3 surprising ways scarcity can help your business

Scarcity can give your business a competitive advantage. To be sure, certain scarcity—lack of ambition, insufficient talent, and too short time to run out of remaining cash—predicts the company’s demise.

However, there are other kinds of scarcity that can make your company more successful than resource-rich competitors. how so? A company that derives a substantial source of revenue from a well-developed product line lacks the sense of urgency to promote the founders of fast-growing startups.

Lack of urgency leads to slower growth

• employee ——The best talents will choose fast-growing competitors;
• customer ——Who pays too much for the humble product; and
• investor -As the value of company stocks lags behind faster-growing competitors, they will be affected.

In my research on 37 publicly traded technology companies, I found that their revenue and share price growth vary greatly.

For example, although the company’s average compound annual revenue growth rate from 2010 to 2020 was 20.9% and the stock price growth rate was 25.4%, the revenue and stock price of the best performing company, Shopify, soared by 82.1% and 93.2%, respectively. At the same time, the worst-performing Xerox company’s revenue and share price growth fell by an average of 10.7% and 0.1%, respectively.

What makes the best performer different from others? I think it’s their ability to use an entrepreneurial mindset — resourceful, creative, and fast, cheap experiments — to succeed in a scarce world.

If a large company can continue to think and act like this, it will maintain faster revenue and stock price growth. Here are three types of scarcity and how big companies can use them to stimulate faster growth.

Few markets continue to grow at a double-digit rate. This means that if a company gains a considerable share in such a fast-growing market, competitors may switch jobs, cut prices to gain market share, and quickly saturate all potential demand.

In response to this time scarcity, the fastest-growing companies have created management processes that enable them to capture new, high-growth markets before the old ones fall. As I wrote in June, ServiceNow has done a very good job in this area.

This Santa Clara, California-based workflow management software provider is at the top of my list of technology companies-from 2010 to 2020, the average annual growth rate was 59.2% and the stock price rose 44%.

ServiceNow expanded its original product—Management IT Service Tickets—to adjacent markets such as IT operations, human resources, and finance. ServiceNow also adds new technological capabilities that customers want to purchase-such as artificial intelligence and analytics.

takeout? ServiceNow’s strategy of achieving growth through expansion into adjacent markets rather than acquisitions is an effective response to time scarcity.

Few executives have the ability to open up new markets and create new growth for large companies. Such leaders—such as Steve Jobs and Jeff Bezos—are rare and highly respected.

Netflix CEO Reed Hastings (Reed Hastings) did the same. Netflix’s revenue and share price have increased by an average of 27.5% and 35.5% respectively in the past ten years. As I wrote in June, Hastings invented the DVD mailing business and then created a brand new business-online streaming-which required different company strengths.

Netflix overcomes the problem of insufficient management bandwidth in two ways to open up new markets. First, it creates a culture that attracts the best talent and delegates most decision-making to talent. Second, because Hastings freed himself from most decisions, he used the freed spiritual space to imagine and occupy a brand new market.

The most successful large companies do two seemingly contradictory things: make employees accountable for achieving quarterly revenue and profit targets with Encourage them to quickly invent new revenue-generating products.

To achieve these two points, the company must have a culture that can attract enough talents and operate processes that can continue to drive talents to achieve these two goals. As I wrote in May, a project management software provider Atlassian has mastered this art-maintaining an average annual revenue growth of 40% in the ten years ending in 2020, because its stock has grown at an average annual rate of 53.4%.

Atlassian attracts talents who act like entrepreneurs. Through various hackathons, Atlassian invented 14 new revenue-generating products to solve unmet customer needs. At the same time, the company often exceeds quarterly financial expectations.