Wednesday, 24 June 2015

The "Market Gap Effect"

I was invited to a meeting as a guest the other day, where some senior staff were discussing an issue they were having.  My purpose there was to give an update on some project work I was helping them out with.

Manager #1 - "Organisation X is trying to muscle in on something that we've always done.  That can't be right, it was always said that the key difference between Org X and us was that we did this thing and they didn't."

Manager #2 - "Yeah, someone ought to stop them doing that.  That's our remit."

I sat there, wondering at what point was best to interject.  After all, I was only an guest.  Finally I felt that I needed to speak.

Me - "So, are you saying that they're disrupting your business?  Trying to takeover your remit?"

Manager #1 - "Well, no...we stopped doing that thing some time ago."

Me - "I think that it's really important that you look at your business model here, after all, that's what defines what you do and how you do it.  E.g If you're a local village grocer's shop you probably shouldn't suddenly change to selling sporting goods and stop selling food.  If you've pulled the plug on something that you supply which they need, then you can't really blame them for filling that gap themselves."

There was a stunned silence as everyone looked from one to the other.  Did they understand me?  Were they going to kick me out?  I stared back at them.

Chair - "I think we'd better start doing that thing again"


I realised that I'd just stumbled on a practical example of what I call "The Market Gap Effect".  It's nothing particularly complicated really, it's just that if you're doing something well, and customers like what you do, then if you stop doing it, you're going to leave a gap in the market.  The effect of leaving this gap is that someone else will fill it with their offering and take a profit from doing it.  Not only that, but you alienate your customers because you've cut off something that they need.

Now you may ask why they'd stopped doing a key activity, one that people were happy with and needed them to do.  I'm not really 100% sure, but in my travels through business, I've often found that many organisations either don't plan their changes very well, or they just feel that a certain area of the market isn't where they "should" be operating.

In the case of business change, they know where they want to go, and they're so focussed on that, they forget some key things that they were doing well in the past and eventually the people doing those things forget to do them too.

Where there's a need and the organisation feels that it no longer wants to operate in that area, then that's a prime case for selling, outsourcing, sub-contracting or whatever you feel is most practical.  You can't really just stop doing it, because your business has value wherever it does something that someone else needs or is prepared to pay for.  By just stopping doing that thing, you're giving the value away to whoever spots that the need is there and is prepared to service it.

So, beware of "The Market Gap Effect" because those people who buy things from you will need to go elsewhere if you don't supply.  I'd be glad to hear your comments on if you've seen this happen in other organisations where you've been.  No names needed.


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