If the specialty skill is properly maintained the innovator is usually protected against competition.
The second ecological niche is the specialty-skill strategy. Here the niche an innovator occupies is just as unique as in the tollbooth strategy, but it tends to be somewhat larger. For example, everyone can name the major U.S. automobile manufacturers. But how many people know the companies that make the brake pads or electrical circuits or headlamps that go into these cars? Those largely unknown companies occupy a specialty-skill position in an ecological niche. Developing high skill at a very early time in a new industry or market captures this position. Once the market begins to grow, the innovator has a significant head start over potential competitors and has already become the standard industry supplier.
The cost example is that of America’s leading twentieth-century inventor, Charles Kettering. Kettering aimed in all his inventions at creating a vastly profitable niche business. And his first, and probably the world’s most profitable invention, was aimed at creating a specialty-skill niche market. it was the self-starter. Until then, automobiles had to be started by cranking by hand, which was very hard and also quite dangerous. But for fifteen years or so, during the period of the most rapid growth in the automobile industry, every carmaker had to buy Kettering’s self-starter. It added very little to the cost of the car, maybe 1 or 2 percent. But Kettering’s profit margins were known to be around 500 percent or more.
ACTION POINT: Exploit rapidly growing segments in your industry by providing a specialty skill for that industry that improves upon existing operations.
Innovation and Entrepreneurship
Entrepreneurial Strategies (Corpedia Online Program)
* Source: The Daily Drucker by Peter F. Drucker