Identifying and understanding market shifts is a critical task for any company of any size. Those companies that capitalize on (or at least adjust to) market shifts thrive (or at least survive) while those that don’t struggle or even cease to exist. These days market shifts appear to be happening with greater frequency and thus representing more opportunities– or threats – for B2B marketers.
Shifts vs. Cycles
But first, let’s distinguish between market shifts and market cycles. Market shifts are a significant and permanent change in market needs and behaviors. Market cycles are a significant, but transitory, change.
For example, the dramatic decline in commodity prices and demand affecting the mining industry is a cycle vs. a similar decline in the oil and gas market, which is seemingly a shift driven by technologies affecting energy production and demand.
Companies can wait out a cycle (although the smart ones act to gain a competitive advantage) but not so for a shift.
Examples of Recent Market Shifts
Here is a list of recent market shifts:
- Customers that shop and buy in different ways, a new generation of buyers and greater role for the internet and mobile devices
- Adoption and use of cloud-based services
- Sharing economy, providing new resources for services with different cost-structure
- Digitization, i.e., Internet of Things, Industrial Internet, and Big Data
- Tailor-made drug therapy, drugs tailored for individual’s genetic profile to provide more effective treatment than traditional drug therapy
- Technologies affecting energy production and demand, e.g., fracking, efficiency initiatives, and alternative energy
What to Do?
To state the obvious, identify and understand market shifts before your competitors do so that you can truly capitalize on the shift and avoid getting blindsided.
This is much easier said than done for established companies given the inherent bias for the incumbent business model and market view. Which is why many leading companies are found reacting to market shifts and scrambling to find a way to compete against upstart (and previously unknown) competitors, such as McDonalds or Big Oil.
As always, start with the customer. Key questions are:
- Is the market shift occurring within your company’s core customer base, or does it represent an emerging customer segment? If within your core customer base, then the task is more doable since you can leverage existing relationships and brand reputation.
- Does the shift affect product needs (what they buy) vs. channel needs (how they buy)? Shifts related to product (or service) needs are probably more challenging, and new product or channel needs have implications for pricing and promotion.
- How relevant is your business model for meeting customer needs? Can the incumbent business model be modified, or does your company need to develop and acquire a new business model?
Over the course of business history many companies have modified their business model by adopting new brands, products, and channels to capitalize upon, or respond to, a shift within their core customers. For example, leading retailers have now moved to omnichannel strategies, from a bricks and mortar starting point, and both Microsoft and Oracle have introduced or acquired cloud-based services.
Market shifts related to new product needs or emerging customer segments typically involve a new and different business model. However, very few established companies either acknowledge this or can pull this off successfully, largely due to inherent bias for the incumbent business model. RR Donnelley is one example, trying to move away from print as new “information” customers emerge, and NRG , operator of conventional power plants in the US, established a separate division to sell energy-producing products to consumers, according a recent article in the Wall Street Journal.
All companies know they need to monitor the market to try and anticipate market shifts, and most would admit they could do a better job of this. From my experience, companies usually have some awareness of market shifts, but they struggle to truly understand – and acknowledge – the impact of market shits and then do something about it.
The inherent bias for the incumbent business model and market view is very, very powerful. To overcome this, B2B marketers, like Santya Nadella, Microsoft’s CEO (WSJ article – Microsoft’s Nadella Makes Peace with Silicon Valley), need to accept that no business model last forever and continually seek a diversity of perspectives regarding the market.