TheStoryArchitect.com | Why we miss major market shifts
This article describes one of the key reasons we miss major shifts in market trends.
market shifts, startups, chasm, analysis
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Why we miss major market shifts

Why we miss major market shifts

There’s a taxi company in my town that I refer to as Rabid Taxi.  They earned that name after one really bad experience with one of their drivers.  I had a work trip to present our virtualization strategy to customers in Ottawa and I was taking the train.  I called for a cab, and when the driver picked me up, he offered me a flat rate to the station and we agreed on $25. I told him I needed to use my credit card as it needed to be expensed.

When we got to the train station he said the fare was $30.  We argued a bit over the price (I had sworn he had said $25) and finally I begrudgingly agreed as I was worried about missing my train.  I gave him my credit card and he said he could only take cash. His machine was broken. After convincing him that I didn’t have any cash on me he decided that he would write my credit card number down because his machine was actually broken.  I left his cab angry and made my way to Ottawa.  After a couple of days I forgot about the incident.

2 weeks after my trip there was a furious pounding at the front door of my house.  My wife answered the door as she was downstairs and about to head out with friends.  When she opened the door I heard someone screaming and yelling at her.  I ran downstairs and was confronted with this cab driver from 2 weeks ago practically frothing at the mouth yelling that she needed to “pay him cash now!” and that my credit card was crap.

It took a few minutes to calm him down, and I explained to him that the card was fine, I had used it on my trip for other expenses without issue.  I then asked to see the credit card slip that he said was declined.  I compared the slip to the credit card and the issue was the he wrote the card number down wrong.   Even after this, he was unapologetic. I called the company he worked for and asked them to make him apologize. He refused.  Hence why I call them “Rabid” Taxi now.

It’s no surprise to me to see “ride-sharing” apps like Uber start to take over a significant amount of share from the traditional taxi industry, up to 46% in key markets.  The experience I had was not the only and not the worst experience I’ve ever had with a traditional taxi service.   But it did seem to be a surprise to the people who were deep in the taxi industry, from the people who operate and run the services, to those who regulate the industry.

The traditional taxi industry’s response has been to try and force Uber and other ride-sharing services to conform to the taxi industry’s licensing and regulatory frameworks, with varied success depending on the city.  In Canada, Uber is banned in Vancouver outright, while in Toronto it is so far tolerated, (although there have been some spot crackdowns and fines of drivers).

What none of these taxi services have tried to do is to match Uber’s user experience and compete with them on the same grounds.  Even though there is a price advantage with Uber’s model, for many people it’s not the cost that’s made them switch.  It’s the experience.   It’s almost as if the people who run the taxi organizations are blind to the customer issues that plague their industry.

Closing the Borders

 

I remember being on a work trip in the US in Austin, taking some time to explore the Domain when I walked through a Borders for the first time, a store similar to a Chapters in Canada.  It was also the last time that I visited a Borders because they were going out of business.  A similar fate has hit book stores with the big box ones closing, consolidating, or merging and the smaller ones finding some rare niches to survive.  Why? Because a large number of consumers shifted their book buying behavior to buying e-books instead of regular books.   The shift happened pretty fast and caught many of these large companies off guard.  But again, they seemed blind to the reality of the shift that was coming until it was too late.

My wife was one of those people who shifted from reading regular books to reading e-books.  But shortly before she shifted she swore she’d never read an e-book.  She liked the feel and texture of regular books. They were easier on her eyes.   If she was someone that Borders had surveyed about buyer intentions and was part of a large majority of their customers, they would have convinced themselves that their core market was “safe”, that only a small percentage of their customers were going to switch. Nothing to worry about.

But she did switch, and she switched after one of her friends got an e-book reader and showed her all the advantages of e-books.  The fact that the one device carried all her books.  That it was lighter.  That it fit in her purse. That the battery lasted a long time, the books were less expensive, she could look up words, she could change the font, she could read at night with a small light, and on and on.

Missing the Virtualization Wave

 

When I was a Technical Sales Rep at Dell in the early 2000’s Vmware was just starting to promote its virtualization software as a solution for enterprise datacenters.  At the time companies ran one application per x86 server, which lead to a large amount of server sprawl, underutilization, wasted datacenter space and excess power consumption.  I had been involved in a few early sales to some visionary CIOs who had brought in virtualization to run multiple virtual servers on fewer physical devices.   This is standard practice today, but at the time it was ground breaking.    I saw the promise of this technology and at the time I said to my colleagues that every company was going to be doing this.  Many of them guffawed at this idea.

