COMPETITIVE MARKET STRATEGY

1. Where are there market opportunities?

2. What is your market strategy / competitive positioning to capitalize on those opportunities?

When answering these questions realize while there are helpful tools and concepts, there is no right way to answer them. You do need to be hypothesis-driven, so you don't "boil the ocean." And, it takes a lot of thinking, problem solving, analytics, and synthesis.

Southwest Airlines' market strategy started on the back of a napkin. Back in the '60s, Herb Kelleher and Rollin King were having a cocktail at a bar, when Rollin said, "Herb, I've got an idea for a better airline." He wrote Dallas, San Antonio, and Houston on a napkin and then connected the three cities with a triangle, proclaiming "There's the business plan."

While the competition was focused on the hub and spoke route model, Herb and Rollin thought a high-utilization, low-cost airline with excellent service and a point-to-point route model could win the market. After 50 years of competing, Southwest is the largest U.S. domestic airline.

1. A market defines the solution space a business competes in

2. Market strategy defines how a business is positioned in a market

3. Successful businesses differentiate and align their business model to their market positioning

Markets and market strategy are often nebulous concepts since they are based on how you look at and frame a competitive space. Two similar competitors can look at their market in very different ways, which, over time, will drive them to create distinct strategies and actions. One competitor will often do better than the other based on how they frame the market and their market strategy.

Market strategy is big-picture stuff, and sometimes you need to understand what your goal is in evaluating a market. Below are 4 reasons, the typical drivers, and some company examples.

How you define your market is just as important as your evaluation of the market. If you define it too broadly, it may be more difficult to find compelling opportunities and create a differentiated position. If you define it too narrowly, it may not be big enough to pursue. Below is an example of a market map of the battery power markets. As you think about how to define your market, can you subsegment the market by geography, customer segment, solution, use case, product, or service? If you subsegment the market correctly, you might identify white spaces, and better understand current and future competitive dynamics.

Every market has an adoption curve, where the y-axis is the total percent adoption of a solution, and the x-axis is time. It is insightful to understand where your market is on its adoption curve, and what the market will max out regarding percent adoption. The first time I saw an adoption curve was one of those big "aha" learning moments.

Why is understanding your market's adoption curve important? Because it will explain a lot about the competitive dynamics and help you focus on what is vital to growing market share. An adoption curve has four main stages - 1. Innovators, 2. Fast Followers, 3. Consolidators, 4. Cash Cows. Where is your market on its adoption curve?

Market strategy is about understanding how the market will evolve and then navigating to the end state by architecting a differentiated and superior value proposition and business model, which Netflix does with a "take no prisoners" precision and magnitude. Netflix's leadership is very strategic. Understanding that DVD usage would decline as Internet bandwidth grew, they started their subscription streaming service in 2007. Recognizing the end-game of entertainment as compelling content, they began to finance proprietary content in 2013, with the launch of House of Cards. In 2017, they spent over $6 billion on original exclusive content. So, as you think about market strategy, first think about the logical end state of the market, and then think through how you can grow the customer value wedge.

PESTLE Analysis is effective in thinking through the trends that will drive the end state of a market.

It is a simple framework that covers the Political, Economic, Social, Technological, Legal, and Environmental dimensions of macro trends.

Below is a starter list of the potential trends that can affect the market dynamics and lead to threats or opportunities. In your PESTLE analysis, it is up to you to understand the importance, nature, driver, impact, and magnitude of the trends. And, even more important, how you will navigate and capitalize on these trends through your market strategy.

Launched in 1979, Porter's Five Forces is still an essential market assessment framework. Porter's 5 Forces analysis starts with assessing supplier power and buyer power, in terms of their strengths, weaknesses, consolidation, and dynamics. Next is assessing the threat of potential entrants and substitutes. The level of supplier and buyer power, potential entrants, and substitutes determines the industry or competitive rivalry in the market. A strong Porter's 5 Forces analysis generates insights into market dynamics, M&A opportunities, and market positioning.

To dominate a market, a company not only needs a solid value proposition but also sustainable competitive advantage, creating a competitive moat around its business model.

There are eight main sources of sustainable competitive advantage and we go more in-depth on the topic here. Companies that end up dominating a market, typically have deliberate strategies to grow their sources of sustainable competitive advantage.