My weekend essentially involved reading the various profit models that Adrian Slywotzky had put forth in his best selling book. It clearly mentions that not more than one model needs to be digested in a week.
What is Local leadership profit ? This involves firms taking up strategies that clearly leverage the leadership position at the regional level and then scale up in a tactical way. A few examples to kick off the understanding are walmart, starbucks who started in a small location, built up the leadership at each of their respective locations and then used it as a weapon to expand to other locations. At the same time, there are umpteen examples of local leaders who find it difficult to scale. What could be the reason ? Is it purely a matter of luck, or are there are operational issues, strategic issues that entail the success of a small local leader firm to take on the world ? Let’s explore
What’s necessary to build a Local business in the first place?
- A strong demand for the product / service at the local level , where there are considerable entry barriers for any outsider to replicate the biz and run away with the profits
- Sustainable value / rather than filling a one time need
- A marketing strategy to introduce the product / service to the local population
- Willingness to completely focus on the customer at the regional level
What’s necessary to hold on to the Local business leadership position and scale it (more importantly) ? To answer this question , one must read closely 2 books atleast, Made in America by Sam Walton & Pour your heart in to it by Howard Schultz.
The other profit models which I have not blogged about, but are equally important to understand are
Entrepreneur Profit Model : Extraordinary expense management
Specialist Profit : Lower cost through better knowledge, Better price through reputation, shorter selling cycle, More rapid and universal penetration, Windfall profits because of the replication of high-valu, high margin answers
Installed Base Profit: Install a set of hardware components and generate margins on the software/services part
DeFacto Standard Profit: Be the standard in the market and soon a lot of ancillary players will start supporting the standard which inturn brings an increase in the sales of standard product
Brand Profit: Higher margins through good brand image