Why Selling Your Secrets To Competition Is A Sound Business Strategy

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Competition? That's the enemy isn't it?

Why would you sell or worse, give the competition your ideas? It doesn't seem to make sense at all and yet it's a very solid business strategy—and especially for small business.

In this episode, you'll find three solid reasons why competition can change your life for the better.

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Approximately every month we take our nieces, Marsha and Keira for dinner, but Keira always does something very curious.

Since the girls were little, my wife Renuka and I have taken them to dinner

After dinner we head to the mall, where they buy themselves an ice-cream. The first thing Keira does when she gets her ice-cream is offer me the first bite. “Not too big a bite”, she'll always say. But yes, I do get the first bite, before she continues to devour the rest of the ice-cream. In doing so, Keira is sharing what's rightfully hers to keep. She doesn't need to have a chunk of her ice-cream bitten off, no matter how small.

Like Keira, our business is our ice-cream

We don't need to share our secrets with someone else, do we? Yet, the smaller your company, the bigger the upside in sharing the secrets and knowledge you've gained over the years. Big companies can thrive on muscle power alone and sell solely to their customers. A smaller business, on the other hand, needs to learn to share; to teach the competition what they already know.

I know, I know, this strategy sounds really odd. However, there are very solid reasons why you should wade right into the unlikely world of “teaching your competitors”.

Let's find out why and cover three main points.

1: Clients Come And Go, Competition Remains Longer
2: You're always ahead of the competition (even when you tell them what you know)
3: Why selling your information to competition makes the market more viable

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Part 1: Clients Come And Go, Competition Remains Longer

Imagine you dominated 90% of your market. Would you be happy?

About 20 years ago, I heard of a lumber company that was hugely successful. So successful, in fact, that the competition was reduced to just 10% of the share of market, while this lumber-company gobbled up the rest. Ideally they should have rested on their laurels.

A 90% stake signifies a healthy bottom line and lots of champagne, but they were restless. Their restlessness arose from their unusual plight. Being a lumber-based company, they could only operate profitably in a certain geographical area. If they tried to sell outside that area, they would run into increased transportation costs and other additional taxes, which made it unprofitable to go outside their boundaries. In short, they were “trapped” and could never expand or grow their business.

What would you do in such a situation?

Marketer, Jay Abraham, came up with a solution. He suggested the lumber company sell their secrets. As you can imagine, such a suggestion meets with instant pushback. The lumber company was the market leader because they had a system to treat the trees.

I don't remember the story very well, but it went a bit like this: If they overdid the treatment, the lumber would be “overcooked”. If they were too cautious, the wood would be “raw” and unfit for any use. Every year, companies lost hundreds of thousands of dollars worth of precious lumber, because they hadn't perfected this system of treating the lumber just right.

And now the company was being asked to sell its secrets

You'd recoil if you were asked to do the same, wouldn't you? Like some crazy grandmother defending her precious recipes, you'd refuse to give away your secrets. What if the competition learned all of the methods and put you out of business? Why should you sell something that has taken you so much pain to acquire? Giving away, or selling your secrets to the competition seems like the most dimwitted thing to do.

Selling to competition may seem foolish, but competition is an exceedingly powerful source of revenue and longevity.

My friend Julia used to own several bed stores. Over the years she learned how to run the stores very effectively. So effective was she that she'd make 200-300% higher profits over other stores. What's interesting about a bed store is that the goods aren't terribly unique. If you look at a brand like Sealy or Sleepyhead, you're likely to find the same beds in practically every bed store.

Yes, her profits were higher than other stores, but there's a limit to how much stock can be held in a store

Unless Julia were to lease a new space, get the franchise rights, hire new staff etc., there seemed to be no way to increase her profits with clients. However, there was a spectacular, if slightly hidden opportunity to sell the secrets to the competition.

Clients come and go. You buy a bed, and you're not exactly rushing out to buy another one tomorrow, are you? So clients buy the product and leave, but what does competition do? They stick around. If Julia were to sell her secrets to the competition, they'd stick around for as long as they were getting results. The “result” might mean greater profits, more time off, less staff turnover, or less chaotic management systems.

Which is what the lumber company did as well

They realised their geographical boundary was going to inhibit their growth, so they started having seminars. At first, the seminars were modestly priced at $5000 per head. Then in barely a year or so, the very same seminars shot up to $25,000 per person. Would you find the price of the seminar prohibitive? Lumber companies lost hundreds of thousands of dollars every year.

