What Business are you Really in?

“What business are you in?” This is one of my favorite questions to ask when we meet with small business owners and entrepreneurs. On surface this appears to be a very simple question. If you are a pizza business owner, of course you are in the business of selling pizza or food. But, think about it in terms of what value are you bringing to your customers rather than what you are selling. Are your customers really craving for pizza or are they looking for the convenience of no cooking and pizza happens to be one of the choices? Are they ordering pizza to feed bunch of kids at a birthday party? Are they looking to satisfy their hunger after late night partying without having to drive to your store? As you can see, how you look at your business can have a significant impact on how you run your business. In fact, it can determine the success or failure of your business down the road.

Many aspects of your business depend on how you answer this question, including product you sell, target customer base, marketing, pricing plan and your competitors. In short, your entire business model depends on this question!!!
You want proof? Just look the success Southwest Airlines had since it started its operation out of small airport in Texas with just few planes. They didn’t think of themselves as airlines in a classic sense. They looked at themselves as providing efficient transportation service to customers who were looking for an alternative to bus service. They did not even consider large carriers such as American Airlines as their competition. This meant that Southwest had to be low cost (charge similar fair as bus service), efficient (board and depart the plane quickly) and innovative (provide fun experience). They also had to settle for small airport instead of the large hub that American Airlines was using. Out of this, however, emerged a formidable business that turned the airline business model over its head and drove many competitors, including bus operators and airlines, run for the cover.
So how do you go about answering the question – “what business are you in?” You need to break it down in several sub-questions to get the most value out of your answer. Here are the sub-questions you need to ponder.

• What are you selling? Auto manufacturers used to think they sell cars. However, the new generation of buyers doesn’t want the hassle of owning a car, but they still have a need to go from point A to point B. So now auto manufacturers think of themselves as selling transportation needs rather than just cars.
• Who are you selling to? Car salesmen might think that they are selling to the husband, who may be writing the check, but behind him might be other influencers – wife and kids – who could be real decision makers.
• How are you selling? Music industry executives and artists clung to their old way of selling music through CDs for a long time, but Apple showed them customers really wanted to get their music digitally on their iPods. Look at the success Lady Gaga has, who was one of the early converts.
• Who is your competitor? Think about Southwest example we talked about earlier.
• Why are your customers buying from you? Kraft thought customers were buying cream cheese to spread on the bagels, until they found out how customers were using it in many innovative ways. This prompted them to change their marketing campaign to emphasize these alternate uses, helping boost their sales.

At the end of the day, you need to provide your answer to this question in a very simple fashion. As Einstein famously said – “If you can’t explain it simply, you don’t understand it well enough.”