How do you know when your market is shifting? It is a fundamental question that should be asked in most firms much more often than it is.
Signs that your market is shifting include slowing sales, a remix of your service revenue, declining profitability, changing buyer titles and new competitors popping up, just to name a few.
Libraries could be filled with books written on business strategy. Some of my favorites include: The Innovator’s Dilemma, Blue Ocean Strategy, Great by Choice, Discovery-Driven Growth, Market Busters and The Marketing Imagination. You have probably read many of them. As you read this, you probably are thinking that a shift would be obvious and you would never get caught with your proverbial pants down. I love your confidence.
I have worked with very talented people at great firms, previously as a CMO and now as a consultant. No one is immune from the phenomenon. Culture, personal bias, arrogance, denial and ignorance are common precursors to getting left behind. If you do not want to get caught in the shift, you must get clear on these three things.
What is your new market opportunity?
If you don’t understand where the market is going, it is difficult to attack it. It seems obvious, but most firms can’t even agree on what is actually changing in the market. You may have visionaries in your firm who sound the alarm. Unfortunately, firms prefer the comfort of the known versus the discomfort of the unknown. The gravitational pull of past success will seek to destroy any attempt to deviate from the firm’s glorious past. Your leadership team must understand what has changed and what it means to you. Are your services being commoditized, replaced by technology, or served by highly specialized niche competitors? Has the buyer shifted across functions or from higher to lower-level buyers? Has your traditional channel or product been disintermediated? Why has it changed? What are your options for growth? How will we get there?
Example: A market research firm is seeing its revenues fall. Its traditional referral channel is failing because employers are terminating existing buyers and replacing them with social media and big data sources. Traditional buyers are not being rehired at new companies. Instead, they are hanging out their shingles and are now low-cost competitors.
What are the core capabilities needed to attack the market?
Firms often overestimate their ability to go after a given market or buyer. A common market du jour for firms is the coveted “C-level” buyer, more often than not, the CEO. Most firms rarely have the capability or capacity to carry on a conversation with a CEO and, thus, misconstrue the CEO’s interest in an issue that the firm can help solve. As a result, firms run in circles trying to have CEO conversations. Firms can buy and/or develop capabilities to target the new opportunity, but they cannot attack the market until they have the capability in place. What capabilities do you need? How are you going to develop the core capabilities to attack the market?
A value-added reseller of IT infrastructure is seeing its traditional data center, application delivery and networks being cannibalized by the cloud and the BYOD phenomenon. Hardware sales are commoditized and buying decisions are application-driven, and often now made by business unit leaders instead of the CIO or CTO. Its sales team is made up of product experts not consultants, who neither fully understand nor address the new buyer’s issues.
Is our brand relevant in the new market?
I often say that McDonald’s restaurants have many brand/business strengths. Their marketing prowess is exceptional, operationally they are impeccable and the geographic locations are coveted. These are all attributes that might apply well to, say, selling automobiles or liquor or clothes. Would you buy a car, Scotch, or a little black dress from McDonald’s? I assume not, because McDonalds sells hamburger and french fries. The McDonald’s brand has no relevance in those markets. Could it be relevant? Absolutely, but how much time and money would it take to change the market’s perception?
One of the nation’s top project management firms has penetrated more than 80% of the life science industry and is seen as the industry leader. Outside that niche, the broader market perceives project management as a commodity of check-the-list taskmasters. The firm believes that its project leadership and methodology are exceptional and applicable to many business issues like M&A, supply chain optimization and product development. Its brand name includes the words “project management.”
Be it regulatory, technological, demographic or geographical, no market is immune from shifts. Buyers demand cheaper, faster and easier approaches to solving their problems. It behooves us as firm leaders to accept this fact and be vigilant in seeing the shift. It is not a matter of when, but of where, because it is already happening. The best firms understand this and have the early warning systems in place to respond and exploit changes. They move when they have capacity, resources and cash to weather the shift. Those that wait too long lose options.
Before you can respond to a shift in your market, you must answer these three fundamental questions:
- Where is our best market opportunity? You must agree on the opportunity as a firm and you must be willing to let go of the past. Vacillating will confuse your team and potentially destroy your chance at success.
- Do we have the capabilities to pursue it? Competition is too strong to fake it. Clients can easily tell those firms that have the expertise and results to deliver.
- Is our brand relevant to winning where we want to go? Just because you want to play in a given market does not mean that you have earned the right to do so.
I love the adage “There are three types of people: those who make things happen, those who watch things happen and those who wonder what happened.”