Jack Welch argues, ‘When the rate of change inside the business is exceeded by the rate of change outside the company, the end is near:
Today’s markets can evolve incredibly quickly. New ideas and structures, standards and expectations can spread in a way that was previously reserved for fads and fashions. Speed is driven by the connectivity of people through technology, the rise of non-locational communities and the constant desire of consumers to have the latest, best, coolest, smallest, fastest devices.
Whether it is the latest multi-disciplinary mobile phone, or a new range of Puma shoes, or the latest interactive game, as soon as it enters one market, it enters all markets. In the past, movies were shown in North America up to 6 months before Europe. Within weeks of release in LA, it will now be bootlegged in the shops of Bangkok or available online to people anywhere.
Similarly with products; the rapid and repetitive disruption of the data storage market shows how large floppy disks were displaced by smaller disks, and they by CD-ROMs and they by USB devices. The benefits of each new device were huge – scaling up storage capacity many times, shrinking in size, cheaper and more convenient. Once the new device hits the market, everybody wants it everywhere. And one click of amazon.com can deliver it within days.
The effect of networks, the viral impact of communication across them, the contagiousness of new ideas. Hotmail, launched by Microsoft as a free online e-mail service, went from launch to leadership within days. Without any traditional marketing to boot. The bottom of every e-mail sent by a Hotmail account holder contains an invitation to the receiver to set up their own free account. Yes, they needed early adopters to start the ball rolling but, after a few days, the snowball was enormous – 100 million people in the case of Hotmail.
The same effect can be seen in every other market too. Speed is also perpetuated by the expectation of newness and intolerance of oldness. It is spurred on by intense competition and the ability to deliver new products to market faster than ever before. Car manufacturers launch models every year, and sometimes new editions every quarter, while in the days of Henry Ford, the cycle times were more like decades.
Clothing retailers will launch new ranges at least once every season; although, now that is the convention, to be fashionable requires a new range every few weeks. Visit a Zara clothing store one week and it is unlikely to be stocking the same clothes when you return a few weeks later. Make your mind up now or it will be too late. And, indeed, to get there before anybody else, Zara’s designers don’t wait to see what’s the latest fashion on the catwalks; they go straight to the yarn mills of Milan to find out what’s emerging. You can now buy the high street imitations on the same day that the new designer range is modelled.
Cycle times are much faster and shorter, more unpredictable yet more powerful. We live in a constantly evolving state of newness. When is the best time to buy a new laptop? Never. Because whenever you buy it, it will inevitably be displaced by something better in a few months, and your own model, while completely adequate, will have its price slashed because enough people still want the latest thing. At the same time, this creates a whole secondary market for remainder items – and the rise of stores like TK Maxx in the clothing market, selling massively reduced designer clothes only a few months ‘out of date’, and indeed challenging the full-price unbranded items of mass market chains.
Speed can often be witnessed in the form of ‘vortices’ within markets, a little like highs and lows that drive our weather systems. The difference is that these vortices are typically manmade, or through the competitive and customer responses to deliberate actions. Each vortex is the result of significant change and creates a significant impact on its surroundings. As a new idea develops, the vortex builds momentum, and its increasing centrifugal force draws nearby competitors and adjacent markets into its reach.
The market-driving business, seeking to define its markets in its own vision and advantage, will often need to create such vortices, but it also recognizes the wider consequences of its own actions. In the early stages it will be more isolated, creating new opportunities fairly remotely from what else is going on. However, it then starts to affect others as competitors respond, and the business needs to step up to leading the ‘game change’ rather than just defining it. Ultimately new market conditions start to form, and the business must actively shape these new structures as it normalizes.
So how do you keep pace with the rapid pace of markets? How can you get ahead of the curve rather than behind it?
Like the athlete who is most likely to win the gold medal, the strong company will learn to control the pace, choosing when to set it, when to slow it, when to just go with it. The key to this is to align the rhythm of the business to the pace of the market. Every business already has a rhythm, usually driven by its planning cycle internally – typically an annual event, with a rolling 3- to 5-year horizon. Product development cycles are driven internally by the frequency of market research, and the complexity of product development and market entry processes. Externally, the pace might be driven by industry events – the IATA conference for airline schedules, the major fashion shows in clothing design, or the GSM World Congress in mobile phones.
Organizations can break these natural rhythms and create new ones: planning cycles once a quarter rather than annually, accelerated product development processes can radically reduce time to market, and more modular business design can enable business structures themselves to rapidly morph to exploit new capabilities and market opportunities.
However, like the athlete who is most likely to win the gold medal, the most successful companies can set the pace to their own advantage – be it fast or slower, they can exert influence that conditions how others behave. Armani can influence fashion show organizers and Nokia can influence whole supply chains, regulators are strongly influenced by leaders who drive economies, and retailers are reluctant to go without PEtG or Unilever products on their shelves.
Indeed, rather than just synchronizing your business to the market, a leader might seek to create a rhythm slightly faster than the market, so that they lead rather than lag — they are the innovators rather than imitators. This might be achieved by working to a 10-week cycle rather than a 12-week cycle in fashion, by being faster to spot trends like Puma, or by having the earliest adopters hooked into your brand like Apple. And if they are effective in executing their market entries, they can define coolness and charge a premium for it, before the mass market arrives.
Possibly related posts: (automatically generated)
Market Speed Incredibly Quickly
- Cash Flow: The Business Lifeline
- Network Marketing and the Law continue...
- Maintain a competitive edge
- The mobile Internet Part 2
- Pay Attention to Business Conversion Rates
- Market Space
- Managing Stakeholder Relationship Part 2
- From Status QUO to Wholesale Change
- When a Promotion You Made Fizzles
- Market Space continued
