By Alain Samson and Thorsten Roser from London School of Economics.
The UK is a hotbed of entrepreneurial talent, but not all small businesses make it.
Why are some businesses more successful than others? Our report analysed and compared the following businesses:
- The Body Shop – the ethical cosmetics retailer recently sold to French cosmetics giant L’Oreal in a £652m deal
- Last FM – the internet radio and music community and one of the world’s largest social music platforms which in May 2007 announced a £140m takeover by American media giant CBS
- Webvan – an online credit and delivery grocery business that was started at the peak of the dotcom boom but went bankrupt in 2001
The key findings of the BT Business-commissioned report are as follows.
Do…
1) Be different
The Body Shop has proved that distinguishing yourself from competitors will increase recognition. They did this by setting up new business units across the world and occupying the niche of ethical retail in health and beauty.
Last FM also achieved distinctiveness by becoming one of the first websites to allow artists to have their music streamed online. They now make a profit through advertising and selling to affiliates.
2) Collaborate
Last FM had to make the public aware of their website and find a way for people to listen without involving the music industry. They realised they needed a partner to achieve this and by working with Audioscrobbler (a system that builds personal online music profiles by monitoring what users play on their computers) Last FM were able to boost awareness and their profile.
3) Have The X Factor
People need a reason to buy from your business. It isn’t good enough to be the same as others on the market – you need to be better. The Body Shop achieved this by combining an issue that people feel very passionately about – the environment and animal welfare – with health and beauty products.
4) Get help from others
Small and medium enterprises (SMEs) need to focus on their business, increase turnover and improve quality, and one way of doing that is to outsource services such as IT and telecommunications. This allows them time to concentrate on building their business and not worry about tasks such as fixing computers.
Don’t…
1) Over promise
Webvan’s marketing promised to deliver products to customers' homes within a 30-minute window of their choosing. Unfortunately, their operations could not live up to that promise, which fundamentally let down customers and lost business.
2) Ignore strategic partners
The main mistake Webvan made was to try and build everything on their own instead of partnering with existing supermarket chains, wholesalers or a network of independent grocers. Even though Webvan was popular, the enormous amount of money spent on infrastructure far exceeded their sales growth.
The report concludes that start-up businesses need to consider a number of factors if they are to be successful. Having a dynamic and original idea is important, as is using the help of others where necessary.
“With so much entrepreneurial talent in the UK, many people are looking to start up their own businesses,” says Bill Murphy, Managing Director for BT Business.
“Alongside having great ideas, businesses need a support team to help them concentrate on what they do best.”
