|Eight Myths About Alpha Companies
In business, as in the animal world, just about every product category has an
Alpha—a company that leads the pack. Alpha companies enjoy higher
profitability, lower competitive pressure and more control over future revenues
than follower companies do. Alphas are so influential that almost everyone in
their category looks to them before making their own decisions. [Editors
note: See the May 2008 issue of the Business Edge for the article
How to Become an Alpha Company.]
What made Starbucks the Alpha of coffee retailers, when there were already many
others with arguably a better product? What made Harley-Davidson the most
desired product in the world (even above diamonds), when its product quality was
far lower and its prices much higher than most of its competitors’ motorcycles?
What is the secret to making products people will pay almost anything for?
The secret to being an Alpha and dominating one’s product category lies in: (1)
identifying your company’s real Alpha assets—the things your company offers that
drives buyers, and (2) managing those Alpha assets by making them the focus of
all decisions and performance measurements. Alpha companies help customers
believe their products will provide them with self-satisfaction and personal
significance. They make it possible for customers to feel smarter, bolder,
braver, more influential, more knowledgeable, more admired, or more fulfilled.
As a result, customers will flock to your product.
About the Author
|Dispelling the Common Held Myths of Alpha Companies |
Myth #1: To dominate the category, your company has to be the biggest.
Size, in terms of market share, number of employees, or number of locations,
does not equal domination. Often, a smaller competitor in the category is the
true Alpha—the company the rest of the industry tries to keep up with, and
the one that drives customer expectations. A good example is Ben & Jerry’s.
Myth #2: Price is the deciding factor for consumers when they buy. If
price were the ultimate driver of buying decisions, there would be no
Mercedes-Benz, Dom Perignon, and Rolex. Consumers are willing to pay more
for something they believe gives them more. Research shows price is actually
the last thing customers consider before a purchase.
Myth #3: To achieve dominance, you have to be first to market with an
idea. In truth, few of the Alpha companies today were either the first
in their category or the first with the type of product they currently sell.
Victoria’s Secret and Starbucks are good examples. They were not the first
to sell sexy underwear or coffee—they were just best at marketing those
products so customers clamored for them.
Myth #4: The Alpha in a category offers the highest quality product.
That would be true only if customers wanted the best quality. Evidence shows
that customers want something else—a product that satisfies a functional
need, but also makes them feel smarter, more attractive, more admired and
more significant, among other emotional reactions. A good example is
Harley-Davidson. Its motorcycles are of poorer quality than Japanese bikes,
yet dominate in customer loyalty and price leverage.
Myth #5: To learn how to be an Alpha company, follow the leader.
Every time you follow the leader, you convince customers in your category
that the leader’s product is the one they should aspire to. To be an Alpha,
strategic differentiation is critical. The real trick is to find unmet
higher-level needs that you can “own” as things you uniquely address well.
Myth #6: The fewer competitors in your category, the better. Quite
the contrary. Eliminating or attacking competition is the worst thing you
can do if you want to dominate your category and grow your customer base.
Aggressive competitors drive more consumers to the products in your
category, and demand for those products—yours and theirs—begins to grow
geometrically. Furthermore, when you have competitors imitating you,
customers seek out your Alpha products with even greater enthusiasm.
Myth #7: Sometimes Alpha companies just “come out of nowhere.”
Fortunately, once you understand how Alphas evolve, you can reliably predict
who will grow dramatically before that growth even starts. By comparing all
competitors in your category in the factors that constitute an Alpha, you
can readily see which companies are in the process of creating growth
potential, and which are not.
Myth #8: It takes time to acquire a dramatic share of the market.
Most corporate executives find it hard to believe that dramatic,
revolutionary growth can occur for a company in a short amount of time.
Evidence shows, however, that using Alpha learning can create significant
growth, usually within a year or less—even if the company is already a top performer
or, conversely, has been in a prolonged cycle of stagnation or
Wes Ball is founder of The Ball Group, located in Lititz, PA. It is a
strategic innovation management consulting firm that helps companies ranging
from Fortune 100 to medium-size regional companies create dramatic new growth.
He is also the author of The Alpha Factor: The Secret to Dominating Competitors
and Creating Self-Sustaining Success (Westlyn Publishing, 2008). Wes can be
reached at firstname.lastname@example.org.