My new laptop and I have been aggressively navigating an eye opening experience! It started with a trip to tax free Salem, New Hampshire. After being dismissed by my previous employer I was feeling like a naked Social Media guy. No laptop means little ability to communicate. So it was off to Salem to get my new communication vehicle and still nameless friend.
Driving down Salem’s main strip was a bird’s eye view of the times we live in. Salem once harbored a handful of electronics juggernauts. Today? Here is the current status:
1. Comp USA- Long gone!
2. Tweeter- Rigamortis!
3. Circuit City- Bankrupt & going out of business.
4. Best Buy – The lone survivor but hurting!
I eventually purchased my computer at Best Buy – despite the obscene price cuts at Circuit City. But that is not really the point of this blog! During my laptop due diligence I realized that niche oriented business are still thriving despite a poor economy. I would not classify Best Buy as being niche by any stretch.
Nestled in the Rockingham Mall resides two companies that are hustling and bustling: GameStop and The Apple Store. Both organizations provide products that the Best Buys & Circuit City’s of the world currently sell, but not nearly as effectively. Both stores were packed! GameStop’s shelves were loaded with games and had a line weaving out the door. Meanwhile, The Apple Store’s staff was conducting demo after demo and having a great deal of success selling their products as a result. Recession? Where?
My bean began to buzz – what was the message that my new laptop had led me to? It was simple really- companies that establish a niche and dominate-win! It falls in line with what is going on in all facets of business today, too much expansion and not enough focus. Do what you do- and do it well! Don’t be tempted to expand despite the good times because everything is cyclical. Dark financial clouds always come back to rear their ugly head. These electronic heavy weights became too expansive to survive in a poor economy, while the companies with a smaller focus chug along because they are flexible enough to adapt quickly and don’t have too much overhead.
For example, my Gamestop Edge card provides me with consistent discounts, the ability to trade in games and a free subscription to a magazine (Game Informer) which allows me to rate and review 
games. They also conduct fun events around Guitar Hero and Madden Football. Why would I go to Best Buy, pay full price for a game and not partake in those added benefits? GameStop’s focus allows them to provide a better customer experience, complete with a chance to be heard.
What does my realization mean to the Social Media world? For now…not much! Many companies I speak with still find Social Media to be daunting. It is new and still very much in its infant stages as an industry. But you are seeing some Social Media companies focusing on one niche and doing very well with it. A couple companies I mentioned in a previous blog posts, have stuck their flag in the sand and claimed that business as theirs. See 
Radian6 & Techrigy for Social Media monitoring. Also, Crowdvine is focusing on providing a cost effective solution for conference creators.
Right now the major Enterprise Social Media platform providers are jockeying for position. The heavy hitters have already emerged (see Jeremiah Owyang’s recent report) but currently do not focus on a particular business to service. Today, they will provide a solution for any business objective in any industry. My bet is that will not be the case in the coming years. If I were them, I would start planning for the future. It may be blue-ocean sailing right now, but the day will come where the waters will become choppy. It might be best to find an island named niche and start calling it home. As the Social Media market matures so too will the need for focus…it is the way new business avenues always seem to shake out.
I have put a reminder in my Outlook for 1000 days from now to see how my hypothesis looks. I’d be interested in your predictions and if you would like to take a crack at naming my thought provoking laptop…have at it. 
Thanks for reading!
Fantastic blog. Really insightful. While being a niche business does not guarantee staying power(see Starbucks), these type of businesses do seem to be more resistant.
Starbucks is also a “high end” niche product. They too are guilty of over expanding. Breakfast sandwiches? CD’s? They need to get back to creating interesting coffee concoctions and for the time being cut their costs.
Derek – interesting predictions. Remind me in 1,000 days (and I know you will) how things turn out.
Regarding Best Buy, I’m actually keeping a close eye on them these days. While they’ve suffered just like many of the other big box retailers, I’m bullish on their progress due to the open and honest nature of their people. It started with their Blue Shirt Nation employee community and has now progressed through some of the social activities of their CMO, Barry Judge (he’s on Twitter as @bestbuyCMO and he blogs at http://barryjudge.com).
Either way, it’s thought provoking stuff.
