How do Markets Change?

How do Markets Change?

“Outside of LearningLeaders, how do you see markets change more generally? How can I take my experience here and apply it in another industry if necessary?”

There’s probably entire books written on the issue, so I’d consult there. The way I look at it is as follows: markets are never standing still. One of the following is probably happening at all times and potentially multiple of them at the same time. These market shifts are all ‘from the perspective of a market participant (company).’

There’s a narrative element to it, where a single market will follow a critical path to its current status. For sure, a growing or expanding market one year could be a converging market the next and a shifting market the year after. There’s also likely to be some combination of the following market types at any given moment:

Expanding Markets - Many companies begin in a niche market and expand their definition of market outwards into larger and larger markets. Start at the bullseye and expand outwards in varying concentric circles or overlapping circles. Most companies WANT to be in this space, because it represents growth and opportunity.

Examples: Uber wants everyone to believe that they are just in a niche market right now but their real opportunity is ‘global mobility.’ Although I’ve been sprinkling quite a bit of salt on the Uber IPO, I’m truly rooting for them to transform the ‘last mile’ problem which makes it so challenging to many to access schools, fresh water, and healthy foods.

Converging Markets - Not ideal, but companies sometimes realize the market is shrinking for your product and is becoming less and less relevant to people. This often happens slowly and predictably (to everyone except the companies to which the convergence is happening!)

Examples: Panasonic Fax machines - some people still swear by it, but over time the market has become smaller and smaller for physical fax machines. A fax machine company can still eek out a living by marketing directly to them. But days are likely numbered.

Concentrated Markets - Some companies start by appealing to larger markets and then find out their true customers are in a small segment of the market they originally attacked.

Example: PayPal - they began trying to appeal to everyone. Then they realized that eBay Power Sellers were the optimal customer for them. So they slashed their focus on other customers, moved to the eBay Power Seller market, and concentrated their attention there. Once ready, they then viewed their opportunity as an Expanding Market.

Shifting Markets - Some products or services have their day in the sun and then the market shifts suddenly. Maybe regulation enters a market or customer preferences shift very quickly.

Example: Cronuts - I’m sure there are still some Cronut aficionados out there, but the hype seems to have died down considerably since Cronuts made waves in the news a few years ago.

Evolving Markets - Customers’ preferences change slowly over time but the market size doesn’t change considerably. This is likely to be ‘glacial’ in pace and take one or two decades or even longer to make a full change.

Example: Homes. I would love to think that we’re going to be able to replace all homes on the earth with eco-friendly dwellings within the next 10-20 years, though I’m not holding my breath. I think it may take 50-100 years to replace all homes and buildings with more environmental-friendly versions! The shift will happen, but just take time. Another example would be the evolution from PC to mobile.

Bifurcated Markets - Market splits in two and likely because some sort of regulatory action or natural duopoly. Example: iOS / Android or China / US internet. Consumers, products, and services typically exist in one at the same time as the other, but offerings, preferences, etc. are different. For any company that selects one market over the other is making a conscious choice to split the total opportunity into smaller pieces for a greater chance at succeeding in one.

This list is by no means exhaustive and I’m sure there are entire textbooks and university courses written about the subject. My take on the matter would be that markets are all probably a cocktail of what’s been described above: 60% one, 30% another, and 10% a final one. Our target market, for example, depending on how you look at it might be 70% Expanding and 30% Evolving if we are looking at the Chinese domestic debate and public speaking market. If looking globally, perhaps it is 50% Expanding, 30% Evolving, and 20% Bifurcated, as at the current juncture we are unable to take advantage of all opportunities out there beyond China and even Shanghai.

The important point for me is not to necessarily have percentage amounts aligned perfectly, but to consider the implications for what sort of change is needed in Product Market Fit as market structures are in flux.