Today's management mantra is "do it faster, better, cheaper, smarter (FBCS)" and customers will beat a path to your door." While this is often sage advice, there are industries were FBCS is of little use. If your target market happens to be one of those industries, FBCS will bring you frustration instead of profits. Your product or service may be genuinely faster, cheaper, better, and smarter -- but they won't buy it. It seems irrational, but is it?
Surprisingly, some customers' indifference to FBCS is not only sound but easily intelligible when you step back and look at the competitive forces within the industry. According to Michael Porter, the five forces that determine the level of competition within an industry are customers, competitors, suppliers, entry barriers, and substitute products. (Entry barriers determine how difficult it is for companies to break into the industry. Substitute products are items that serve the same function as the industry's product; for example, airplanes are substitutes for trains.) The level of competition in an industry depends on how these forces align.
Why your customers might not be interested in FBCS.
Imagine that your customer's product is the only one of its kind in the market, there are no competitors, and their customers can only buy from them. Furthermore, other companies can't enter their market for one reason or another, and there are no substitutes for their product. Under those circumstances, FBCS would be a lot of bother and a waste of resources. In all likelihood, your customer would already be making huge margins, so faster and cheaper are of little interest. Likewise, who cares about better and smarter when you have a captive market?
A market economy won't sustain noncompetitive conditions like these indefinitely. But in every market in every industry there is a different combination of market forces at work. To the extent that competition is inhibited (entry barriers are high, competition levels are low, and substitutes are unacceptable), FBCS is inapplicable.
Understanding the forces in your industry.
Take time to analyze the forces affecting your industry, and seemingly illogical situations will start to make sense. You may begin to understand why margins are thin in some industries and high in others ... why some industries seem mired in the Dark Ages while others are advancing at the speed of light.
Industry analysis is a practical tool for deciding which product or market opportunities to pursue and how to pursue them, and for suggesting strategies to improve your competitive position and profitability in your current business.
If you want the force to be with you, you need to understand and master the forces in your industry.
Recommended reading:Competitive Strategy: Techniques for Analyzing Industries and Competitors, by Michael E. Porter, 1980, Free Press. A classic strategy book that brought strategic planning into the 20th century.