Best,
Aaron | @aaronstrout
Hi Derek,
Interesting conversation to be sure. Niche can be incredibly powerful, especially because the “everything to everyone” approach is nearly impossible to do well. Even mass market brands – like Target – have a niche “angle” (like Target’s “design for everyone” focus) that presents them as personalized and interesting.
Social media, by its very nature, *has* to be tailored and focused to the business. It’s the only way it works. And more and more companies will find out that social media can be the mechanism though which they create that personalize, niche feel to their business.
PS – I’m with Aaron; I’m interested to see what Best Buy does in their industry now that they’re exploring social communications and missing some key competitors.
Thanks for the Radian6 shoutout too; by now you know I really appreciate that.
Best to you,
Amber
Nice work Derek. While you’re probably right that the everything to everyone providers are here for a while, all players are in the process of trying to better define exactly who they serve and what those target customers can expect from their services. Doing that in a niche way is much more of a tractable problem than trying to serve everyone’s needs.
Hi Derek -
Interesting observation. I actually see this a bit differently…which is the service and experience are differentiator, not necessarily the broadness of the offering.
Commoditized goods can be found anywhere. If I want a TV, a stereo, or some other consumer electronic I can probably find the best price online…and it will be a whole lot easier than driving around to 5 stores so why would I go in? I would go in to talk to someone knowledgeable who can explain to me how the product I’m buying works with everything else I have. I would go in because it is a cool place to be and somewhere where I can find benefits other than just the purchase of a product.
It’s sort of what online social media is all about – making online stores more like those high service/experience examples of offline destinations like the Apple store, Gamestop, or even Starbucks.
I think big one-stop shop stores will still persist – people still like to touch and feel things – but we certainly do not need so many.
Nice post!
Great post Derek. I like the “too much expansion, not enough focus” explanation. It points to a break from reality for all forms of business. At the end of the day, we all have to have solid business fundamentals.
That was certainly one of the driving forces behind CrowdVine going into conferences. We wanted to be privately owned so we knew we needed to find a market where we could be valuable. Even after the crash, our business is growing.
Being privately owned and profitable seemed like a maverick decision out here in the bay area at the time, but you’re right that that sort of unsustainable thinking is going to pass.
Focus is a powerful thing … and generally a winning strategy over time.
I’ve always believed that having a differentiated strategy on a focused segment will help companies win.
There’s a great book by Al Ries on the topic.
http://www.amazon.com/Focus-Future-Your-Company-Depends/dp/0060799900/ref=pd_bbs_sr_4?ie=UTF8&s=books&qid=1233684744&sr=8-4
I always use the analogy of if I had to have heart surgery, I’d always go to the specialist not the general practitioner.
Good post Derek.
-Rick
Derek -
Your recent “walk about” has given you clarity of the social networking marketplace. I am intrigued having been around the table before when this question of focused success versus trying to be a me-too company has been the discussion. Companies that consistently ask why they are going to add a service, widget or feature will have a certain edge. If the answer is that it is:
1) Demanded by current customers and sited as a gap in an offering by prospects
2) Product, services, and sales completely agree this is a direction that will help current customers and future sales.
3) It furthers service and expertise in your success area
The economy will force social networking companies to better define who they are and who they serve. This needs to be able to be done in a clear concise message. By serving all do you really serve few? I am increasingly grateful to work with in a social networking company that has this clear focus on what we are great at second to none.
Pauline Brannigan | @pbrannigan
Derek interesting read and apologies for the exuberance about social networking.
“Plastics”! http://www.youtube.com/watch?v=PSxihhBzCjk
As we all know there’s never a simple answer to these kinds of questions especially with so many moving parts but one thought I would raise is “context”. As social networks grow in popularity the more successful ones will think about how they communicate, sell, socialize and service in the context of who they are or who they want to be. I don’t know if there will continue to be mega social networks or like the “bunch” http://www.jargondb.org/glossary/dinosaurs-mating new ones to replace them but there will always be smaller very focused social networks trying to serve a specific audience. On the web more so then on the street having focus as well as developing trusted relationships works.
