Shrink the Pond

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The greater the differentiation of your products and services, the stronger your value proposition. Prospective customers tend to prefer specialists.

As Tom McMakin, co-author of How Clients Buyputs it:

If you can’t say you are the largest or best in a category, make your market definition smaller. Shrink the pond.

As if it were so easy.

A couple of hundred years ago in the Wealth of Nations, Adam Smith noted that specialization is limited by the extent of the market:

As it is the power of exchanging that gives occasion to the division of labor, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market. When the market is very small, no person can have any encouragement to dedicate himself entirely to one employment…

So, to differentiate yourself, it helps to specialize. If you specialize, you need to expand your addressable market. To expand your addressable market, you must utilize technology. To the extent such market-expanding technology is readily available, others will utilize it to compete with you. That puts further pressure on you to specialize.

In other words, if you can reach the world, the world can reach you. Increasingly, no matter where you are in the world, you must be world-class in order to compete. That brings us back to square one: you need to specialize—you need to shrink the pond—in order to compete.

In what pond can you be world-class?

Key Ideas

  • Competition compels businesses to specialize—to “shrink their pond.”
  • Our capacity to narrow our marketing focus is inversely related to the size of our addressable market.
  • Technology allows us to extend the reach of our products and services over time and distance.
  • If we can reach the world, the world can reach us. Increasingly, that means we must be world-class to compete—even on Main Street.