Thought Leaders
MarketBusting

In Wharton's Advanced Management Program and other executive programs, Professor Ian MacMillan has introduced a set of tools to challenge executives to think more rigorously about their growth opportunities. The tools, developed with colleague Rita Gunther McGrath of Columbia University, provide frameworks and specific actions that managers can take to identify strategies for growth. Now McGrath and MacMillan, co-academic director of Wharton's Strategic Thinking and Management for Competitive Advantage executive program, have brought these and other tools together in a field guide for cracking open markets to find opportunities for growth inside.

The new book, MarketBusters: 40 Strategic Moves That Drive Exceptional Business Growth (Harvard Business School Press, 2005), analyzes growth opportunities using five tools, each of which looks at the market through a specific lens. Within this framework, they identify 40 strategic moves that companies have used to “transform their market spaces.”

These strategies are drawn from the authors' research on companies that they call “MarketBusters.” These firms have achieved the following:
  1. a 2 percent gain or loss in market position of an incumbent as a result of the incumbent's own moves or the moves of another player
  2. annual growth in sales of shipments of 10 percent or more over at least 2 years from a new entry by an innovator
  3. annual sales or shipment growth by an incumbent that is 5 percent greater than the growth in the underlying market.

Five Lenses and Five Tools

The authors encourage managers to examine growth opportunities through five different lenses:

 
  • Customers: By using “consumption chain analysis” managers can look at ways to transform the customer experience at every step in the consumption chain, from awareness of the need for the offering to purchase to repair and final disposal of the used-up product. For example, Logistics.com rethought the logistics of product delivery systems to create an integrated shipping system. It used software to improve the consumption chains for both shippers and carriers and built a business that sold for more than $21 million in 2002. Coinstar, Inc., reviewed the consumption chain involving accumulating, counting, and banking loose change. Coinstar transformed the process with machines that count change and return paper script in supermarkets that can be used to buy groceries. By transforming this consumption chain, it created a revenue stream that has grown by 30 percent per year since 2001.

  • Products and offerings: Through the tool of “attribute mapping,” McGrath and MacMillan examine how the attributes of a company's offerings are positioned relative to customer expectations of competing offerings. The framework allows managers to look at how attributes of the product or service offering please or displease key customer segments. By looking at different attributes, companies can improve the positives and eliminate the negatives. For example, Procter & Gamble's SpinBrush dramatically improved the positives for its toothbrushes by making electric toothbrushes much more affordable. Michelin Group eliminated one of the negatives of automobile tires with its “run flat” tire that allows drivers to continue for 50 or more miles after a puncture.

  • Key metrics: Managers can also identify opportunities for growth by looking at key metrics that drive the profit growth of the business. The authors use a tool they call “unit of business analysis” to change the fundamental unit of business from which companies derive revenues or dramatically enhance the productivity of the existing profit drivers. For example, GE Locomotive changed the unit of business in its market from selling locomotives to selling haulage contracts. While cement companies traditionally measured their business based on cubic yards of concrete delivered, Mexican firm CEMEX changed its unit of business to something more important to customers: cement delivered within a specific delivery window. This led to a radical redesign of its logistics systems, allowing the company to achieve 98 percent reliability of delivery within a 20-minute window (compared to 4 hours). The company became the third largest cement and ready-mix concrete supplier in the world.

  • Industry shifts: As industries change, this creates opportunities for companies to develop new growth strategies. The authors introduce an “industry shift framework” to probe the patterns of industry change and exploit these insights to take advantage of, or drive, the change. These patterns include:
    • Industries that swing through cycles of surplus and scarcity
    • Shifts in an industry constraint or barrier
    • Increased pace of industry evolution and shifts in patterns of costs
    • Bottlenecks that cause value chain reordering.
    Each of these patterns presents different opportunities for growth. For example, in an industry such as energy generation, with predictable swings between surplus to scarcity, energy companies can use peaking plants to “end run” the swings. These plants are relatively inefficient but are only operated during times of high demand when prices are high enough to justify the costs. Companies also can benefit from second-order effects of industry shifts. For example, Sealed Air Corporation has taken advantage of the demand for better packaging created by the growth of online retailing by introducing more environmentally friendly bubble packing instead of polystyrene popcorn packing. Another strategy is for companies to drive shifts in their industries by reducing costs or eliminating bottlenecks. For example, MBNA created affinity programs to find new customers and keep its credit card loss rates below industry rates, growing rapidly while reducing its costs.

  • Emerging opportunities: Finally, companies can exploit changes that create entirely new markets or industries. The authors introduce a “tectonic triggers framework” to recognize such shifts and capitalize on these changes. These transformations, like tectonic plate shifts, occur when “numerous small things accumulate to reach a tectonic breaking point.” These triggers include technological innovations; changes in social possibilities and attitudes such as the rise of antismoking sentiments; natural phenomena such as diseases, droughts, or global warming; institutional and regulatory changes; and demographic shifts such as the increasing numbers of middle-aged and older people. These shifts can create opportunities for MarketBusting. For example, Subway recognized the demand for healthy foods driven by concern over rising rates of obesity in the United States. It focused its business on healthy, fast food and by 2001 the chain had surpassed McDonald's in number of stores (although the Golden Arches still had about eight times the sales volume). The authors point out that this solution did not rely upon a breakthrough in technology or radically different business model. Subway understood the tectonic shifts in its market and took advantage of them. An early success in taking advantage of tectonic shifts was the introduction of Swanson's TV dinner in the 1950s, capitalizing on the need for simple meals with the rise of two-earner families and America's growing fascination with television.

These are just a few of the many strategies offered in the book. Instead of offering simplistic recipes or blueprints for growth, the authors instead present a toolkit that can be used creatively by managers to craft their own growth strategies. McGrath and MacMillan recognize that this is a dynamic process. “No strategy will go on being successful indefinitely. Competitors will catch up, markets will change, and even companies that had a great idea can stumble when they take their success for granted,” they write. They urge managers to think of their pursuit of growth and profitability as “a journey, not an event.” The tools and strategies presented in MarketBusters can help take this journey in new and profitable directions.

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