When making decisions about the strategic direction of your business, do you focus primarily on how you can improve your core products and services, increase their market penetration, and take them into new markets or market segments?
Or, do you focus more on identifying new needs in your established market and continually developing offerings to meet those needs?
In my work, it’s common for most clients and prospective clients to emphatically claim the latter: they are market-focused, yessiree, no doubt about it.
And for most, that was true once upon a time. The organization came into being to serve a particular market, and that market now represents its core member or customer base.
But, in reality, they are now product-focused. The market, at this point, is a given. No real effort is being made to assess it on a meaningful, continuous basis. Rather, the focus is on the product delivered – typically, for the types of organizations we focus on, some assortment of meetings, seminars, Webinars, and online courses. (I’m using “product” broadly here to encompass the core offerings of an organization, even if these are service-oriented.)
Now, there’s nothing inherently wrong with that. It is perfectly valid to be a product-focused organization; to focus the majority of your strategic energy on a line of great products and/or services. Apple, for example, has done that quite well (which is why we are now up to iPhone 11 as of the time this article was updated). The problem is when you are really product-focused but think and act as if you are market-focused, or vice-versa.
Why is that an issue?
Mainly because it results in misallocating and misdirecting resources.
If you are market-focused, you pour your resources into determining new or emerging needs in your market and coming up with products to meet these needs. You don’t assume you know your market needs, but rather are bent on discovering them and serving them. Market research is a primary focus and it is often coupled with a strong emphasize on customer service and interaction.
On the other hand, if you are product-focused, you pour a large part of your available resources into developing products your customers may not even realize they need and then investing over time in making these products look better, perform better, and achieve better results (again, think of the iPhone). While market-focused businesses aim to keep pace with the market, product-focused businesses aim to set direction and lead the market. Innovation – in areas like technical features, processes, and user interfaces – is a primary focus and is it often coupled with a strong emphasis on supply chain management (to decrease costs and increase margins).
As may already be obvious, these two approaches require different types of people, different technologies and processes, and ultimately, different cultures. If you think you are pursuing one, but are operating like you are pursuing the other, any progress you make will come much more slowly and with much more friction than necessary – if it comes all. The same is usually true if you have not made a conscious choice as to which you are pursuing.
I should add that market focused vs. product-focused isn’t a hard, either-or distinction. Every organization needs to pay close attention both to its products and its markets. But knowing which one is primary as a driver for your strategy is critical.
Speed, Foresight, and Market Leadership
If you are operating in a time when market conditions are fairly stable and competition is moderate, either a market-focused or a product-focused approach can work.
But what about when times become more complex and chaotic? When things are changing rapidly and your customers or members are having a hard time knowing what to do? When new competitors are entering your market regularly?
Either approach can still work, but with different requirements for success.
Market-focused requires great speed and agility, particularly in gathering and analyzing market data. Very often the same data is available to you as is available to your competition. Drawing accurate conclusions from your data and executing quickly to respond are the keys to success. Which – if you are a market-focused business – begs questions like:
- What is the key data we should be tracking?
- Do we have/can we get access to data our competitors don’t have?
- Are we taking the necessary steps to track it, and who’s accountable?
- What are our processes for converting insights from the data into action, and again, who’s accountable?
Tools like the Market Insight Matrix can be helpful in working through these and related questions. Keep in mind, too, that these questions and the actions they prompt don’t apply only in times of complexity and rapid change; they simply become much more critical in such times. Many traditional education providers are suffering precisely because they have not appreciated – and acted on – this point.
Data is also important for product-focused organizations, as are the types of questions raised above, but speed and agility are not nearly as important as foresight. Successful product-focused businesses leverage data – in combination with imagination – to see opportunities that others, including both customers and competition, don’t see yet. Doing this requires a willingness to take risks, place big bets, and be patient. It can take time – sometime years – to develop a market leading product. And, while speed can become a factor in maintaining leadership, more often innovative products falter because the product-focused business gets distracted by chasing current trends – i.e., becoming market-focused – rather than continuing to seek foresight.
Again, these are not hard, either-or distinctions. Product-focused companies can certainly benefit from speed and agility, and market-focus companies benefit from foresight. The difference is one of emphasis.
So, which are you?
For my perspectives on “market-focused” and product-focused” I’ve drawn inspiration from the concept of the Driving force discussed in Benjamin Tregoe and Jon Zimmerman’s Top Management Strategy. Published nearly four decades ago it remains, in my opinion, one of the essential works on strategy that every leader or aspiring leader should read.
While Tregoe and Zimmerman discuss a range of other possible strategic options, the vast majority of businesses, in my experience, pursue either a “market needs” or a “products offered” Driving Force – but often aren’t clear about which. I’ll concede that the distinction can be a subtle one. It took me a number of re-readings and good bit of reflection to fully appreciate the implications. You may experience the same reaction in reading this article, but I encourage you to re-read and reflect, as needed, and possibly even to read Tregoe and Zimmerman’s book. (It’s relatively short.)
Then, step back and ask, “Market or product: which is our focus?”
A version of this post was originally published on the Tagoras blog on Nov 21, 2011. The current version has been substantially updated.