The 6 Best Business Strategy Examples

Best Business Strategies #1: Tesla

• Playing the Long Game

Conventional business logic is that when you're starting something new, you create a 'Minimal Viable Product' or MVP. Essentially that means that you create a version of your product that is very light in terms of functionality, but just about 'gets the job done'. It also means that the first version of your product usually has to be sold at a fairly low starting price, both to compensate for its lack of features, and to generate interest in a new launch.

Some organizations (including many tech startups) take this concept even further and launch the first version of their product completely free of charge, with a plan to 'monetize' later on once they've added more features and feel confident that people will be willing to pay money for what they're offering. Tesla on the other hand, did things completely the other way around. It's been known for a long time that Tesla's long term goal is to be the biggest car company in the world. They know that in order to become the biggest by volume, they're going to have to kill in the lower-end consumer car space - that is cars costing less than around US$30,000 to buy. Rather than start with this market though, and create a cheap low-featured version of their electric car to achieve scale quickly (and therefore benefit from economies of scale in addition to reaching their growth goals) - Tesla instead created the absolute most luxurious, expensive, fully-featured sports car that they could muster. That car was the Tesla Roadster, and for context, the newest generation of the Roadster will retail from upwards of US$200,000 for the base model. And this was the first car that they ever produced - knowing that they couldn't achieve the necessary scale or efficiency to turn a profit (even at such a high price). Fast-forward to today, Tesla dwarfs the competition as the most valuable car company in the world. So their unconventional strategy certainly seems to be working, but why?

What can we learn from Tesla?

The first thing to note is that Tesla have in-fact made incredible progress towards their goal of mass-produced affordable electric cars. They've even made a genuine annual profit for the first time in their history. The second thing to note is that much of Tesla's business strategy was actually forced upon it. In reality there was no way that they could have created a cost-effective mass-market electric car without economies of scale. And as a startup, they weren't even close to having those economies of scale. Furthermore, because what they were building was so unique they couldn't rely on outsourcing or partnerships to gain those economies of scale.

Actually, Tesla's supply chain strategy is one of the most brilliant moves they've made. They knew early on that batteries would present not only the biggest technological hurdle to their car, but also the biggest bottleneck to production. Rather than let this derail them however, they took complete control of their supply chain by investing in factories that made batteries themselves. This had the additional benefit of allowing them to use those same batteries in parallel business ventures such as their Powerwall. Of course, all of these strategies required vast quantities of capital and outside fundraising (Elon is rich, but not quite rich enough to fund it all himself!). And that's where the marketing genius of Tesla kicks in. Except that for the most part, their marketing efforts are only partially about the cars themselves. It's Elon Musk's personal brand that had more sway on whether or not they got the investment they needed. He's smart, divisive, wild and ambitious. But whatever you think about Elon Musk, you'd be hard pressed to traverse more than a couple of consecutive news cycles without seeing him on the front page. And that's a fantastic recipe for getting the attention of investors.

Best Business Strategies #2: Airbnb

• Forgetting all about Scalability

Airbnb is one of the fastest growing tech companies, shortly after their IPO in December 2020, they reached a US$100B+ valuation. They currently sit at a US$87.74B valuation. Airbnb has quite possibly changed the way we travel forever. But did you know that they started out about as low tech as you can get? The first Airbnb rental that ever took place, was the renting out of 3 air mattresses on the floor of co-founders Brian and Joe's apartment. They made $80 per guest. It seemed like a great idea for a startup, so they put up a website and started inviting other people to list their own mattresses for hire. They got a few bookings here and there - but for the most part, things didn't go well. So much so, that in 2008, they resorted to selling cereal to make some extra cash.

They had plenty of listings on the site, and plenty of site traffic - but too few people were actually making bookings. They were frustrated about the lack of effort they perceived in the listings people were making. So they took matters into their own hands.

What can we learn from Airbnb?

The thing I love the most about this story, is that it confounds one of the most commonly stated principles of building a tech startup - that you must make everything scalable. What Brian & Joe did was anything but scalable. But it got them enough traction to prove that their concept could work. Later, they did find a way to make this solution scalable, by hiring young photographers in major locations and paying them to take professional photos of owner's listings (at no charge to the owner).

Best Business Strategies #3: Toyota

• Humility can be the Best Business Strategy

In the year 1973, the 'Big Three' car makers in the USA had over 82% of the market share. Today they have less than 50%. The main reason for this, is the aggressive (and unexpected) entry of Japanese car makers, led by Toyota into the US market in the 1970's. Cars are big, heavy and expensive to move around. That's one of the reasons why the US market was so surprised when Toyota started selling Japanese-made cars in the US, at prices far lower than they could match. The car industry was a huge contributor to the US economy, so one of the first reactions from the government was to implement protectionist taxes on all imports of cars - thus making Japanese cars as expensive as locally made cars. But the tactic failed. Within a few years, Toyota (and by now others too) had managed to establish production plants on US soil, thus eliminating the need to pay any of the hefty new import taxes. At first, US car makers weren't all that worried. Surely by having to move production to the US, the production costs for the Japanese car makers would rise up to be roughly the same as those of the local car makers. But that didn't happen. Toyota continued to output cars (now made locally on US soil) for significantly cheaper than US companies could.

