into.

👦"Since we are a small company, there is no way we can win by imitating the big players! We have to do something unique that the big players aren't doing!"

...If you or the business owners and freelancers around you are feeling this way, it is a very dangerous sign.

In this post, I will reveal the true nature of the terrifying misunderstanding hidden behind the phrase "doing something different from the big players."

🐯 The illusion that you can't win unless you do something different from the big players

"Big companies have the capital and the brand recognition, so we can never win in a head-on confrontation. That's why we'll compete using our own unique methods that no one else is doing!"

This is a phrase I hear often, and at first glance, it sounds very cool, doesn't it?

However, wait a minute.

If you focus only on "doing something different from the big players" and end up with a "weird, off-base method that nobody wants," all that awaits you is failure (red ink).

Conversely, even if it looks plain and uninteresting at first, "thoroughly imitating the good points of big players and the systems supported by customers" will give you an overwhelmingly higher probability of success.

For example, suppose you are about to start playing golf.

If you want to get better, what is the first thing you do?

You would surely watch professional swing videos and explanations on YouTube, and first try to imitate that form (mimic the model).

You certainly wouldn't say, "I'm going to develop a completely different, never-before-seen way of hitting the ball from scratch!".

However, in the business world, for some reason, there is no end to the number of business owners who dislike "imitating the pros (big players)" and try to work hard using their own completely original methods.

The business systems adopted by large companies are "proven, perfect, correct routes" that have been established after spending vast amounts of time and money to determine that "this is what customers appreciate most and what costs the least."

🐯 A case study of "a small printing company" that changed drastically by letting go of their pride

Here, I will tell you about a case study of a small printing company I know.

That company had not seen an increase in sales for many years and was struggling with its management.

So, the president thought, "Let's write down all the work in the company and thoroughly identify the waste."

They wrote down every process in the company and visualized everything, including "who is doing that work and how much time they are spending on it."

Then, an astonishing fact that no one had expected was revealed.

Surprisingly, it turned out that the very process they were most passionate about and working hardest on—"printing in their own factory"—was the one eating away at the company's profits the most (the cause of the deficit).

When they ran the printing press using their old machines, it cost 500,000 yen every month in labor and maintenance, meaning the more they worked, the more they lost money.

Once the president knew the reality, he cleanly discarded his pride as a craftsman.

He then stopped printing in-house entirely and decided to outsource it completely to a "major printing company" that was overwhelmingly cheaper.

Because the major company uses massive facilities for mass production, they were able to provide a finish better than the quality that cost them 500,000 yen for only "400,000 yen."

What happened as a result?

Even though they did no work in-house and didn't get their hands dirty at all, the "100,000 yen difference" began to remain in their hands as company profit every month.

🐯 Use major companies as your "subcontractors"

This is the essence of "imitating the majors."

Major companies generate large profits by skillfully utilizing subcontractors and systems that are cheaper than their own internal costs.

In that case, we small and medium-sized enterprises and sole proprietors should just imitate that structure exactly.

Use "major companies that are cheaper and have better quality than us" as our own powerful partners (subcontractors) instead.

There is no management strategy more efficient and risk-free than this.

Business is not a place for a contest of vanity to show off your own obsessions or pride.

The final numbers and the money remaining in your hands are everything.

🐯 To escape the "labyrinth" of doing things your own way

There are truly many business owners and sole proprietors who self-destruct by sticking to strange pride or "useless differentiation" and doing things their own way.

I discuss this in detail in the article below, including personal stories of failure where I looked away from what was truly important and paid the price, so please be sure to check it out.