There are three key avenues to creating your X-Factor.
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How can you make your startup stand out from the competition?
Because it’s not enough to claim you’re different. To get an edge, you’ve got to show—not tell—consumers why you deserve their attention.
In the book Start. Scale. Exit. Repeat. I share about how my CEO coach, Patrick Thean, helped me reframe my mindset around identifying our company’s X-Factor. “It’s actually not something special about you,” he said. “It’s you creating something special.”
With his insight, I could look back and see how every successful venture I’d had was because we had created our X-Factor more than it being something about the company itself. From my own experience and conversations with other startups, I’ve found three key avenues to creating your X-Factor:
1. Make a Nearly Unbearable Brand Promise
This is exactly what sets apart a brand like Domino’s with its “30-minutes or free” promise. A Nearly Unbearable Brand Promise will hurt if you break it.
When we were trying to scale Hostopia in the mid-2000s, we struggled to find our differentiator from all the other hosting services that were popping up.
On the brink of losing a deal with Earthlink, we made a “Hail Mary” proposal: “We’ll guarantee 100 percent migration of all your customers’ websites. And we’ll pay fair market value for any that are lost.”
Since the fair market value of a website at the time was $350, this was an expensive—and unbearable—promise to make, especially when it came to migration, where glitches happen so easily.
Standing on the foundation of the Nearly Unbearable Brand Promise, we set up the systems that would allow us to fulfill it—and created our X-Factor in the process.
2. Look for the ‘Bottlenecks’
Speaking of systems, every industry has “bottlenecks” in their processes. Verne Harnish advises you to look for these “bottlenecks” by asking, “What are the setbacks my competitors or customers are facing? What’s causing friction or frustration?”
For Tesla, the “bottleneck” was the traditional car dealership model. So they nixed it from their processes. And now companies like Carvana and Drivetime are doing the same for used auto sales by reducing friction in the car-buying process.
Oftentimes, bottlenecks have been a part of an industry so long, nobody pays attention to them. They become blind spots and “necessary evils.”
One of my favorite examples is National Car Rental. You just show up and go. They literally eliminated the line-up.
If you create the system to solve—or even bypass—the bottleneck, you’ll create your X-Factor.
3. Expand Your Horizons to Find Your Niche
Sometimes, the biggest failure a company can make is a limited view of who it is as a company. It’s the mistake Blockbuster and Sears both made. Instead, you might need to do something that sounds contradictory—expand your horizons to find your niche.
This strategy works particularly well if you’re in a well-established industry. Joe Foster, the co-founder of UK-based Reebok, ran into this problem when they were trying to get a foothold in the athletic market in the US. They were going head-to-head against giants like Adidas and Nike, trying to gain traction in popular sports like American football and basketball.
Then one day, a key player on his team named Arnold came to him and said, “Hey, maybe we should look into making sneakers for women’s aerobics.”
The idea wasn’t exactly in line with what they were doing then. Some on the Reebok team even balked at creating a product for an untested market.
However, with little competition in the new niche, they created a couple hundred pairs of sneakers for women’s aerobics. Then, one magical day, the actress Jane Fonda wore a pair of Reeboks on TV to promote her aerobics video series. Sales skyrocketed.
By expanding its horizons, Reebok found a niche it could dominate, going from $9 million in revenue to $900 million in four years. In 2005, competitor Adidas paid $3.8 billion to acquire Reebok.
Remember—every company out there was once a startup. The ones who survive don’t wait for an X-Factor to drop in their lap—they create one.
Find the Bottlenecks. Or Expand Your Horizons to Find Your Niche and then create that Nearly Unbearable Brand Promise.
Read more about creating a strong X-Factor in the award-winning book Start. Scale. Exit. Repeat. Or you can check out our “Finding Your X-Factor” episode on Startup Club.