How to Win When the Game Changes

As a young product manager in the mid-90’s, I was sipping champagne and enjoying company cafeteria cake in Finland with the executive team of a multinational cell phone company. We were celebrating their new cell phone, whose battery life was measured in weeks, not days. But as I sipped my champagne from a plastic cup, I felt a twinge of anxiety: I had just watched them out innovate my then-employer, a large American cell phone company.

As an engineering business leader at my company, I was chartered with building world-class components as well as driving OEM business – two goals that were frequently at odds with each other. The outcome of my job well done was that my customer became a competitor of another division. In this case, for instance, the customer was celebrating their imminent product lead over my own company –  one which wouldn’t be relinquished for some time. I was both vendor and competitor, and like the rest of the cell phone companies fighting for market share, we were about to feel the effects of an inflection point.

Types of Inflection Points

The long-lasting cell phone battery is an example of a technology-driven inflection point, in which new and unexpected applications of devices and software create meaningful changes in the end users’ experience. As Clayton Christensen has explored in his amazing book The Innovator’s Dilemma, these moments are fraught with challenge for market leaders because as the landscape shifts, they stand to lose their position of dominance by clinging to old norms. The leader going into an inflection point often turns into a laggard coming out of the turn.

In addition to technology inflection points that mark a shift in product development, there are two other types of inflection points: channel inflection points and market inflection points. The rise of Amazon as a leading source of consumer purchases, bypassing brick-and-mortar stores and delivering the world to your doorstep, is a pronounced example of a channel inflection point. A market inflection arises in the form of a step change in demand or buyer preference – for instance, the groundswell of demand for organically produced food, which turned Whole Foods from a neighborhood health food store into a national mega-chain.

Surfing the Wave Instead of Avoiding It

At the risk of sounding like Yoda, the only constant is change. In the game of business there are those who do the inflecting, and the inflected — it’s happening all the time, and it’s actually a key factor in growth. Finding and utilizing inflection point strategy is a resource efficient way to build substantial market share.

I actually advise my clients never to enter a new market unless an inflection point is present or imminent. As Kim and Mauborgne pointed out in the book Blue Ocean Strategy, a company entering a market without an inflection point will need to unseat the incumbents, and the world is littered with the empty shells of companies who sought this path. The battle-ground against an incumbent market leader becomes cost and quality, and unless a disruptive path is available, you run a very high risk of hemorrhaging cash, with little return.

Two Steps to Staying Ahead of Inflection Points

  1. Go directly to the customer, do not pass Go. The first thing most organizations do when hit with an inflection point is start analyzing and comparing all the products in their category. In an inflection point, categories are death because you need to focus on your end user and not the product competition. In the obsession with product categories, we miss the very real possibility of a customer buying something in an entirely new or different category. For instance, the Flip camera wasn’t a camcorder, and it wasn’t just a point-and-shoot still camera. Rather, it started a new category based on the customer’s desire to put a video camera in their pocket and upload it to the web.
  2. Listen for what they are not telling you. The winners in the inflection point game have one thing in common: ruthless focus on the end customers’ unarticulated desires. The Finnish cell phone company got that no one wanted to have to plug their cell phone in every night — it was an imposition of the technology. Removing that need allowed people to carry their phones everywhere without worrying about power, which drove up usage, etc. Another channel inflection winner, Zappos, revolutionized the shoe business by providing customer service that outshined most store’s in-person service models. No one stated on a market survey that they wanted a phone that didn’t need charging, or shoes delivered to their front door, but by shrewdly integrating the unspoken into the larger arc of customers’ desires, they found huge new business models.

I’d love to hear your thoughts on product, channel or market inflection points.

  • Is your industry facing an inflection point now?
  • What kinds of inflection points — technology, channel, market — have you seen already?
  • What does your company do to stay in touch with their customers and market?

Please share your comments on Twitter or shoot me an email with your thoughts.

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