However, social networks need to be monetized to exist. Advertisers have been looking at the space as a place to promote their products and services but not enough success have been called out, so far. Research shows that consumers want to talk to their Brands. Brands are being told they need to learn how to listen. A paradigm shift is underway.
As time passes Brands will better understand and appreciate the value of social networks and how to interact effectively. Before 1000 days are up you will see a shift from banner ad media buys to social networking media buys and they will manifest themselves in context to the Brand. As that happens Consumers will be better served, social networks will be more vibrant and become the next great technological advancement in our life time.
NICHE SERVICE
It will be interesting to see how niche effects services and utilities in this new economy. If GameStop and Apple are niche and Best Buy is an example of Everything-to-Everyone (E2E); then how will juggernaut E2Es like Comcast fair against niche players such as NetZero?
NICHE STOREFRONT
I probably sound old-fashioned when I say this, but whether it’s a local one-off (florist, pharmacist, etc.) or chain (Gamestop), I hope we see a resurgence of the smaller players where they remember you by name when you come back. I can stand to see far fewer CVSs, Walmarts, Targets and Best Buys breaking ground in our familiar neighborhood locations.
Good post. Being all things to all people is often a losing strategy unless you can gain some type of economy of scale (which you can then in turn offer lower prices, one-stop shopping convenience, etc.). Walmart is doing relatively well in this economy because among many other things, they offer commoditized goods at everyday lower prices. I think it would be an interesting discussion to see if people feel that online social networks being offered by Ning, Yahoogroups, and many others are commoditized.
Our niche is real-life groups and most of our users are ex-users of these networks. While it’s been enticing to look at at the market opportunity for being a general social network, the needs are different and the cost to reach users is different enough where it makes sense for us to focus on our niche.
Derek, interesting take. I look at this and on one level it makes sense, but I have to mesh that with what I know about this marketplace. Right now the social media space is overserved. There are too many companies building onlinecommunities, and as a result they have too few clients to grow. We all know there is going to be a wave of consolidation, it’s part of the natural flow of an emerging industry. 140+ companies will quickly turn into 14 after the dominos start to fall.
The challenge these companies will face will be to integrate multiple software platforms into a single workable platform. The obvious choice is to pick the best platform and run with it. No one is going to want to eliminate a feature that won a client though, so they will probably cannibalize features from other platforms as they absorb other companies client lists. The danger here is of creating a Frankenstein’s monster platform that tries to do to much. The best answer here, to me, is to create a clean, strong, versatile base platform and to treat the different features you can offer as apps. By doing this you can sell a customized offering tailored to any customers needs without turning your platform into a bloated mess. And since people are already familiar with the concept of buying an i-phone and sticking the apps they need onto it your business model fits into your customers comfort zone.
The idea of niche specialist offerings still resonates with me, I just have to integrate it with my instinct that companies are going to consolidate, and when multiple companies merge the new company will be sort of all over the map. Also, we know from the forces pushing the M & A wave that the companies with the broadest bases will be the strongest and most stable. The new larger companies will form out of multiple smaller companies, each with its own track record of successfully selling within one or two core markets. In order to integrate them without loss managers will have to create a new internal structure that can manage multiple and widely different constituent competencies without losing blocks of valuable customers (and lets face it, a platform developer isn’t worth what they spent on their software platform, they are worth the contracts they have managed to develop and keep).
I think the best way to pull this off is by creating bubbles within the company, pairing up sales execs who have expertise, contacts, and a track record in a market niche with designers who are familiar with the needs specific to that market and having them focus on building a niche focused practice group within the larger company. They say when you go to Vegas if you can sell one casino within a week everyone on the strip is asking for your number,
Focusing on a niche is a tried and true sales strategy. And having expertise within the clients marketplace is the best way to serve them and create a community that’s a winner. I just think that companies have to be bigger to survive. So to me the most successful companies 1000 days from now will be larger and more flexible, and offer more services to more people. At the same time, they will be subdivided internally into niche practices that focus on one or two marketplaces. Boutique operations will likely fail as standalones, the social media company of the future will be more like a mall, a conglomerate of multiple small successful boutique operations with the flexibility to change them out to grow and compete in a changing marketplace.
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Interesting points you put accross, be sure to keep this updated!