business career entrepreneur success

The Value of Trade-Offs

There is one company called Trader Joe’s that is famous not only for it financial success, but also for making quite successful trade-offs. They actually started with the ambition of not doing what other in their business do and they achieved more than one would expect: they have fans not customers. Which is a great deal and explains their success. But, how did they do this?

The list of what trader joe’s does not do includes offering many branded products, having spacious parking lots or stores, offering self-checkout, accepting coupons or having a loyalty card, running sales or TV advertisements, have a large selection and having a stable product line. This is pretty much flipping the market and creating a unique competitor that’s doing everything else strategically in a different way that’s difficult to imitate.

Value of trade-offs and choosing what not to do is that it certainly makes  your firm distinct and hard for existing players to imitate you, but also it helps you mitigate negative forces in your industry.  Some example of successful trade-offs are Southwest Airlines – they have no assigned seats, smaller regional airports, only one kind of plane, no inter-service and no hub-and-spoke system, eHarmony – they are a no casual match online matching company,  Edward Jones – they are a no online services and no IPOs, commodities and penny stocks, and have limited array of services, and Planet Fitness – which differentiate by no appealing to gym buffs.

Did other try to mimic? Yes they did, but again they did not really make a commitment to their trade-offs and ended up in failing. Tesco tried to imitate Trader Joe’s and this was a failure because they simply stayed a Tesco with a Trader Joe’s look. But why is this not something that more firms are doing? Why everyone seems to follow the herd of companies benchmarking one another and doing exactly the same things? One reason is the growth trap. It’s simply difficult to choose what Trader Joe’s has chosen and develop in the same way, have the same compensations, and gain the same publicity.

The point here is how to brake the paradigm. How to differentiate not just be different in minor details while basically having the same strategy. In the end it’s all about deciding on what you can eliminate and reduce of what others do, and what can you create and increase of what other do or do less than they might.  A Strategy rests on unique choices, and one has to make choices and choose what not to do, which in the world of quick success schemes proves to be really difficult.