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Moving to the Next Big Thing

When Market Adjacencies Are Just Not Enough

Fred Engel

Westerly Consulting


Continued growth means moving to new markets.  The real challenge comes when the small incremental changes that worked early on are no longer available and you have to create a new product in a new marketplace that is far away from the comfort zone that brought success.  Recognizing that a major leap is required is a hard for most companies to absorb because the model of success that has worked in the past often traps them. Not finding the new market area will limit growth and often start the downward cycle of the company failing.

Let me start with a story. A few years back I developed a product that was extremely successful. It grew nicely in the marketplace, customers liked it and we evolved the product to adjacent markets providing solid revenue growth.  Each new adjacent market segment required only incremental change to the existing product and almost no training to the sales force.  Several years into this we worked harder and harder to fit our solution into the adjacent markets we wanted to attack, often settling for smaller segments under the belief they would eventually break out and we would win a lot of business.  This proved to be a bad strategy.

Our problem was we were locked into growth through small changes. Six years of success gave us a mindset that was one of small incremental changes.  Oh, we made big changes, but it was to make our existing solution fit our customers’ new needs.  When it came to new markets our approach was: we had a solution, we just needed to figure out how to make it fit.

The problem with having a solution and looking for a problem is that you try to force fit things into that solution.  It’s the old saw about the guy with a hammer to who sees everything as a nail.  But while you are forcing your solution to be bent to a problem, someone else is building a solution that fits the problem better and thus is more natural for the customer.  Customers will flock to the more natural solution. There is an endless list of companies that disappeared because they did not see this properly. RIM, maker of BlackBerry, is a great example of this today.  They are struggling to enter the new market and only time will tell if they have the time and skill to make it happen. You have to really know the broader marketplace if you are going to succeed. 

How to avoid getting stuck in the wrong market

1.   Get the leadership to set the growth goal clearly.

a.   Make it clear that new markets are of interest to the company.

b.   Companies are a collaborative effort and common goals greatly enhance moving in new directions. 

c.   Incentives need to be in place for people to take the personal risk of driving to new markets.

d.    Protect those carving out new areas from all the backbenchers that will resist change.

2.   Define your markets careful and broadly. 

a.   Being narrow in your definition will cause you to win a narrow space. 

b.   If you want broader growth than that then you will have to define a broader market. 

c.   When Coke, for example, switched from thinking about soda to thinking about the share of the stomach they saw themselves as a small player with places to grow. 

3.   Define your core competencies as a guide to what markets to watch.

a.   We too often define our competency in terms of the product we sell, not in terms of what the company is good at. 

b.   Competency is not just what you build, but how you sell it, who you sell it to, and how you finance it.

c.   Apple saw itself as a consumer company not just a computer company.  Dell did not. 

4.   Avoid the trap of doing what is politically easier in your company. 

a.   Enhancing the current product is often a much easier internal sell. This is a very pragmatic approach as it is much cheaper to change an existing product than to build a new one. 

b.   In order to build a new product you have to steal resources from the existing business and divert it to a new, unproven, market.  You will get a lot of resistance because it is hard to think in new ways.

5.   Take personal risk.

a.   The bulk of the organization will resist what you are doing

b.   Connect with the leadership and keep them on your side for guidance, political path clearing, and protection

c.   Know that knowing how to create new revenue is good for you and good for your company.

6.   Get lots of people involved in looking at new markets and seeing what you see. 

a.   You will need a lot of people to help overcome the internal resistance to new ideas.

b.   If it is a new radical step you will not be able to convince people without help. 

c.   People are more likely to follow you if they have been seeing the changes all along and understand the context.

It is very easy to avoid moving to new markets but not as rewarding.

Send comments to: fred@westerlyconsulting.com