Monday, July 27, 2015

Mold Your Strategy

As industries change and new competition attempts to enter the market, companies need to be aware of these changes and mold their strategy to meet the needs of customers.  In every market, competitors continually introduce disruptive technologies that are cheaper and similar to sustaining products. Understanding how these destructive technologies will alter the future of the market and viewing them as a real threat will help companies with sustaining products change their strategy to match the new competition. At the same time, as Clayton Christensen said in Why Good Companies Fail to Thrive in Fast-Moving Industries, “they need to take the threat seriously without putting at risk the needs of present customers who provide current profit and growth.”   When should a company adopt a strategy to match destructive technologies and why should they venture out of proven markets if they are already leading a large portion of their current market?

After reading this week’s articles, I became very interested in how companies should react to destructive technologies that eventually end up as blue ocean creations.  For example, when the first Ford Model T rolled into the market as the first mass-produced car priced so that many Americans could afford it.  Not only was it entering into what I would consider an uncontested market, but it was also a disruptive technology to over 500 luxury car makers and the horse-drawn carriage market.  These two markets where offering products to different consumer groups where many Americans were only interested in carriages.  When the Model T was introduced at a price of $850 dollars in 1908, it was nearly half the price of a luxury car, but twice the price of a horse-drawn carriage. It’s simple yet durable design allowed them to mass produce the Model T helping to cut costs and lower their price while still offering a quality product.  By 1924 they had the price down to $290 dollars and captured over 61% of the market.  At what point between 1908 and 1924 should the luxury and carriage market thought about changing their strategy to avoid losing market share?  In what was viewed at a small and unattractive market, not many people had faith that the automobile would take off and many, including President Wilson, viewed it as unpopular and for the rich.  Competitive companies did not view it as a threat, but should have if they intended to remain profitable in the marketspace.  

Companies need to keep an eye on disruptive technologies and reshape their strategy once the new technology starts to gain market share.  In the case of the Model T, luxury and carriage makers should have begun finding innovative ways to produce and market their products as soon the Model T showed proven success.  Although they could not analyze a market that never existed, they should have realized that the new production process that Ford was using and time put into making the car easier to maintain was adding enormous value in the market.  Companies need to take new disruptive technologies seriously especially in today’s ever changing market.  I am not suggesting that companies completely change their strategy as soon as a disruptive technology shows signs of success, but rather change at a pace similar to their growth.  

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.