Adam Smith states that in a small market the division of labour and specialisation is pointless. A carpenter, for example, can’t just be a carpenter, ‘but a joiner, cabinetmaker, and even a carver in wood, as well as a wheel-wright, a plough-wright, a cart and wagon maker’. He must diversify or go broke.
DEFINING IDEA…
Diversify or Die.
~ ANON
Smith was writing his economic treatise just as mass production looked set to rule the world. If a market was too small, there was no point in creating a specialised product that could not be sustained by that market - in those situations, the craftsmen must diversify. Ironically, the advice is still valid today, but for different reasons.
The Industrial Revolution moved seamlessly into globalisation. The one-size-fits-all approach to business arrived and companies such as McDonald’s and Wal-Mart flourished in that environment. Globalisation and technological advances meant that markets traditionally limited by distance opened up and consumers entered a truly global economy. Economies of scale, where large multinationals use their buying muscle to negotiate lower costs ensured prices to the customer were kept low. The downside was that this drove out the competition because smaller suppliers couldn’t match the prices and went out of business. This phenomenon can be seen on any high street as more and more small retailers are forced out of business by out-of-town supermarkets selling everything from clothes to insurance.
But things shifted. Consumers became a little more discerning and stopped responding so enthusiastically to cookie-cutter solutions. They wanted to feel as though their particular situation was being addressed by a tailor-made answer and the need for more sophisticated marketing emerged.
Fact is, you may be selling the same product or service but now you need to sell it with a little more finesse. Smith suggested that specialisation was pointless in a small market because essentially there was a limited demand. Ironically, we’ve come full circle and that specialisation is now mandatory if you are to effectively compete in the very large market. Appealing to the mass market doesn’t work; we can’t be all things to all people. Instead, we must identify our key skills and package them up to meet the demands of a variety of niche groups.
For example, I am a writer. That basic skill could be used in a wide range of areas, from website content, business report writing, technical writing to copy writing and ghosting books. I specialise in ghosting books for busy professionals because I enjoy it, but also because saying I’m a writer and can write anything is a weak marketing pitch. This may be true, but it doesn’t win business: I have to specialise to succeed, and so do most other businesses.
HERE’S AN IDEA FOR YOU…
What are your core skills? Besides your current clients, who else might use those skills? Could you repackage your offer to talk directly to niche audiences? For example, I wrote a book detailing how to become a published author and how doing so can massively impact on your career and income. Being an author is a powerful marketing and business development tool. On the assumption that some readers might never find the time to write their own book and contact me, I focused on a niche.