…and 5 Assumptions Why it is Not Present
by Michelle McDonald Pride
In a capitalistic economy, competition is spoken of freely. It is arguably a cornerstone of the free market and the way by which entrepreneurs distinguish themselves in an ever-evolving sea of technology and startups. Competition allows businesses to create loyal tribes of customers, improve products and adapt to changing market trends. It is an engine of growth for economic development.
Competition in commerce is often equated to competition in sports. This assumption places a time limit on the dueling match, mandates strict rule adherence and requires that there be a clear winner and a clear loser. After all, only one team can actually wear the pre-printed winners shirts!
Competition in Business: A Different Animal
This mentality boxes in the idea of competition and isolates it from reality. While there are many similarities, motivations and lessons to be learned from competition in sports, competition in commerce is an entirely different animal. The rules of the game are being written as it is being played. There is no definite time limit and competitors can enter the arena at any time. There are no judges to determine what is fair and the scoreboard is an undisclosed bottom line.
For many entrepreneurs, those differences get their blood pumping and their mind running. It is invigorating and presents new challenges everyday. However, for some (and many BAM entrepreneurs) it causes anxiety and stunts business growth.
In some sectors, business as mission has operated as its own informal marketplace for many years. Few BAM businesses have risen to the challenge of competing in a traditional marketplace. Regardless of whether it is within the BAM niche or the broader marketplace (and especially within developing economies) competition is necessary for sustainable business development.
5 Reasons Why Competition is Necessary
1. Competition makes businesses better
Product quality and customer care are just two examples of how competition drives businesses to perform better. When other businesses provide similar products, a business is forced to distinguish itself in the marketplace. Is it price point? Quality? Experience? Competition mandates innovation and performance.
2. Competition makes it real
Some businesses begin as a hobby and may teeter on the edge for years before becoming “real”. Other BAM businesses begin because jobs are needed, but not necessarily because a product is ready to be brought to market. These informal structures struggle in a competitive marketplace. Competition makes it real. Competition demands that businesses operate in the formal economy for survival and growth.
3. Competition discovers niche markets
A business has to pivot every so often and make changes to remain relevant and successful. Competition expedites the realization of the need and timeline for those pivots. By making these changes, a business further defines its marketplace and creates a personal niche for its unique offerings.
4. Competition identifies strengths and weaknesses
Although a painful pruning process, competition helps businesses to identify strengths and weaknesses opportunities for growth in their model.
5. Competition creates customer tribes.
When there are numerous offerings for similar goods in a marketplace, customers gravitate to one over another for a reason. Why will they choose you? Competition helps to create loyal tribes of brand advocates that choose your business and share about you in comparison to the competition.
Despite the reasons above and the numerous additional reasons that did not make the list, competition is often brushed off in conversations about BAM and social enterprise. It is almost a dirty word and something that only affects “big” companies. The assumptions as to why this happens are just that…assumptions. But if these assumptions are accurate, their implications extend much further than the idea of competition. If accurate, they inherently stunt and obstruct the sustainability and scalability of BAM.
5 Assumptions Why Competition is Not Present
1. We are all on the same team
BAM businesses are united across global market sectors by a common vision: the transformation of lives through the Gospel. Still more so, others are united by a shared goal such as fighting human trafficking. To many it just feels wrong to say you are in competition with one another when such huge goals are at stake. Remember, competition is about making one another better. It does not mandate that one wins and one loses. Some of the best partnerships come from competitors in the marketplace.
2. Zero sum fallacy
If your BAM business grows, does that take away from another BAM business’s profitability? Not necessarily. If it took away market share from a non BAM business would you feel differently? The economy is not a single pie that is cut into slices. Your market is not a pre-determined size and you are not in competition to take someone else’s share.
3. The fear of losing…and what that means
For BAM businesses, quitting is just not an option. If the business closed, the ramifications in the community would be detrimental. Because of this, exit strategies for BAM businesses are few and far between. Businesses that fail in the traditional market are forced to close, but BAM businesses are often propped up by donations for an infinite amount of time. Sometimes, delaying the inevitable is more painful that cutting off the dead limbs and saving the tree itself.
4. Too small of a marketplace
What does your business offer or produce? Who is buying it? Are they buying it because they love it or because they love your story? While story is important and a critical marketing tool for BAM businesses, it is also a hindrance from developing products that succeed against like products in the traditional marketplace. Operating in a story based purchasing relationship keeps a business in the informal market and never allows competition to fully refine the product or services.
5. Stuck in survival mode
Survival mode happens to businesses with dwindling cash flow as easily as it happens to businesses with significant revenue. Survival mode is when a business is just trying to make it day to day. Competition studies, market analysis, focus groups, future planning…these are all “luxuries” afforded to businesses that make it out of survival mode. Businesses who allocate their resources and intentionally operate with a future outlook are able to fully reap the benefits of operating in a competitive landscape.
Competition is a critical part of business development and economic development. The presence and awareness of competition is often an indicator for a business (or an economy’s) readiness for growth. Although a difficult conversation in the BAM and social enterprise world, it is necessary as the benefits are infinite. As iron sharpens iron, BAM businesses can continue to make one another better through competition.
Join us for our Summer Series on The BAM Review Blog, summer 2016. We’ve asked BAM leaders and practitioners to write about topics they are passionate about for a series of one-off blogs throughout the summer.
Michelle McDonald Pride is the Founder of Trading Hope and The Foundry Marketplace. After leaving a career in private wealth management, she began working with impact driven businesses around the world. She is on a mission to show the world that business can be profitable and transformational at the same time.