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- One of the world's largest makers of semi-conductor chips
embedded in automobiles, cell phones, electronics, appliances,
among others, wants to migrate into higher value reaches
of the industry and the inter-connected products that surround
its core business, particularly in software. Of course,
it must stretch without abandoning the present arrangement
where its revenues and market relationships reside. And
then, who knows, the stretch may become too much of a stretch,
or the value may shift elsewhere in unanticipated ways.
- A market-leading pharmaceutical company plans to break
into a cozy status quo dominated by three of its competitors
with a breakthrough new class of drugs. Can it move the
market away from the complex web of physicians, specialists,
brand equity and patient loyalty that has locked in around
the currently available drugs, and build a new equilibrium
around its own?
- A technology-rich global consumer products player looks
at the pipeline of innovations and new products to come
over the next ten years and wonders if it can continue to
keep the consumers excited and compelled in a product category
that is maturing. Moreover, how does it keep them away from
the less ambitious, but "good enough" pipeline of a competitor
and the no-frills, low-cost alternatives from upstart entrants
that are turning the market from being innovation-driven
to becoming a commodity, price-driven game?
- A telecommunications player has bet big on broadband.
It is wondering what it would take for the drought to end,
for the narrowband status quo to be finally come apart and
for the investments to finally pay off. Is there something
else, it can do but wait?
- A leading player in digital imaging ponders its moves
as the field of play changes. Some of the changing circumstances
are due to market dynamics, while there may be other changes
that the player itself could drive by its own market position
and a network of partners it could potentially assemble.
Which of these levers should it pull on and which direction
must the strategy aim for, given that the jury is out on
what the imaging industry's future will look like in five
years?
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These are only a few of the many questions along these lines
we get asked regularly by clients from around the world. There
are some common themes running through these questions. In
each case, the current equilibrium in the company's market
is on the verge of being disrupted either because of moves
the company plans to make or because of external market forces—competitive
moves, new technologies, evolving consumer needs, or a combination
of them all. The direction these companies' markets will take
depends on many inter-connected—and possibly fragmented—market
participants. In some instances, as in the case, say, with
broadband, the status quo has remained steady, and the challenge
is to understand how and when it can be disrupted, and who
will be left standing when that happens.
In each case, the company's challenge is to shepherd the
market to a new, more profitable, equilibrium and a platform
for growth beyond that. At times such as this, strategy process
is less of the traditional assessment of attractive industries
and market segments or a contemplation of distinct core competencies.
It is not enough to do the exercise in linear algebra of markets,
linking the data on customers, competitors and costs—and
then solving for the missing variable in the equation; besides,
many sophisticated companies have become quite good at doing
the basics, and so have their competitors. At such junctures
the company needs an "endgame plan", and a business model
that helps it identify the many players involved in the status
quo and on the critical path to its desired endgame. The business
model provides the economic basis to design the incentives
that will orchestrate the behaviors of these players: to figure
out ways to motivate them or block them so as to create the
market conditions for the endgame.
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Our approach to these issues, Shaping Industry Endgames,
is a proprietary process that integrates several different
activities: joint hypothesis and idea generation; research
and analysis; design of both business models and a plan to
achieve the endgame objectives. The scope and duration of
the work varies depending on what is needed to make informed
choices and take timely action: from a workshop mode to multi-month
systematic engagements. At the conclusion of our work, and
during the process, the client should expect the following:
- A clear understanding of the status quo and the resistance
points (if any) to change
- A view of an endgame - a future industry-market scenario
the client takes leadership in orchestrating—"qualified"
from several alternative paths to the future
- Levers to activate to get to endgame, including partnerships,
M&A, if needed, and the associated business model, and the
consequences in terms of reactions from the rest of the
market
- Explicit understanding of the risks and options for managing
and shaping them
The typical client for this work values growth and recognizes
the high uncertainty on the path to growth, and has at least
two out of the following three characteristics:
- Uses innovative methods, in new technology, new ideas,
new marketing, investment and/or product choices, or new
processes as key levers for competitive advantage and growth
- Plays in "complex" markets with multiple inter-connected
constituents
- Plays in industries with high potential for structural
changes in: industry structure, technology, evolving customer
needs
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