Redefining markets
Firstly, nothing drives shareholder value as much as organic growth. Secondly, achieving organic growth is much easier in growing markets. These two rules of thumb are simple, to the point, and verified by numerous studies. Despite this, many firms struggle in low-growth or even shrinking markets. In order to avoid the downward spiral of mature markets, decreasing margins and never-ending cost-cutting, all firms should periodically assess their market definitions critically. Are we operating in the right market? Are there other markets that would offer higher growth and more interesting prospects?
Vectia has helped our clients in redefining their markets particularly in the following situations:
- Unsatisfactory performance in terms of historical or projected growth.
- Acid test for the current strategy and market definition.
- Plans to change the offering scope or penetrate new customer groups.
Achieving growth through redefining markets
We believe that all companies can find growth by creatively redefining their markets. Many firms define their markets based on products or industry borders. Often much more lucrative growth opportunities can be unearthed when a firm emancipates from the traditional product based market definition and decides to focus on what the product enables or on the customer’s unmet needs.
During a market definition process, the following topics are typically covered:
- Visualising the current market definition and its implications for growth.
- Finding growth from the core: dividing the core market into multi-dimensional competitive arenas.
- Finding new growing markets: exploring extended markets by investigating e.g. firm capabilities, networks, customers and end-users.
- Analysing the identified markets in terms of e.g. growth, competitive dynamics and marketness.
- Creating an internal market development roadmap: what changes are needed in firm’s mental models and business models.
- Creating an external market development roadmap: what market practices should be developed, which new actors are needed in the market.
Selected references
Forestcluster Ltd: Radical Market Innovations