I started the first part of this text, questioning the reasons why several companies that have been so successful for decades are failing. Former success companies such as Blockbuster, Polaroid, Toys R Us, Borders, Compaq, GE, Woolworth, Kresge, and many others that enjoyed high market share, strong sales and huge profits should be studied and understood from a different point of view. I then proposed a new perspective to see the world that is not only focused on what is happening in your immediate surroundings, and discussed that unless we change the way that we SEE things and start to see that the business world is much larger that our micro, surrounding environment, we will continue to be surprised that things have changed and that we have been left behind.<\/p>\n
A new way on how to treat markets, new technologies, new customer\u2019s needs (that not even the customers know yet), and new ways of thinking strategy and business models must be in our radars.<\/p>\n
The way our strategic decisions are made, that is, highly influenced by ours best customer needs and wants (listening to current customers is considered a best practice), may lead a great company to the wrong direction. That happens because our top \u201cA\u201d customers who provide us with growth and profitability and therefore to higher stocks prices, are interested solely on solving their current needs for more technology advanced features, more efficient supply chains, higher capacity product solutions and other features that will enable them to become more competitive and more efficient. Our customers have competitors and to face up competition they need better products and solutions, with more functionalities, and as soon as we deliver these new functionalities, they ask us for new ones. Does this happen in your company, in your market? The problem of this thinking process is that we continue over and over to improve our products and solutions, spending huge amounts of money and effort in new product developments to beat our competitors in satisfying our current customers, and then, these new features reach a point that they overcome what customers really want and need. That is the moment when a new entrant with somewhat less technology features offering comes into our surrounding environment and begins to take our customers away with much lower cost\u2019s solutions.<\/p>\n
The logic of why following current and key customers\u2019 needs and wants may fail, resides in the fact that established companies compete among themselves by investing heavily in new functionalities, have to increase its prices more and more, as new features are implemented to keep up with the desired growth and profitability rates (higher costs, higher prices to satisfy our stocks growth needs). Higher prices usually mean higher end markets, top of scale customers. This constant upward moves, leaves and important \u201cspace\u201d at the lower, downward customers levels. This is a problem because the vacuum that is formed on the market is a huge opportunity for new entrants. These new entrants are small, have smaller structures to compensate their margin\u2019s goals, and therefore are able to price much less than the former providers in this market range.<\/p>\n
The strategy of moving upward to higher valued, higher prices markets space makes sense from a traditional point of view, and the majority of established companies have been successful with this strategy. But when a substantially new technology supplied by a low-cost structure firm, comes to fill this vacuum in the market, with more convenience and lower prices than the incumbent players, the successful strategy applied for so many years may lead to a disaster. That happens because these new entrants will eventually in the future, enter the higher markets with much lesser costs than the former owner of that space. That happened several times in the disk drive industry when more and more capacity was introduced until the point that the attribute capacity was no longer the most needed quality of a disk drive. Size and price became the new attributes and billion-dollar companies began to lose market share to former small startups.<\/p>\n
Another concept very mind opening is that, the things that established companies consider its capabilities may be theirs\u2019s disabilities. That is explained by the fact that capabilities like processes and values are not flexible and when the context changes (new surrounding environment), the company does not change as fast. Creating new capabilities like values (criteria used when making prioritization decisions) or processes (methods by which people transform inputs into outputs of higher value) are very difficult and demand huge amounts of effort in different forms. Changing these would also take a lot of time that we do not have. When faced with new technologies that can disrupt our environment of success where we have been so successful for so many decades, changing our organization the way the new markets require may be happening too late.<\/p>\n","protected":false},"excerpt":{"rendered":"
I started the first part of this text, questioning the reasons why several companies that have been so successful for decades are failing. Former success companies such as Blockbuster, Polaroid, Toys R Us, Borders, Compaq, GE, Woolworth, Kresge, and many others that enjoyed high market share, strong sales and huge profits should be studied and …<\/p>\n