Jul24
How to Out-Compete a Larger Company
Point: Use friction to your advantage
Story: McGuckin Hardware is a family-owned store in Boulder, Colorado, long known to any do-it-yourselfer as the place to go for supplies. The store has knowledgeable, friendly staff, many of whom have worked at the store for years over its 54-year history.
A few years ago, Home Depot opened a store in Boulder, with twice the space, offering lower prices. Can McGuckin’s survive against giant Home Depot? Or will it become another mom-&-pop store shuttered by behemoth retailers with economies of scale in supply chain and large marketing budgets?
According to recent research by Wharton’s Olivier Chatain INSEAD’s Peter Zemsky, McGuckins has a good shot at success due to a concept that Chatain and Zemsky call “friction.” As they define it, a friction is any force that makes it difficult for buyers and sellers to connect. For example, a poor location is a friction if it makes it harder for customers to get to the store. A complex website or a confusing store layout is a friction if it’s hard for customers to find the products they want to buy.
Smaller companies can out-compete giants by exploiting frictions. For example, McGuckin’s can use its loyal, knowledgeable staff to help customers quickly find what they need or give them sound advice if they’re embarking on a new project or product purchase. Long-time loyal employees are more likely to go the extra mile to help a customer. McGuckin’s loyal staff also know the local area, so they know which paints withstand Colorado’s intense sun and which garden plants thrive in the local climate. McGuckin’s local knowledge reduces its distance to its customers, which reduces friction.
Action:
- Document the time, costs, knowledge, hassles that customers face in finding your business, buying from you, or using your products
- Compare the frictions in your business or products with those of your competitors
- Adjust or redesign your business to minimize your friction
- Emphasize your low friction in your marketing and advertising
For more information:
Olivier Chatain and Peter Zemsky, Value Creation and Value Capture with Frictions
4 Comments »Case study, Growth, How-to, Opportunity, Strategy
4 Responses to “How to Out-Compete a Larger Company”
Rosemary Carstens Jul 25th 2009 at 05:17 pm 1
The concept of reducing friction for your customers/clients, frustrations that they might experience elsewhere doing business, is definitely one I apply. I try to keep focused on what I can do for THEM that will make their jobs easier. I frame all my inquiries with prospective clients in those terms and even ask them what the most frustrating thing is for them in getting that service so I can subtly address it with each suggestion. One thing I think everyone is looking for is a sense that the person supplying their product or service knows who THEY are as individuals and this is something the smaller business owner can often do more effectively than a large corporation. We can know them by name, let them know we are working hard to help them meet their deadlines, going the extra mile. We never say “OH, such and such a rule won’t let us do that.” We get the job done and they feel we care about THEM in the process. Now THAT’s priceless!
Cindy Morris Jul 26th 2009 at 08:34 pm 2
I couldn’t agree with you more, Andrea. As small business owners we can certainly have the edge over a corporate entity because we offer direct, personal service and we need to capitalize on that. We also need to be easy to find, easy to access, and easy to use. Streamlining our offerings, listening to, and implementing feedback from the people who use our services is the SMART way to run our businesses.
Thanks for the reminder!
Cindy Morris, msw
Priestess Entrepreneur
http://www.SuccessPriestess.blogspot.com
How to Leverage Your Small Business | Private Practice from the Inside Out Jul 27th 2009 at 08:51 am 3
[…] pointers on how to leverage your “little guy” position.
lawrence berezin Jul 28th 2009 at 12:12 pm 4
Andrea,
Great case study and terrific, valuable advice. My wife’s family owns a plumbing supply business in Western NJ, which has been in operation for over 50 years. About 4 years ago, Home Depot opened a store about 2 miles down the proverbial road.
Family owned, operated, unmatched customer service vs. Large, so-called wholesale supply house, with little understanding of local customer base. No contest (thankfully). Family business actually benefited from reverse flow of new Home Deport traffic.
I’m going to take a look at our operation and discuss with some customers to see about reducing “friction.”