The genesis of this book is a meeting that we recently had with the CEO of a multibillion-dollar distributor. He had just met with his management team about how Amazon and the other digital giants had entered his business and were steadily vacuuming up market share.
This was the third meeting we had that week with CEOs of major companies asking us the same questions:
- How can I defend my company against these aggressive digital giants with overwhelming digital capabilities and price-cutting mentality?
- I’m cutting my costs across the board, but my profitability is dropping—what else can I do?
- How can I identify and invest in growing my real profit core—my business segments which will provide high growth, and remain profitable and defensible against my new competitors?
- How can I align my organization around my profit core and build dominance in my target market segments?
Chapter 1 Excerpts
Several years ago, the front page of The New York Times reported that two Columbia University geophysicists had found clear evidence of ancient villages lying beneath hundreds of feet of water on the seabed of the Black Sea. Their investigations, later narrated in a fascinating book, Noah’s Flood, revealed that a sizable portion of what is now the Black Sea had once been a giant freshwater lake, filled with meltwater from Asian glaciers.
About 7,600 years ago, as the last ice age waned and the waters rose, the Mediterranean Sea breached a high mountain barrier and a monumental flood rushed through the Bosporus valley, running through what we know today as Istanbul. Ocean water poured into the lake with historical force, destroying and submerging all life in the area, and formed the Black Sea. This was the actual event that storytellers memorialized as the biblical flood.
Today, business is transitioning from one major era, the Age of Mass Markets, to another, which we call the Age of Diverse Markets. The two ages could not be more different, and the change is as inevitable and disruptive as the flood that created the Black Sea. While the transition began some time ago, it is rapidly accelerating and the seismic shift is leaving managers scrambling for a practical pathway to succeed in a new, very different world.
Today, as the Age of Diverse Markets tsunami rushes in, industry after industry is being disrupted by digital giants like Amazon, Uber, Google, Facebook, Apple, Alibaba, and by other savvy incumbents that have staked out a strategic high ground and generated sustained profit growth.
The wave is gathering speed and is pushing through the consumer landscape and into the B2B markets. Amazon is experimenting with placing Alexa, its voice-controlled device, throughout hospitals and in key in manufacturing plants where supplies are ordered and used. Uber’s rapidly growing Uber Freight is displacing many traditional trucking companies. Google acquired Fitbit, spearheading the company’s move into the personal health/medical industry. The timeframe for managing significant business change is three to five years, so organizations that are under siege from these forces must devise and initiate a response very quickly. The digital giants are moving fast, and even the pandemic crisis has not slowed them down.
The biggest problem in business today is that all too many managers are not embracing the Age of Diverse Markets success elements that will enable them to prosper. Instead, they are doubling down on tactical innovations and tuning up old practices from the Age of Mass Markets—usually with diminishing results. Savvy managers, on the other hand, are realizing that the new disruptors are not winning by doing old things better, but instead by doing new things that incumbent companies are simply not capable of doing with their current ways of doing business.
The key to success in the Age of Diverse Markets is choosing your customer. This has three imperatives:
- Choose: Define a defensible strategy that your company can dominate, choose the customers who fit, and say no to those who do not.
- Align: Identify and build the capabilities that will enable your company to achieve high sustained profitability with your chosen customers in your target strategic group (i.e., the set of firms pursuing the same strategy), and focus your resources to quickly excel in your strategic direction.
- Manage: Develop your organization so your managers can seamlessly coordinate to identify and support your chosen customers, and to meet their diverse and rapidly evolving needs.
The objective of this book is to explain the currents of change that are creating today’s disruptive tsunamis, and to give managers a realistic pathway to success—one which involves managing in a new, creative, data-driven, and much more interesting way. In our experience across a range of industries, we have seen successful companies achieve long-term industry strategic leadership and sustained 10% to 30% annual profit growth—even while so many of their peers have run aground, victims of the devastating competition from the digital giants.