Shape your market
How can you get practical leverage on the complexity of your firm’s operating environment?
So far, strategy has lacked a framework systematic enough to make your firm’s operating environment manageable without oversimplifying it into just-so stories and tautologies, sacrificing its rich potential.
Market shaping offers the first practical framework for leveraging complex environments. Having clearly defined the parts of a market system, the framework arrays clusters of those parts into a hierarchy of layers by order of both the firm’s influence over them and their impact on the shape of the system, and shows you how to design each one to achieve a new market shape. The goal is to generalize to every market and every firm, and to operationalize without the need for traditional forms of market power.
· Radiating out from the core of the Market Fan are four ranked layers, or clusters of elements, which a market shaper can explore and potentially mold. These layers we label, in order: Exchange, Network, Representations, and Rules of the Game
· The first two layers flow from the firm's chosen business model, affording the firm more managerial influence. The latter two rank as harder to influence, but more influential if you succeed.
· Exchange is the minimum foundation of all market systems. Buyers and sellers must find each other and agree on what’s being exchanged and the pricing. Here, market shaping options to explore are: redefining the sales item (improving functionality, bundling or unbundling, carving out different property rights to trade); changing the pricing logic (altering price levels, switching price carrier); and/or devising fresh matching methods to connect providers and customers (digitalizing platforms, or building on existing bricks-and-mortar methods).
· For a market to run smoothly and develop it takes more actors than just buyers and sellers. The network needed may run to sub-contractors, providers of complementary products or services, intermediaries, information providers, market research agencies, media, interest groups, regulators and more. Here, market shaping options to explore are: enhancing the set of actors (adding or removing actors, securing a healthy level of competition); redefining actor roles (clarifying and optimizing role division, educating customers and other actors to play their role); and/or fostering material and immaterial infrastructure (investing in infrastructure even if it earns no direct revenue, extending your role to infrastructure provider, or inducing other actors to build it).
· Representations cover all the forms of verbal and non-verbal language that let us represent to ourselves and others the elements and shape of market systems. Here, market shaping options to explore are: coining or adopting facilitative language (making product category names accessible, deploying ancillary language and concepts to explain a new market, and familiarizing the unfamiliar via metaphors, conceptual extensions and boundary concepts); fostering confidence-encouraging information (setting the agenda for media attention to legitimize new markets, ensuring suitable market research and statistics); and/or promoting symbols that legitimize new markets (events and awards aligned with your market vision, or industry associations for their cachet of authority).
· Rules of the Game, whether formal standards and regulations or informal social norms, define what are acceptable plays. Here, market shaping options to explore are: influencing de facto or de jure standards (building coalitions and/or pushing for adoption, allying with the biggest faction in standards wars, forgoing your IP for a favorable standard); securing regulation, de-regulation or re-regulation (persuading regulators with hard facts or surrogate advocacy by customers and others, or industry self-regulation to stabilize a market); and nudging social conventions (influencing customer preferences, challenging obstructive industry conventions).
Illustration: The Market Fan - illuminating the systemic markets