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What is your market space doing for you?By Kay Plantes
Working Assets' loss reflects the strategic importance of market space decisions - that is, decisions about target market(s), geography, distribution channels and offering scope that collectively answer the question, "Where does your business compete?" AT&T's broader market space creates benefits that trump Working Assets' feel-good appeal, cultivated by contributing part of their revenue to worthy causes. Broader isn't always best, however. Microsoft's stand-alone operating systems trounced Apple's fully integrated computers for decades. More recently, both ease of use and virus issues have enhanced Apple Computers' attractiveness. What's best is for leaders to think strategically about market space. There are three generic market space strategies. The first is a target market or vertical strategy - offering a broad array of products that cut across industry categories to a narrow target market. Harley-Davidson offers motorcycles, maintenance, clothing, household goods, rallies, and vacations to motorcycle enthusiasts. Honda, Harley's key competitor, pursues the second strategy, a technology or horizontal strategy. Honda leverages its engine technology into cycles, cars, lawnmowers, jets, construction power supplies and other products, sold into different markets. Madison's Neider & Boucher, a business law practice, pursues the third and most focused strategy, a niche strategy. The affable Joe Boucher and his partner Charles Neider started their niche practice in 1995. Whereas key competitors such as Foley & Lardner and Michael, Best & Friedrich offer a complete array of legal services in multiple geographies to multiple target markets including large and small, public and private businesses, nonprofits, governments and individuals, Neider & Boucher focuses on a narrower target: area businesses that are small and mid-sized, offering a more limited scope of legal services. Neider & Boucher provides many of the services its clients need, such as business formation and dissolution, obtaining and defending trademarks and trade names, handling disputes, and tax and estate planning. But, like Working Assets, it doesn't offer complete one-stop services. In serving a smaller target market, the firm lacks scale to support infrequently used services such as bankruptcy filings, obtaining patents and defending white-collar crimes. Neider & Boucher wisely formed working relationships with other firms to supply these services. Customers are drawn to niche companies because of their "specialty" nature, signifying they're best at what they do. Neider & Boucher's narrower focus also lowers overhead costs, allowing partners to be far more directly involved in client work. "We appeal especially to start-ups," Boucher said, "as we've walked in their shoes." Though significantly smaller than its strongest competitors, Neider & Boucher was chief counsel to about one-third of the Wisconsin start-ups eligible for investor tax credits in 2005. Niche strategies can be risky as niches may become less attractive or not viable. If Internet-based legal software and filings create disruptive innovation in legal services, will small companies do their own law work? On the other hand, niche firms, because they are more nimble, often exploit advances in technology faster than larger firms burdened with expensive legacy systems. Your firm has a market space, whether or not it's proactively decided. Does your market space create unique target market benefits? Will external trends strengthen or weaken your market space's attractiveness? Think strategically. Otherwise, today's satisfied customers may be gone tomorrow. Kay Plantes is a Madison economist, strategy consultant and executive educator. plantes@execpc.com madison.com ©2009 Capital Newspapers. All rights reserved. |
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