Jeff Cornwall recently wrote a post about the MLM industry and whether or not it constitutes real entrepreneurship. Reading the post reminded me of another entrepreneurial strategy – turning a commodity into a niche.
My brother in law (Dave) lost his job as a graphic designer a few years ago and decided to start doing freelance web design. The problem with web design is that, as a service, it is very near commodity status. Rates vary at firms all across the country, and I am sure that designers will tell you there are major differences in skill across companies, but, to the average person that just needs a basic website, most web design companies appear extremely similar. Dave realized this and actually used it to his advantage.
One of his early clients was a multi-level marketing company. Such companies usually desire sites that are more graphically intensive than average, which means more expensive too. So, Dave decided to focus on websites for the MLM niche and set up VisualMLM for that purpose. While other web development companies were taking the approach that web design is web design and were willing to work with anyone, VisualMLM focused on this one single niche. And good things happened.
First Dave began to know and understand the industry, which gave him lots of credibility when talking with potential clients. Secondly, it turns out the MLM industry is a close knit group, so most of his clients referred others and as a result, he has never done any marketing. (A side result is that he has been pitched on joining so many MLM companies he is basically immune to it.) He had to hire another designer, then a programmer, then another designer, then a project manager, and I think they are up to 7 or 8 people now.
Of course, some of these MLM companies had other types of sites they wanted designed, but instead of doing general design, Dave incorporated another company to focus on a separate niche (although he also decided to establish a broader parent company called VisualScientists to hold all these other projects). Then a client of his decided to get into online video, and because he had a great working relationship with VisualMLM, he wanted them to do it. So the company got a chance to develop some new expertise.
The moral of all this is that many companies, particularly service and consulting type companies, struggle because they try to be all things to all people. The common thinking is that if they narrowed their potential client base then they would have less business. But it doesn't work that way. By narrowing your client base you actually make your marketing a lot easier, which is why niches are so good for launching business. So find an industry that seems somewhat commoditized and find a way to turn it into a niche. You get the advantage of working in an established field where the business model is already well understood, but by presenting your offering in a new way, you don't have to compete directly with all the existing industry players.