What can we learn from Toyota?

Most business success stories that you read - especially in the western world, involve bold moves and against-all-odds tales of bravery. Which is what makes this particular story so unique. Toyota spent years studying the production lines of American car makers such as Ford. They knew that the US car industry was more advanced and more efficient than the Japanese one. So they waited. They studied their competitors and tried to copy what the Americans did so well. They blended these processes with the strengths of their own, and came up with something even better. Toyota proved that knowing their own weaknesses can be the key to success - and be one of the best business strategies you can ever deploy.

Best Business Strategies #4: HubSpot

• Creating an Industry then Dominating it

HubSpot isn’t as famous as Airbnb or Toyota. But, with a US$22.14B valuation, they’re no slouch, and more impressively they’ve achieved that valuation in an industry that didn’t even exist before they invented it themselves. That industry is known as ‘inbound marketing’.

 Most of the marketing that we experience is known as 'interruption' marketing. This is where adverts are pushed out to you whether you like it or not. Think tv adverts, billboards, Google Adwords, etc. In 2004, HubSpot created a software platform that aimed to turn this concept of marketing on its head. The HubSpot marketing platform helped companies to write blog posts, create eBooks and share their content on social media. The theory was that if you could produce enough good quality content to pull people to your website, then just enough of them might stick around to take a look at the product you're actually selling (behind the blog). This was a big deal. I can tell you from personal experience, that 'interruption marketing' is really really expensive. We pay Google around $10 each time someone clicks onto one of our AdWords adverts. Remember, that's $10 per click not per sale. That adds up pretty fast. On the other hand, this blog receives approaching one million clicks per year - at a cost of zero. I've written before about how inbound marketing basically saved our business - so it's fair to say that this example is pretty close to my heart!

What can we learn from HubSpot?

The interesting part of the story is this: HubSpot created a new type of marketing. They then used that type of marketing to market their own company, who's sole purpose was to sell a platform that created that new type of marketing. Head hurting yet? Mine too. In a nutshell, HubSpot had an idea for a cool new way of marketing. Most companies would have taken that new way of marketing, and applied it to something that they were already selling. But instead, the HubSpot guys decided to monetize the marketing strategy itself. They took a whole bunch of concepts that already existed (blogging, eBooks, etc) and packaged them into a 'new way of doing things'. Not only that, but they created an awesome narrative, and then proved how powerful this new way of marketing could be, by building a $2bn business from it. They smoked their own dope, and made themselves very very rich in the process.

Best Business Strategies #5: Apple

• iPhone Launch Shows Tremendous Restraint

Ok I hear you - this is such an obvious inclusion for the 'best business strategies'. But as one of the first people to adopt smartphones when they came out in the 1990's this is something else that's pretty close to my heart. I remember using Windows Mobile (the original version) on a touchscreen phone with a stylus - and it was horrible. I loved the fact that I had access to my email and my calendar on my phone. But I hated the fact that my phone was the size of a house, and required you to press the screen with ox-like strength before any kind of input would register.

Thankfully, a few years later, BlackBerry came along and started to release phones that were not only smart, but much more usable. Sony Ericsson, Nokia, HTC and a whole host of other manufacturers all came out with reasonably solid smartphones, all well before 2007 when Apple finally released the iPhone. I remember arriving at the office one day and my boss had somehow gotten his hands on one of the first iPhones to be sold in the UK. I was shocked. Normally I was the early adopter. I was the one showing people what the future looked like. And yet, here was this guy in his mid 50's, with his thick glasses, showing off a bit of technology that I'd never even seen before. And that is the masterstroke that is the iPhone. The reason why every single smartphone I'd ever owned had sucked in comparison to the iPhone, is because there's no real market in selling phones to geeks like me. We're too few and far between - and either too poor or too stingy to drop any real cash on new tech. Apple could easily have created a phone much earlier than it did and sold it to me. But it didn't. Instead, it waited until the technology was mature enough to be able to sell to my boss. Someone who is far less tech-savvy than me. But also far more financially equipped.

What can we learn from Apple?

The big learning here is that first-mover advantage is often not an advantage. A well-executed 'follower' strategy will outperform a less well-executed 'first mover' strategy every single time. One of the most common misconceptions in the startup world is the concept that it's the 'idea' that matters the most. The truth is, the world's most successful companies were rarely the first ones to innovate. I'm looking at you Nokia. At you Kodak. And at you too, Yahoo.

Courtesy: best business strategies in Australia