While it lasts, the niche strategy is the most profitable entrepreneurial strategy.
What all niche strategies have in common is that they are unlikely to endure forever. One threat is for the niche to be outflanked, and especially by technological change. That happened to Alcon. Fifteen years after it became a worldwide near-monopoly, somebody in Czechoslovakia invented a new cataract operation, the implant lens, in which eye muscle has to be maintained rather than dissolved. And Alcon’s solvent became history.
Another threat is if a niche becomes the main mass market. That’s what happened to the Travelers Cheque. Before World War II, a European trip for Americans was still the rare exception. Now the transatlantic jets carry more passengers in two days between Europe and the U.S. than all the steamships carried in an entire year before World War II. And the new mass traveler uses a credit card. And when the automobile market became a mass market, in the U.S. during World War I and in Europe and Japan after World War II, the intense pressure to cut costs meant that to be the niche supplier depending on a specialty skill ceased to yield niche profits. These players were the ones, and still are, on which the automobile companies put the greatest pressure to cut prices. And they had no choice but to yield.
ACTION POINT: Evaluate the threats of obsolescence to any of your products, processes, and services. Maintain a systematic program of innovation to offset inevitable threats to the products and services of your enterprise.
Innovation and Entrepreneurship
Entrepreneurship Strategies (Corpedia Online Program)
* Source: The Daily Drucker by Peter F. Drucker