Being the first to market does not always guarantee success; as a matter of fact, it’s almost always is a recipe for failure. Just ask Yahoo, Sony, MySpace, Blackberry, or Blockbuster, all of whom were innovators and creators of their original markets but eventually lost their leadership positons and in some cases, their entire businesses by not being able to flawlessly focus on a unique and clear value proposition to the right and targeted customers.
In Advantexe’s simulation-centric business acumen learning programs, we typically provide learners with the opportunity to understand and explore concepts of strategic thinking and planning. We discuss frameworks such as Porter’s Industry Structure Analysis, Blue Ocean Strategy, and the Value Discipline model that says in all of the world of strategy there are only three different value propositions a company can offer to its customers; Operational Excellence (Low Cost), Customer Intimacy (High Touch), and Product Leadership (Strong Innovation). One of the most interesting phenomena to explore and understand as business ecosystems evolve is that contrary to what you might think, Product Leadership does not always equal first to market. By using a business simulation – and allowing learners to set and execute a strategy over 5 years – they can understand the system of business and how the dynamics play out in a competitive environment.
What we typically observe is that true market leaders after 3-5 years in a simulated marketplace are almost never the first ones in but rather the first ones to find the right fit between their products and the specific needs of their targeted customers. For example, Company C was the second company to launch the AWESOME product (at version 3.0), but was the first to capture more than 70% of the sophisticated customer segment by not focusing on the cost segment or the solution segment.
Think about that from a “real world” perspective! Yahoo was one of the first search engine companies but Google created a different customer experience and targeted the needs of their customers. Apple was a very late entrant to the mobile music market but they focused on “creating the soundtrack for your life” and invented the iPod instead of Sony’s approach of creating more versions and focusing on their own inward technologies. Myspace was the first significant social media platform but they totally missed the needs of customers who wanted to control security and content and Facebook disrupted the world by paying attention to customer needs.
Over and over, we see that true market leadership is won by companies who match their value dashboard to the value dashboard of their customers.
Understanding the Cycles and Business Acumen Impacts of Market Leadership
Establishing market leadership is the goal of every strategy and value proposition. When you can establish it in a way that creates unique differentiation and brand loyalty your margins are higher, your people are more engaged, and your customers are delighted. All of which creates more market momentum to continue to innovate, strengthen you value proposition, and drive more share and more positive performance. Think about how P&G, Coca-Cola, Walmart, Amazon, and other market leaders can keep separating further from their competitors in the cycle. Below are three business acumen perspectives of the more significant impacts of establishing market leadership:
Supply Chain Dominance
Market leaders can establish a dominance over their supply chain. Vendors, raw material suppliers, and other suppliers lose a certain “balance of power” based on not only sheer volume, but prestige of being associated with a market leader.
Human Capital Management Dominance
Inevitably, the best people want to work for the best companies. They can learn more, grow more, and experience more. Established market leaders create a dominance and a cycle of recruiting and retaining top talent which again brings in more top talent.
Financial Capital Dominance
Market leaders also can raise more and cheaper capital because of their market dominance, growth, profitability, and potential. The ability to raise more capital can become a major strategic weapon to grown and innovate at a much quicker rate than competitors.
What to do if you are not the market leader?
Most markets have 4-6 major competitors taking in up to 80% of the market share which means there is always only one true market leader in the market. So, what do you do if you are #2, #3, #4, or #5? Change your strategy? Change your approach? Fire all the leaders? The answer is actually very easy; you have to redefine the market because you cannot and will not ever be able to beat the market leader at the same thing the market leader is already doing well.
The iPhone is a great example. Nokia, Blackberry, and Motorola dominated the mobile phone market when Apple was “just” a computer company. Nokia invented the touch screen, but didn’t understand that it needed apps. Blackberry had the brand and the loyalty, but they continued to focus on making mobile phones. And Motorola? Well, Motorola was already not a market leader and they bet the house on making their mobile phones smaller as a technology play. But it was the iPhone that blew up the market and created the smartphone and integrated the camera, the music, the phone, and all of the elements of a personal computer into one unique and flawlessly executed device.
In summary, the first product / service in any market is destined to fail if the focus isn’t on matching the right solutions to the right customers. All strategies can work well if you can drive toward market leadership, but sustainability can only happen by understanding the business ecosystem and adapting the system that is driven by customers.