Navigating a Market Transition
The general definition of “transition” is changing from one state or condition to another. About 10 years ago John Chambers, former CEO of Cisco, began using the word in the context market transitions. A market transition is simply when there is a major shift in a particular market space that dramatically changes the competitive landscape. These often result in new competitors and challenges existing incumbents to transform or become obsolete.
There are a number of ways a market transition can come about, but three common examples are:
- A shift in regulation – where significant federal, state, or local regulations result in a dramatic change in what is acceptable or allowed in a market. Examples of this kind of transition are what the financial services industry experienced last decade with the Dodd Frank regulations and what the health care industry is experiencing today.
- New technology or platform – is introduced from an adjacent market or completely unrelated market that reshapes market norms. Think Amazon’s entry into retail.
- Customer demand – for a product or service that is better, simpler, or more easily accessed from what they have today. They may also recognize a need incumbent companies missed or another company may recognize and capitalize on that desire. Think about Apple’s introduction of the iPhone and what happened to BlackBerry and Nokia, the leaders in the mobile market at the time.
Some companies, like Cisco and GE, have benefited greatly by being able to anticipate or even create market transitions. However, during times of market transition, many of the typical rules of business must go out the door if a company is to successfully navigate a transition.
Having support from senior executives who’ve done this before is a huge advantage. However, that is obviously not always possible as the talent is in short supply. So here are three key things to keep in mind if you find yourself needing to transform your company in response to a market transition:
Focus on the transition not competitors
Typically good business practice dictates keeping a sharp eye on your competition. However, during a market transition this results in the equivalent of driving a car by looking in the rear view mirror. Given the substantial shifts that occur during market transitions competitors are often lagging, so you don’t want to emulate them, or you need to leapfrog to stay ahead of them. Either way, the company who most often wins is the one who re-writes the competitive approach and adapts to the new environment first..
Established incumbents are typically at a disadvantage
More mature enterprises are often set in their ways. Their policies, procedures, systems and people are structured for the old way, the way that made them successful to begin with. This is hard to change. Compare this to new entrants who are often are more nimble, flexible and not constrained by past history. To successfully address this challenge, view the transition as an opportunity, not a threat. Taking an opportunity perspective allows you to keep your mindset on playing offense as opposed to a threat response which is defensive. The offense mindset allows you to be more innovative and less worried about making a mistake.
Speed trumps all
Keeping an offensive mindset also helps overcome the third key rule of transitions which is speed. During times of transition your organization will need to move faster than it feels comfortable. I often coach my clients that if it does not feel uncomfortable, you’re not moving fast enough. Trust your organization’s resilience. People can often do much more than companies ask of them. When they are empowered and successfully achieve results your employees will feel energized and challenged. Those who don’t will self-select out, which is OK. Long term, employee engagement and morale should go up in aggregate. As a word of caution, this does not mean other important factors, such as quality, should be ignored. However, if priority must be given, in times of transition prioritize speed.
Transformations addressing market transitions are challenging, but also provide huge opportunities for great success. Enjoy them and have fun.