What is market shaping?
Stunningly, strategy has never adequately defined one of its central institution, the market. Old playbooks got away with a hodge-podge of assertions, assumptions and approximations.
But the undeniable complexity of modern markets confronts us with the truth. Markets are elaborate, evolving ecosystems – think biology, not machinery. Today, strategy must embrace complexity or die.
Market shaping is the first strategy to embrace and exploit the truth about markets. It elegantly distils their complexity.
And it shows how any firm can then turn strategy on its head – by adapting the market to the firm instead of the firm to the market, opening up untapped value in the process.
Frame your market
In today’s radically unpredictable markets, the one thing you fully control is what you do – your business definition. And controlling your business definition is crucial as much of firm performance, both in terms of the turnover growth and profitability, is explained by the markets in which a firm operates. Therefore, market selection becomes one of the most important strategic decisions.
Market shaping starts by recognizing that your business definition both spells your identity and frames how clearly you can see, and shape, the rest of your market. It then sets out all the tools and incentives you need to optimize that definition.
Shape your market
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.
Learn shaping principles and plays
When should you make your market-shaping move? How do you pitch your desired market “shape” to other actors? And are there any classic combinations of moves every shaper simply must have?
Market-shaping’s rich variety of moves share common principles about timing and win-win-win outcomes. Timing your move to proven signs of shapeability makes the difference between striking while the iron is hot and repeatedly striking your head against a brick wall. Moreover, every pitch should specify, and ideally quantify – in the right language and in good faith – likely wins to those actors you need to move with you.
Advancing in any strategy modality requires gaining a bird’s-eye view seeing beyond ad hoc moves to cohesive patterns. Therefore, every market shaper will repeatedly profit from a handful of generic go-to combinations presented in this chapter.
Leadership for market shapers
In strategy, leadership consists of both leading your firm and your firm leading the market.
In market shaping strategy, actors collaborate to unleash the value potential of complex systems – and then share in the extra value. But market shaping requires, and rewards, the art of leadership more than ever.
Only, leadership now means influencing by ideas, not dictating and dominating. Within the firm, hierarchy is flattened. Within the market, the shaping firm initiates change, but as often leads from behind as from ahead, either moving first then standing back or starting as fast follower then stepping into the lead.
The market lead is shared and rotated, almost like the supported, switching solos of a jazz band.