We had a training session with a product manager who was bringing us up to speed on some new servers and I asked him why there were not more network ports for VMWare environments.  His response was that only a small % of customers were going to adopt virtualization and that enterprise customers would never adopt it, so there was no point in adding these ports.   When I told him that I had sold some to enterprise customers he seemed stunned.  He couldn’t believe it, and the data that he had from his customer discussions, analysts and marketing surveys seemed to back him up.  But he was wrong, and it was shortly after that adoption of virtualization accelerated exponentially.   Now the penetration rate of virtualization is about 80% of X86 Servers.

Reading the Wrong Market Indicators

 

In the book Crossing the Chasm, the author, Geoffrey A. Moore points out the technology adoption curve. Markets follow predictable paths where early adopters start using a technology just because they are enamored with tech, followed by Visionaries who see the possible future applications of a technology and work to realize the vision in their environments to solve a problem.   But these are a very small % of the market.  The next cohort to adopt are the Pragmatists, which are part of the mainstream market.   They won’t adopt until they’ve seen proof the tech works, and have some examples of their peers using it.

The reason that these large companies are making such disastrous market calls is because they have focused their research on the wrong market segments and indicators.  They look for general market trends and ask their customers about their intentions.  But if they majority of the customers they talk to are in the mainstream market, like my wife for books, they would have missed that fact that a shift was right around the corner.

Not every product crosses the chasm.

 

It’s actually pretty hard for products to “cross the chasm” as the author points out so it’s a natural instinct for product managers and leaders to look at new entrants with a measure of skepticism, especially if it’s a new company or a startup.  It can be difficult to predict which of 100 technical trends are going to affect your market, if 99 of them end up being failures.  There’s a lot of noise in the system that companies would have to pay attention to from a competitive perspective.  They’ve seen a lot of stuff come and go.  So when something does cross the chasm and it starts to be adopted by their mainstream audience it does come as a surprise.

So how do keep on top of market shifts?

 

This is the million dollar question that analyst firms get paid a lot to produce.  But even they get it wrong – they tend to predict linear growth curves, not exponential growth curves.  In my experience by the time they start to report something will be a trend, it’s already started to become a trend, and that may be too late for competitors to react.  But there is a hint in the technology adoption curve, and that’s with the visionaries.  You can’t listen to the early adopters – they’ll buy anything just to try it.  But the visionaries will try and build a successful solution out of new ideas.   The trick is to find the right visionaries – those who have a track record of picking and implementing successful solutions.

The people I would want to listen to would be the friend of my wife who successfully implemented an e-book into her life.  In that context I would have been an early adopter – I would have bought an e-book “just because”, but her friend had a practical application and was willing to be one of the first to solve a problem.   I would have listened to myself as a sales rep, bringing in intelligence from the field that visionaries were solving some pretty challenging tech problems with a new approach.  I would have listened to those first few business travelers trying out Uber because they were fed up with cab drivers.

I remember the biggest concern internally at Dell when I was a technical sales rep and a brand manager was what would happen to our server revenue if we sold virtualization to customers.  Instead of selling 20 or 30 units, we might sell 5.  Our managers worried about what would happen to our unit performance and market share, and the sales reps worried about their quotas.  The argument that I made at the time was that if we don’t do it, then someone else will.  The server sprawl problem was so big in data centers that customers were bound to adopt solutions like virtualization. The server market was going to shrink no matter what we did. I pointed out that there was greater long-term value in being the one to solve our customer’s problems than letting someone else do it for us.  We would be the thought leaders, the visionaries and the practical solution provider to them. I was able to help keep us ahead of the curve locally by educating our team about how big a problem we were solving for customers.

What’s apparent in all of these scenarios is a problem that needs to be solved or an opportunity unrealized.  Uber would not have the growth it has today if taking a traditional taxi were not so painful.  So a trend follower also needs to be on top of the problems that their buyer personas face in using their existing products.  If there’s a problem with the way users experience your product or service, eventually someone will come around and fix it.  If the Taxi industry had been more focused on solving the problems its customers experienced, instead of entrenching its position, there never would have been an opening for Uber to walk through.

 

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