Stop thinking in industries!

Companies love to think in industries. They define the space they operate in as industries. Consulting firms specialize in specific industries and will give you reports about it. Analysts and executives then spend an incredible amount of time studying them to find out that the growth rate of their industry is 12.5% more than another. And corporate development teams are required to check for new opportunities in exactly those industries, treating it as something that is clearly defined with very strict boundaries. If it was just that easy.

In today's complex and uncertain world, something like those clearly defined industries no longer exists. That's why companies need to stop thinking in industries and rather move towards thinking about strategic fields (or “arenas” how Rita McGrath the professor of management at the Columbia Business School calls it). And this significantly changes how to think about competition.

In the old industry perspective, the most significant competitive threat is within-industry competition. And managers with long experience will tell you that they know exactly who their competitors are.

The perspective of strategic fields however is different. Mangers that use this perspective realize that their biggest threat is coming from different fields and disrupt the existing model. They understand that your competitions are companies that provide value for your customers in their “Job to be done” (Clayton Christensen) and not those that sell similar products at a lower price or a bigger set of features.

Think about the automotive market. Companies used to look for other OEMs to identify competitors within their industry. So if you are Daimler you look towards Volkswagen, GM, or Audi. Your customer segments are the low, mid, and high-class vehicles. You will know the relevant players, try to capture market share by reducing prices or extending features, and get the impression you have control over your environment.

If you have a strategic field mindset, however, you understand that you are competing with every company that is solving pain points of customers on the same job to be done, which is going from A to B. And suddenly you need to consider Uber (taxi service), Lime (bike sharing), Tier (e-scooter), or CiteeCar (car-sharing) as competing for the same share of the strategic field as you do. Because the job to be done is going from A to B and not buying a car. A car doesn't need to necessarily be involved at all.

And you will realize that you have new market entrants like Google for autonomous driving (Waymo) or Amazon (bought the electric Robo-taxi OEM Zoox in September 2020) and new ones are emerging daily.

So stop thinking in industries and start thinking in strategic fields while scanning your ecosystem to drive growth in a world of disruption. The next time a consulting firm wants to offer analyzing competitors in your industry or scouting startups re-think if you are looking at the right place.

Your advantages in scanning your ecosystem while thinking in strategic fields are clear.

1. Competition: Identify the companies that are capturing territory in your strategic field and might disrupt existing models instead of looking at (potentially) outdated players while getting the impression you know them anyway.
2. Customers: Find future customers beyond what you would have considered as a market opportunity at all by focusing on the job to be done you support and the problems you are solving for your clients.
3. Partners and suppliers: Detect and partner with growth companies that complement your value proposition and create new market opportunities instead of limiting yourself to your traditional set of partners.
4. Acquisition and investment targets: Don't view acquisitions as a way to consolidate your “industry” but leverage across industry boundaries to acquire new capabilities or grow into new strategic fields.

vencortex empowers corporate development teams in companies of any size with AI-powered insights. Our ecosystem scan app allows you to find, assess, and manage your personalized deal flow with our search engine among over 1 million companies. Based on either similarity of business or natural language definition of your strategic fields.

Readings

McGrath, Rita Gunther The End of Competitive Advantage. How to keep your strategy moving as fast as your business. Harvard Business Review Press, 2013.

McGrath, Rita Gunther. Seeing Around Corners. How to spot inflection points in business before they happen. Houghton Mifflin Harcourt, 2019.

Christensen, Clayton M.; Dillon, Karen; Hall, Taddy; Duncan, David (2016), Competing Against Luck, New York, New York, USA: HarperBusiness, ISBN 978-0062435613. The Story of Innovation and Customer Choice.

Christensen, Clayton M.; Dillon, Karen; Hall, Taddy; Duncan, David (September 2016), "Know your customer's Job To Be Done", Harvard Business Review