One quick way to gauge the health of your long-term prospects as a business is to determine where you sit on the Commodity Curve. This is a little model I developed over a decade ago to illustrate what happens when you fail to adequately differentiate in an increasingly competitive market. It’s not rocket science – Econ 101 and business strategy courses cover this in depth. But after watching clients and other companies conveniently forget this basic tenet, I developed an illustration specific to the situation. Consider this just a little reminder.
It’s very simple: If competition is increasing and you don’t adequately differentiate yourself, margins drop. The red line below is the typical scenario when there are a lot of look-alikes in the market. The blue line is the company that stands apart from the competition by offering something unique that’s in high demand. By being unique, there is little or no direct competition. The company can name its prices and actually increase margins while others are lowering their prices.
How unique are you? Your margins will give you the answer.