Life tolerates no shortcuts
The last laugh comes at the end of the longest journey... and you'll want to be the one laughing
How not to compete … again
In our last article, we highlighted the least effective approach to tackle competitors: slashing your margins and offering no added value except a lower price. Customers seek affordable products at a fair price but are often willing to pay more for a brand with a unique story and a distinguishing feature. As an entrepreneur, you aren't blocked by bureaucracy or silly corporate policies. Embrace this freedom, create your brand, and iterate until you discover the niche where you excel.
If you intend to adopt a price-based strategy for your company, ensure you have a significant competitive edge in the supply chain to make it sustainable in the long run. However, with all due respect, it's unlikely that your company will mirror the success of Walmart or that you'll emulate Sam Walton. There's no shame in this. The reality is that to sustain your business, you need substantial margins and consistent profits over an extended period.
Last time, we saw how many of your competitors might fall into the price-run fallacy and slash their margins to the bottom. Today, we'll revisit something I've already mentioned in this blog: life doesn't tolerate shortcuts, neither does innovation and business. The winner is inevitably the one who decides to tackle the hardcore problems and foundational issues of its industry.
The worst shortcut: fake it and never actually make it
Why bother doing when merely saying is enough? Welcome to 2023, where talk is cheaper than ever. This issue isn't exclusive to business, but many companies, especially those with a monopolistic stance, often neglect to offer genuine, tangible value to their customers. Instead, they prefer emptying their wallets for self-congratulatory ads and posts without even promoting their product. Major insurers, vast banks, overfunded startups, fintechs, and dominant delivery services all share a common pitfall. They mask their failure to consistently provide value and often their inability to profit from their services, opting instead for digital boastfulness rather than genuine marketing.
In business, I suggest you let others indulge in praise and adulation; concentrate on talking to your customers.
This trend of 'saying over doing' represents the most significant shortcut in today's digital era. When companies rely heavily on boastful advertising without substantial backing, they create a facade. Sometimes, they even resort to buying laudatory articles and sham awards. Remember this: no company is too big to fail, and the market inevitably acts as a relentless feedback mechanism. Once a company starts investing in fake value inflation instead of genuine value perception, it digs its own grave, no matter how large and gigantic they might be.
Take, for example, the catastrophic downfall of Enron. Enron, once hailed as the beacon of innovation and a future giant in the energy sector, faced a catastrophic downfall due to its misleading accounting practices and financial deception. At its peak, the company's stock was worth $90 per share. However, in a short span, these shares plummeted to a few pennies. The scandal revealed how Enron used off-the-books partnerships and accounting tricks to inflate profits and hide debts. Despite its massive size and influence, its underlying lack of genuine value and transparency led to one of the most notable collapses in corporate history.
As a small company, it's crucial to walk the talk. Ensure that what you claim in your ads and public communications is validated and echoed by your customers' experiences.
Hard selling at the beginning: inflated value for nothing
Spending millions on self-congratulatory ads might be beyond your budget. Yet, many small businesses eager for shortcuts end up draining their treasury, pouring disproportionately into marketing during their initial months. This approach can be understood; there's a genuine desire to establish a customer base and secure recurring revenues right from the start, and occasionally, it does work. However, many companies employing this strategy overlook the crucial follow-up step: ensuring the customer receives quality service after payment1.
I concur that even the best product, if poorly marketed, might lead you nowhere. However, promoting a stellar product that doesn't actually exist is arguably even more problematic. Never deceive your customers or assume they're oblivious; they'll quickly realize if you don't deliver on your promises. It's recommendable to craft a unique brand image, and investing in appealing graphics, mockups, and websites is beneficial. However, presenting a service you can't provide is a lie and a guaranteed way to fuel customer rage.
Like every aspects of life, marketing doesn't offer shortcuts. Building a customer base on shaky promises creates a foundation vulnerable to any adversities. Should a mediocre competitor address these disappointments, your customers will migrate. A 10% price hike? They'll reconsider their loyalty. And if you consistently fail to provide the value you boast about, they'll inevitably fuck off.
Revenues are valuable when they compound. Shortcuts in customer acquisition might provide an immediate boost, but they destroy the snowball effect of recurring compounded revenue, which requires tangible value and fair relationships with your customers.
Impatience with actions, patience with results
It's tempting to chase glamorous and short-term opportunities. However, the treasure always lies in addressing problems that many overlook, either because they think it's irrelevant or because they know they lack the required skills to actually solve them. In the tech industry, for example, while there's a rush to become project managers, a glaring shortage of developers remains. Some want to sneak into the tech world without doing the demanding groundwork, hoping to claim a piece of the pie with PowerPoint presentations2. Similarly, you'll find a bunch of financial consultants merely following what bigger firms do, not doing their homework on specific investment theses. Likewise, many startups focus on creating glamorous analytical dashboards, but far fewer tackle supply chain bottlenecks. Work on what nobody wants to, and cash in. It may takes longer, but it will eventually work.
It's essential to dialogue with your customers, continuously evaluating the tangible value you bring to them. Having "skin in the game" means being accountable. When mistakes happen—and they will—you must take responsibility. Consider Amazon's approach as an example. Despite its gargantuan size, its customer support often goes above and beyond to rectify issues, even if it comes at a cost to the company. Their dedication to customer satisfaction is their actual strength.
Shortcuts in business are a mirage, tempting but always misleading. The tale of companies that artificially inflate their user numbers to attract investors is always, irremediably the same. While they might enjoy a brief period of inflated valuation, the truth inevitably surfaces, leading to lost trust, plummeting stocks, and notorious blow-ups. Genuine business growth demands time, effort, and authenticity. If it were easy, everyone would do it; if it were fast, even more would try. Not many do, and even fewer succeed, because it's incredibly challenging to take the long, hard road and persevere through countless failures and brutal market swings.
If it's easy money, it's either fake money or illegal money.
A dollar easily earned will be two dollars even more easily lost.
Take the long road; have the last laugh
Keep the faith,
Voss
Nequi, what’s up
McKinsey and BCG consultants, people with MBA in innovation : they all suckers.