Building A Thriving Business (What's at the VERY CORE) Pt 16


I'm back again on the question every business leader needs to periodically ask; which is, what business am I really in? And in this post, I will be discussing a response, few know about. Popular African speaker, Vusi Thembekwayo relayed a remark he heard from a CEO, businesses don't compete against businesses, rather value chains compete against value chains. Where are you along the value chain in your market, and what is the value chain of your business? Let's take a deep dive into this question, so every entrepreneur can understand, what kind of player they are, in order to position themselves for success.

The Goal Of Every Business

Most businesses that sell products are retailers, selling directly to the customer, but that part of the value chain is price and volume sensitive; and there are many competitors in that arena. As an entrepreneur, your goal should be to invest in scaling up the value chain, to become the source. That's where most of the revenue is. Every industry has a source; in the electronics industry, it's the semiconductor/IC manufacturer, in the beverage industry, it's the farmers of wheat/barley, grapes, and other fruit produce. Being the source, is capital intensive, especially, when you take into account, growing demand for consumer products. Only a few businesses can manage being the source.

The Middlemen

The middlemen, are mostly the listed companies, who benefit from financing from shareholders, as they have to finance the upper or lower half of the value chain. All manufacturers and distributors fall into this category, regardless of size. And as a middleman you have to think about financing multiple orders across the value chain; orders from other middlemen, and retailers. If you can’t finance your orders as a middleman, especially as a startup, building network capital through collaterals is the only option.

The Value Chain Of Your Business

Now, knowing the value chain of your business is, realizing what part of your business is actually creating real value for the customer or client. As an entrepreneur, who is a small player in the market, knowing where to invest MOST of your resources is KEY, as that will determine your growth, and survival in the market. For example, not all businesses require a website to make steady sales, or build brand capital. 

 One popular case study is Aliko Dangote, who controlled and improved the quality of the distribution arm of his empire, by investing in trucks, rather than outsourcing it, as he was aware of the inefficiencies in logistics in Africa. Till date, this remains one of his competitive advantages in the market place.

The Plan

If you want to compete with Goliaths like, MTN, Rhodes, Chi Ltd, Apple inc, Alphabet Inc, Dangote Industries, Microsoft Corp, Amazon Inc, you need to know where to invest MOST of your resources, with the future goal of scaling up the value chain in the market or an EXIT strategy. For the latter, the plan should be, how long can I remain in the market, till the Goliaths know MY NAME.

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