Badly treated wood was taken as the “cost of doing business”. Once this lumber company showed them their methods, the other lumber companies were in a position to make a small fortune by not consigning the wood to waste. And it wasn't just the lumber companies in that district, or city, or even country. Lumber companies around the world wanted to pay for that information so that they could reduce waste to the bare minimum. The competition would stick around as long as it was finding the information profitable.

Every bookstore on the planet is an example of this concept of selling to the competition

When confronted with the fact that you may need to sell your secrets, the idea may seem unpalatable, but look at the bookstore in your city. Those videos, the books, the magazines—they're all filled with secrets that are being given away.

Grandma kept her secrets and she's highly revered in her own family, but Grandma's only clients are her immediate family. The clients of the books, videos and magazines are the entire world. And you know as well as I do how the systems start chugging along once you buy a book.

You rarely buy one book and never buy another one again

When a business owner gives you their “secrets” and you get value from the information, you want to go back for more. However, as we've experienced in the past, we rarely restrict ourselves to just books. We buy into a lot more.

The lumber company continued to make steady profits from their sale of lumber to their customers, but it's the competition that needed more information on a regular basis. They were not only able to give information in the form of treating lumber, but on many other topics that the competition needed to succeed as well.

However, the most important bit of all is the longevity of the competition

Customers tend to come and go. Whether you're selling a bed, lumber or consulting, a customer will show up, take what they need and leave. And truly speaking, so will a competitor. However, in many cases the competition will come back to get even more information.

They'll consult with you, buy your courses, attend your workshops, and want to get as much as possible from you. If you're already ahead of the competition, they will keep coming back. No matter whether you have a brick and mortar business or something online, the principle remains exactly the same.

Customers come and go.
Competition stays around a lot longer.

The lumber company was seemingly trapped

Yet, it's that very trap that transformed their business. Instead of dealing solely with clients, they moved to competition and operated in a completely different universe. However, a red flag does pop up, doesn't it?

What if the competition takes your stuff and makes it their own? Is it possible to muscle in, on your market? What if you don't recover from your weapons being used against you? Let's find out in this second section on why you're always ahead of your competition, even when you're teaching them everything you know.

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Two ways to stay ahead of your competition (even if you sell them all your secrets)

You're always ahead of the competition (even when you tell them what you know).

Let's say you started walking down the road, six months ago

Somewhere along the way you learned a lot about the road, the pit stops, the method of walking, rehydration methods, etc. Now you're teaching your competition who's coming down that same road. If both of you were to keep walking, you'd still be many “months” ahead of the competition. Even though they've bought all the videos, read all your books and followed your plan in extreme detail, they're still going to be many months behind, even with you giving away all the tips that will help them move faster ahead.

However, if you're still feeling a bit paranoid about the competition, there are two factors that will keep you ahead.

The first factor is that time marches on.

Let's say you've figured out how to make social media ads get a great return on investment. By the time you teach your competition everything you know, time is ticking away. Things change all the time. What worked for Facebook yesterday, may be different today.

The same would apply for any business. Every so-called “success case study” is only a record of the past, and whatever you teach is likely to have changed anywhere from a tiny fraction to quite a lot. Even if you're teaching in an area that's not changing everyday—let's say watercolours, for instance—there's still some change in tools or equipment.

Something in your technique, material or sequence will change all the time, often without your knowledge. And the competition can't keep up.

The second point is one of mistakes

We all have been lost at some point or the other—even with a GPS. Why is this so? A map is a map is a map, right? We're not supposed to get lost when we're given precise instructions. However, human error, and often, human creativity comes into play. Even when it seems you're following the map with a great deal of precision, there's always some possibility that it will be interpreted in an incorrect manner. Your competition is going to have to work out those mistakes and fix them.

It's easy to believe that selling information to competition is risky

What if the competition takes your ideas and uses it as their own? The reality is different. No matter how generous and detailed you are with your ideas and systems, you will always be ahead of the competition. When we did the Protégé sessions back in 2006-2008, most of the “customers” were really our competition.

For most of our courses we get clients to fill in a form before, or right after they join. In this questionnaire, many of them revealed the primary reason why they wanted to be part of the course. As you've already guessed, they didn't want to reinvent the wheel. They wanted to use the system that we already had in place.

If you stay stagnant, the competition will catch up

They'll show up, they may overtake you and you're likely to be left in their dust. Yet we know that few of us intend to remain stagnant. As we learn and implement, invent and re-invent, we move ahead always maintaining enough of a lead. Plus, a lot of what we do depends on our strategy.

