Future Competition From Emerging Markets

Monday, November 22, 2010 - Permalink
During the recent recession, many companies turned to low cost suppliers that hadn’t previously “made the cut” simply because of the economics of the time – they couldn’t afford more traditional and established suppliers.  This is a classic example of competition “from below.”  And the classic outcome has occurred in many instances – namely, the supplier figured out how to measure up to the expectations.  Those low-cost suppliers are now part of the permanent competitive picture.

This lesson is valuable when thinking about the emergence of competitors from emerging markets.  Their history may be rooted in serving customer segments whose purchase decisions are driven by price, but their future will involve entering mainstream markets.  Our colleague David Hartman has written a new research paper titled The Mandate of Global Presence, in which he argues that most of the competition in the future will originate in emerging markets.  You can download this paper in .pdf format from on the Publications page.

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Introducing Innovation

Thursday, November 04, 2010 - Permalink
One firm that we worked with lamented the fact that an innovation that they thought was a breakthrough had failed to gain traction in the marketplace.  When we spoke with them, we learned that they had tried to sell this innovation to companies where they had no prior business relationships, basically trying to use it to open new doors.

Our research strongly suggests that innovations are unlikely to be accepted by firms that don’t have confidence in the relationship and implementation skills of the company bringing the innovation to them.  And the more dramatic the innovation, the more that such fundamentals matter.  Firms won’t go out on a limb unless they know it’s strong.  Learn from firms that are successful at innovation and make sure that the foundations are in place to allow new ideas to be successful.

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Sources of New Ideas For Overcoming Implementation Challenges

Friday, October 29, 2010 - Permalink
We worked recently with a manufacturer looking to modernize their ‘e’ business systems, a project driven by customer feedback saying that they were “not easy to do business with.”  The approach we took to provide guidance to them involved going to their customers and asking individuals in their purchasing organization to identify the suppliers that they ranked at the top in terms of providing the right information and facilitating transactions like ordering.  The most significant new ideas came from suppliers in totally distinct product lines.

One of the ways in which best practice companies manage implementation involves bringing lessons from other environments to the project team.  Virtually every implementation project involves venturing into new territory along some dimension.  Look to firms in other industries with experience in those new territories for insights that can help your own firm address them effectively.

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Building Life Cycle Relationships With Customers

Friday, October 22, 2010 - Permalink
One of our colleagues recently published a paper titled 'Equipment and Aftermarket Growth Strategy.'  What he found was that for firms that made equipment with long life cycles, there was a tremendous opportunity to link strategies related to the original equipment to strategies for aftermarket parts and service support.

His paper includes case studies of firms that used their parts and service superiority in order to build a preference for their equipment.  Another firm’s business model involved equipment design that facilitated modernization and upgrades over its life.

When your product is going to be used by customers for years and years, there is a great opportunity to learn from firms that have built life cycle relationships with their customers.  These firms not only get the parts and service business, but also are well positioned when it’s time for their customers to replace the equipment itself.

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Investing in Business Relationships

Friday, October 15, 2010 - Permalink
In western markets, we typically observe that firms win business on the basis of a superior product or service offering or because they are the low price bidder.  Then, the best firms develop relationships with their customers and over time build a relationship advantage that leverages their product, service, or cost advantages.

In some emerging markets like China, we find the pattern is reversed.  Relationship comes first.  It’s almost as if the assumption is that if the relationship is strong, then the two firms can solve any issues that exist with respect to product, service, or price.

There is a strong lesson in this for western firms about the need to invest in business relationships.  It’s not only critical when they target new markets like China, but it’s a lesson that can apply even in the more traditional developed markets.

What can be learned from other geographic markets, firms or industries about building CoDestiny relationships?

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