Enough Advantage?

Here’s one of my favorite innovations of the last few years. This one was brought to me by one of Redding students a couple of years ago. It’s the world’s smallest folding electric bike – and the design is, well, unique to say the least.

If you google electric bikes, then you’ll find hundreds of them. Frankly most of them look the same; all except the YikeBike.  Clearly they have reached the minimum standard of differentiating themselves from the clutter. The next question is whether their unique look alone qualifies as a competitive advantage. Or enough competitive advantage? 

Don't be fooled by their "good looks", the company claims there are a host of reasons why someone would want a YikeBike. Even safety, as odd as that may sound, is one of the supposed advantages of a Yike.

Those of you who have taken my courses know I look to three variables: price, quality and service. To be successful, a company has to win in two out of the three; win in all three and you’ve got a monster. So, take a look at YikeBike, what do you think? Are they going to be a winner?

Competitive Advantage

Each semester in my Management 451 class we spend at least a week talking about competitive advantage – what it is, how one obtains it and how is it defended. Sometimes I think the students think this is a bit of over-intellectual sophistry. But then they come across an article like one the other day about Amazon and their building spree and they realize that this is real big boy stuff.

Here’s the background: as of Saturday, Amazon will be forced to charge sales tax in California wiping out twenty years of a huge seven point something percent price advantage over their brick-and-mortar competition. Amazon has publicly acknowledged in their SEC filings that collecting the tax could, indeed, hurt them. And, as you might expect, they are challenging the ruling in court, but until then they will be collecting the state sales tax.

So, how are they fighting back? What is their new competitive advantage? For one, they don’t, obviously, have just one advantage, per se. Students in my class yesterday came up with a few: one-click ordering: their wide variety of products; and their ubiquity were just three. But Amazon, according the article cited above, is not resting there. The goal ultimately is to “super-serve” their customer base by ultimately offering same-day delivery. 

To that end, they have embarked on a construction binge that rivals the pharaohs in ancient Egypt; building seven 1 million square foot warehouses on the outskirts of major metropolitan areas (including one outside of the Bay Area and another outside off LA) with initial goal of cutting their normal two day delivery down to one. 

So that’s a huge start. What do you think? Is the extra service going to be enough to overcome the loss of their tax-free advantage?

Find a Niche

A recent article in the Wall Street Journal (from the August 16, 2012 issue) highlights one of the key strategies for a start-up. Find an under-served niche and, well, serve it. One such example is Gordon Logan, who over the last nineteen years has built a small empire of hair care salons for men. His company, Sport Clips (http://www.sportclips.com/)  is now in almost all 50 states and will be opening its 1000^th store before the end of the year.

 

It is said the quickest path to entrepreneurial success is to find a problem and then solve it; just look at what Mr. Logan said in the Journal article:

WSJ: How did you get the idea for the sports-theme salon?

Mr. Logan: My wife and I have been in the salon industry for 33-plus years. We evaluated industry trends in the early 1990s, and identified that the traditional barber shop was fading away. Men had to go to unisex salons, beauty salons, or one of the chain salons that were positioned as family haircutters. We felt that if we developed a concept where a man or boy would look around when they walked in the front door and said to themselves, "this is my kind of place, I feel comfortable here," there was a huge niche market waiting to be explored.

We realized that men and boys don't typically look forward to getting a haircut, so we place a great deal of emphasis on the overall experience, [including] the ambiance [and] stylists who are trained in techniques of how to deal with male haircuts.

That’s perfect. The problem wasn’t earth-shattering by any stretch of the imagination but it was a problem. And Mr. Logan et al have obviously solved it to the tune of over $250 million dollars in annual revenue.

By the way, for students who want to read WSJ articles but can’t afford a subscription, you can gain access through Factiva, which is available through the Miriam Library databases, http://www.csuchico.edu/lref/dbaz.html.  Just go to Factiva and search for “Sport Clips Inc.” in the Wall Street Journal.

Making Profits from the Bottom up

Before anyone starts thinking I am devoid of humor, let’s take a look at an interesting business that was spawned at my alma mater, The University of Michigan. And before I go any further, let me just say, I’m convinced these guys are going to wipe up.

The business? Advertising on toilet paper. That’s right, two brothers, Jordan and Bryan Silverman, both in their early twenties, have started the Star Toilet Paper Company, www.startoiletpaper.com. 

The Star Toilet Paper web site is straight forward about what they do:

We have one goal at Star Toilet Paper - to increase profits for your company through our form of unique advertising. That means ensuring that you spend less on advertising, while reaching a captured audience….  Here at Star Toilet Paper, we offer a form of guerilla marketing that lets you spend less and get more people talking about your company. Since toilet paper is used by just about everyone who visits a public bathroom, why not catch their attention before they leave the stall with a form of unique advertising? You can maximize the efficiency of your ads and budget by choosing to display them in venues where your ideal audience spends the most time and is most likely to be.

It’s an interesting idea that I am certain will be no flush in the pan.

To read more about the brothers and their company go to: http://www.freep.com/apps/pbcs.dll/article?AID=2012308210019

Peter Straus

Director