BC Business
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In some business sectors, there’s an elephant that dominates to such an extent that its near-monopolistic position can crush any potential competition. The company is just too big and strong to take on directly. Sometimes though, small, nimble and smart potential competitors – mice if you will – see that elephantine size as weakness instead of strength.
To take advantage of that weakness, these mice have to form a focused jiu-jitsu-style strategy that uses the big guy’s own strength against him. More importantly, they have to execute that strategy creatively and quickly. Problem The Yellow Pages Group, known as YPG Holdings Inc. (TSX:YLO.UN), is such an elephant. With an income trust that generated nearly $1.4 billion in revenues in 2006, YPG owns 90 per cent of the Canadian telephone directory market and generates margins above 50 per cent on its advertising sales. It’s a money machine that crushes (or buys) any competitor that’s ever come along. Two years ago, it swallowed upstart competitor Super Pages as soon as it became even a remote threat. It’s a nice, cushy system, if you’re the elephant. But if you’re a mouse with an itch to get a piece of that market, you have to go in with a clear picture of the business opportunity and an adaptable strategy for accessing it. Solution Coquitlam-based Canpages Inc. is a two-year-old start-up that believes it’s seen the opportunity and has a strategy to take on the elephant. Canpages is led by Olivier Vincent, a Parisian with wide experience in the phone-directory industry, including Super Pages. Risk-averse Canadian investors hung up on his business plan, but a Texas billionaire with a long history in the U.S. industry did take Vincent’s call and threw in $110 million. In 2006, small war chest in hand, Vincent started executing that plan. He began building an internationally sourced expert management team and went on the acquisition trail in Canada to quickly ramp up an organization that now has online and paper-based phone-directory platforms, media and advertising sales, and e-commerce capability. In 2006 it acquired 27 independent Ontario-based paper telephone directories and the website yellow.ca, which it has now revamped as a deep and nimble search website (canpages.ca) to lead the online thrust it believes will put it ahead of the lumbering Yellow Pages Group. The site allows users to target searches right down to a neighbourhood and to use their mobile phones to find shops nearby. Vincent knew, however, that he would have to straddle old and new technologies if he was going to grow quickly. Urban hipsters may like cell-phone searching, but the majority of the country’s consumers still rely on the telephone book. Most advertisers, who are the real business target, also still prefer to reach their customers the traditional way. So Canpages asked both groups what they wanted in a commercial phone book. Their answer was universal: something that covers an entire region, not just pockets of it, because people are mobile. So this year, Canpages began rolling out directories that covered regions. The Greater Calgary print directory encompasses seven cities surrounding Calgary. The new Greater Vancouver print directory takes in five municipalities bordering Vancouver. Similar regional books are planned for other urban areas. In all, Canpages now has more than 70 telephone directories in Canada with a total circulation of 5.6 million. Barely two years from start-up, Vincent sees annual revenue approaching $100 million and strongly believes that the elephant is going to have to make room for the faster and more agile mouse. Of course that elephant might end up buying the mouse for its innovations, but Vincent will be happy either way. His business vision was always to change the way the 100-year-old system of the telephone-number search was conducted in this country. Lessons • Make it work. A clear strategy is essential, but you also have to be nimble and adapt to situations as you see them. • Pack on some muscle. We often think in very small terms in B.C. But if you’re going to take on an elephant, you’re not only going to have to be quick and adaptable but strong enough to act. • Track your progress. Vincent is obsessed with measuring performance against goals and milestones because he knows he has to constantly innovate to stay ahead in the game.