In a nation where only gold medal winners are revered and
nobody remembers the teams that didn't win the World Series or
the Super Bowl, it's heretical to proclaim a desire to come in
second or third. When legendary football coach Vince Lombardi
proclaimed, "Winning isn't everything; it's the only
thing," he echoed a people groomed to believe "second
place" is another term for "loser." But is that
smart business?
Some entrepreneurs answer with an emphatic no. "Our core
strategy is to be No. 2. We see it as a real competitive advantage,
and we'll never sacrifice profitability just to get market
share," proclaims Tom McDonnell, CEO and president of Jackson,
Mississippi-based U-Save Auto Rental of America Inc., the
country's No. 2 off-airport, neighborhood car-rental business.
McDonnell, 37, readily concedes that his company, with about 25,000
cars and 500 locations nationwide, comes in well behind sector
leader Enterprise Rent-A-Car: "They have 60 percent of the
market; we're aiming to have 25 percent," he says. But, he
stresses, "for us, being No. 2 is all positive. We absolutely
believe it's a key strength."
McDonnell isn't alone in trumpeting the virtues of second
place. "I've competed against giants for a long
time," says Carey Balzer, 40, CEO and co-founder of Vectris
Communications in Austin, Texas. Balzer's company sells
broadband services—mainly high-speed Internet
access—and wherever he competes, his company goes up against
monolithic Baby Bells. "We prefer to go into markets where a
Bell already offers broadband," says Balzer, who started the
company in 1999 and currently operates in 10 states.
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And it's not just entrepreneurs celebrating the role of the
runner-up. They're getting plenty of support from researchers.
"[Being a second-tier company] can offer significant
advantages," says Steven Frumkin, a professor of marketing at
Philadelphia University. "You know who No. 1 is, and that
knowledge can help you create a profitable niche for
yourself."
Adds Bing-Sheng Teng, an assistant professor at the George
Washington University School of Business in Washington, DC:
"It's much less risky. You get less competitive attention,
and you can operate in the shadows while No. 1 takes the
heat."
Not being the leader doesn't mean being a mere shadow of the
industry giant, however. "Many companies seek to be best in
their niche, not to be market leader," says Chuck Matthews,
director of the Small Business Institute at the University of
Cincinnati's College of Business Administration.
"Don't go toe-to-toe against a much more powerful rival.
It's oftentimes much smarter to dominate a sector than to try
to be the overall market leader."
What benefits do entrepreneurs find by playing this open field?
Read on—you could discover there's big money to be made
by setting out to own not a market, but a piece of it.
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