Staying ahead is a weird concept, because we're not running parallel races with our competition. In reality we're chopping and changing our strategies all the time and any comparison with the competition is odd, at best.

You can't really compare one restaurant with another. You can't throw one author in the same bull ring as another. Comparison itself is a super-weird activity to contemplate. Anyway, if the competition really wanted to copy your work, there are ways and means of doing so.

Instead, selling your work to competition is a much saner idea

It earns you revenue, builds up your authority and no matter how much you give away or sell, there's still an astounding amount of information that remains to be explained. If anything, selling the system is a far superior way to grow a business, as it draws in both customers and competition on a much bigger scale.

But here's one of the biggest reasons why you need to sell to your competition: it is called “expanding the market“. Most of us think of competition as a bad thing, but it's quite the opposite. It makes the market more viable. Let's find out how.

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Why selling your information makes the market more viable

In 2014, Tesla Motors did something very revolutionary. They gave away the patents to their electric car.

What are we to make of news like that? Is Tesla just being generous?

Or does it have an ulterior motive? We know electric cars are a tiny fragment of the market. Despite being superior in almost every way to the petrol-driven car, they're still to make big inroads. But as an article on Forbes Magazine pointed out, Tesla's real competition is not another company.

Instead it's the archaic petrol engines that are being manufactured in the millions around the globe, every single day. By giving away the patents, the competition doesn't have to figure things out. More importantly, they don't have to get into yet another patent lawsuit that would slow them down. Even when the other car manufacturers start to work on Tesla's patents, Tesla should be well down the road.

James Part is the co-founder and CEO of Fitbit, a wireless fitness tracker.

When Fitbit entered the market, they had bigger, gruntier competitors like Nike and Jawbone with the potential to crush an upstart like Fitbit. But here's what Park says. “You need some critical mass to legitimize what you're doing.” And Ben Yoskowitz, an angel investor told Inc. Magazine: “If nobody is competing in your space, there's a very good chance the market you're going into is too small.

Any reasonably good idea has 10,000 people working on it right now. You may not even know they exist because they're as small as you.”

But what's all of this got to do with you? After all Fitbit didn't give away or sell its information, did it?

We grow up in an us vs. them environment. Which means that many, if not most of us, believe that competition isn't a good thing. We also believe that too much competition causes a saturation in the marketplace.

Both these beliefs have some truth in them, but it really depends on your point of view. When you teach competition to do something that you already know, you're not only earning an income, but you're doing your own bit to broaden the market.

My friend, and super-graphic designer, John McWade was literally the first one on the planet to use desktop publishing software

McWade ran into some of the earliest Mac computers back in the 80's. He had a job as an art director of a magazine called Reno when he was given a little piece of software by Jeremy Jake. Jake was the chief engineer of a tiny Seattle startup called All This and was writing a software called PageMaker. Today we use the fancy InDesign software for desktop publishing but the heart of Adobe desktop publishing goes all the way back to PageMaker.

But who was using PageMaker?

Literally no one on the planet, except the engineers and John. Which is when John started up Before and After Magazine. And he showed people how to use PageMaker, and to create amazing graphic design. You could safely say that John McWade single handedly expanded the market and created competition.

Today there are tens of thousands of books, videos and courses on InDesign. Selling the secret of how to create great graphic design has given McWade a good life and a huge fan following. In turn, the expansion of the market has been good for almost everyone. However, this advice of expanding the market doesn't just apply when you're starting up. It also applies when you're entering a reasonably mature marketplace.

Which is why no matter where you look, whether it's books, cosmetics, shoes, consulting or training, there's new stuff appearing on the horizon almost endlessly. Which brings us to a very crucial point.

Your competition is going to sell to your competition

If you decide to keep your secrets all to yourself, that's your prerogative. However, your competition isn't exactly going to keep mum. If you have some great knowledge in selling real estate, and you decide not to tell or sell, another real estate agent will write a book, do seminars and give their version, anyway.

If you're outstanding at creating apps, so are a thousand others who will happily put their information out for sale. The market will exist with or without you, so you might as well get your skin in the game because there really is hardly any downside and a ton of benefit, instead.

Selling to your competition may at first seem like a bad idea, but it rarely is.

No one is saying you need to ignore your customers. Your customers are extremely important, but so is the competition. Go out and find the competition. They're good for business.