Many managers have trouble understanding what is going wrong with their businesses at some stage in their life cycles.
The first issue is related to the understanding of life cycles. Any product or service, which reflects a given “solution” to a certain necessity or problem, has a clear life cycle. This “solution” life cycle is defined by the volume of the adoption along the time (Levitt, 1965) and, since it is introduced in the market place, it is characterized by the distribution of the same adoption along the time (Rogers, 1995).
Taking the Business Match model (Tesmer, 2002) as an example, and using the market matrix defined by “competitiveness and pressure on margins” and “complexity and uncertainty”, we will clear understand that now a days any new solution will evolve from Frontier, passing through Jungle and ending the life cycle in Battleground. It is almost impossible for a new product to do its life cycle through Kingdom instead of Jungle.
In the same manner, if we design a matrix based on two factors: demand and supply, we will find that any product or service (I like to call the combination of those as “solution”) will evolve around the four quadrants of that matrix in a very predictable faction. It will start its life cycle in low demand and low supply (at the same time that is stands in the Frontier quadrant in the Business Match model), will advance to high demand if the market accepts the solution (product plus service), which will attract new competitors on the supply side, increasing this factor (corresponding to the Jungle quadrant in the Business Match model), and as time goes by, the solution’s life cycle will drop to a lower demand level but still in high supply mode (corresponding to the commoditization process, which will take the solution to the Battleground quadrant in the Business Match model).
If we add to this another factor, the solution’s value for the consumer, we will find, as a rule of the thumb, that “premium” solutions will sell in niches, that is in markets with low supply and reduced demand, and that “commodity” solutions will sell in markets with high demand and enough supply to satisfy that. A “premium” solution will never sell in a mass manner. In the same line of though, a “commodity” solution will never sell in a niche, as it would be a real paradox to the concept of commodity: mass production and low price.
If we take as certain that when analyzing any product life cycle using some kind of model we may find some predictable path, than when we cross information from one model to the next, the life cycle stage must be equivalent.
I my work as researcher, I found that many managers do not see this as evident. Many consider that, on one hand, they are in a Jungle but, on the other hand, they have “premium” products. This is a real paradox that many managers try to solve with no success, as there is not such solution. A premium product has to have what the other have not. Normally, this novelty comes from innovation, supported by high quality and exclusivity. If one can produce such product, this means that the product will stand alone, at least for a while, in the market place, meaning no direct competition. But it also means low demand, as it happens with any other innovative product. Consumers do not jump in mass quantities to buy new products. Therefore, and following this line of thinking, a premium solution has to be position in a niche, at the Frontier of Kingdom quadrants, never at the Jungle position.
Mixing up all these positionings and creating conceptual paradoxes, does not help to come to the right strategy definition at all. The marketing approach that a premium product deserves is not compatible with the marketing approach that one has to provide to consumers in a Jungle market.
Only a perfect alignment of all factors can provide a comprehensive and effective strategic solution. Taking wrong premises will jeopardize any potential scenario. We cannot comprise our vision to a single box.
Manuel T. Fernandes, 2009.
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