Finding The Achilles Heel of An Industry For Massive Profit

The main purpose of the entrepreneur is to find the Achilles heel of an industry, and then shamelessly exploit it for maximum profits.

The Dollar Shave Club did this brilliantly by sending high margin razors via mail, which annoyed incumbents like Gillette. Unilever then bought them for 1 billion.

Simple, right?

Well, not so fast.

Disruptive business models are rare. Quite rare. And the sales centricity and brashness needed to exploit them is also rare among founders. Even still, new disruptive business models are far more commonplace than disruptive technology.

Businesses must exploit every advantage in which they can including things they cannot control such as their operational environment. Any wind on the sail is a good wind. Favorable taxation of the internet for instance has certainly helped companies such as Amazon. It is wise to choose an industry that has favorable operational industry characteristics at the onset, as Bezos did with Amazon.

Operational Excellence Through The Arrow of Time

A business is built over time.

Yet a year nowadays on the internet is like a decade was before. Which is why a business which would take 10 years to build in a prior era can be built in one, and a true empire can be built in 10 years online.

Word of new things spreads much quicker than ever before, provided it’s truly innovative and groundbreaking.

An entrepreneur must get his or her business firing on all cylinders as quickly as possible, for as long as possible. That’s how empires are built, barons are created, and the biggest prizes the game of business has to offer are garnered.

Few businesses fire on all cylinders. In fact, it’s extraordinarily rare. A business which is firing on all cylinders so to speak, is growing very rapidly. It’s business model contains much leverage. It’s operational industry is undergoing change.

But most of all, it’s founders and key people are succeeding and functioning on a very high level. How many people do you know that are masters of their businesses, are extremely hardworking, and work extremely smart so there is much inherent leverage in every action they undertake? It’s quite rare. Those are the founders whose businesses are firing on all cylinders.

Entrepreneurs are Agents of Change

Not everyone likes change, but entrepreneurs ought to because they’re in the business of change.

It only takes one good business but most don’t get that one good business going, ever. That’s the sad reality, the harsh truth of entrepreneurship.

Then again, were it not for so many failures would the successes not be as incredible as they are. They triumphed against the odds.

Creating a Disruptive Business Model

Make no mistake, the entrepreneur’s best hope to create that one dream business is the disruptive business model. Something which is unique in the marketplace. Something which truly stands out. Something for which customers truly lack viable alternatives.

That’s the key, a customer must come to you and have no alternative to satisfy their want or need. That’s the fundamental goal of business. A monopoly of sorts, but not a “bad” one. One which arises from excellence and competitors not being able to match the quality of your goods or services.

Disruptive Tactic #1: Shave Someone Else’s Margins

The tried and true strategy to get customers to switch to your brand, product or service is to save them money. Money saved for other organizations goes straight to the bottom line, which should definitely get the attention of the decision makers you’re trying to convince.

But whatever you do, don’t let your pitch be:

It saves you time and money

Because it’s generic to the point of uselessness.

But saving money for customers is hard, as it’s a competitive marketplace. So how can it be done? Consider:

1. Recycling — Companies throw away billions of dollars in stuff. For instance, oil & gas drillers throw away vast amounts of oil that’s valuable when they go to dispose of waste flow-back. Some enterprising operations have taken to recycling that oil before disposing of the waste water, and it’s highly profitable. Find what’s being disposed of free that actually isn’t totally worthless, and earn money re-selling it.
2. Profit Sharing — Companies have lots of leads and revenue which they generate which they might not get compensated for. For instance, a company might refer a lot of it’s customers to an outside vendor and receive no compensation. As a matter of fact, if you go to a cellphone store like Verizon with a broken phone for repair, they’ll often tell you to go to a uBreakIFixit store. Those leads are free, and Verizon gets nothing. There was a company called NREIS which scaled to 300M in revenue and 1,500 employees by offering profit-sharing on title processing services to banks.
3. Cutting Out The Middleman: Nobody likes the middleman, but they’re everywhere. In fact, it’s probably about the most profitable position to be in. Find a way to get rid of the middleman, and provide the needed goods and services cheaper and keep some of the difference for yourself.
4. Re-Negotiating: About everything in life is up for negotiation, and as things change, re-negotiation. Companies have existing contracts with various companies for services which can be re-negotiated, or the supplier can be switched to save money if the vendors are unwilling to re-negotiate. If you can help companies save money by re-negotiating existing contracts or finding cheaper alternatives upon contract expiration you can keep some of the difference for yourself.

In future articles, I intend to explore other tactics of business disruption. Please share this one if you can.