How To Dominate An E-Business Space

In How To Be The 'Go-To' Source, you learned the benefits of pursuing a focused strategy aimed at market dominance in a well-defined space. After completing 'How To Dominate An E-Business Space,' you will know:
* The concept of market selection.
* How to assess and segment your market.
* Which markets you do not want to target

Copyright (c)2000 Lina Group Inc. All rights reserved.

"Sustainable competitive advantage comes from being different. What the strategic mind focuses on is: 'How can we, by limiting what we do, by not seeking to serve all customers, by not seeking to offer every product, by not seeking to enter every geography, how can we, by limiting ourselves, be unique?' That is the essential strategic question."--Michael E. Porter

Find the "Competitive White-Space"

It won't be long before e-commerce capabilities among IT professional services are merely the ticket to entry. Already today, many web integrators are approaching commodity status and running into pricing pressures. The key to avoiding this trap is to pursue a market dominance strategy in which you establish yourself as the Go-To Source: Commit yourself to a market and develop such a superior ability to meet its needs and evolve with it that prospects actively seek you out and are willing to pay you a premium. To achieve market dominance, you must first decide how you will focus and then identify the unique market position you want to occupy. You must select your market.

So where do you begin? As John Keating, principle analyst with GartnerGroup/Dataquest puts it, "Look for the competitive white-space." Find a common critical business problem that no one is adequately addressing and solve it. Become associated with it. Own it.

One company that found the unoccupied territory and pounced on it is eloyalty. At $140 million in revenue, it stands for "solutions for unbreakable lifetime customer relationships." Its market position, and even the name, convey the problem it solves: Customer Loyalty. It's what eloyalty wants to own, and the entire team has bet the company on it. So much so, in fact, that eloyalty is in the process of spinning out from parent TSC as a separate, publicly-held entity. Says Julie Fitzpatrick, senior vice president of marketing, "Purity of focus has traction. After less than a year as a separately-branded entity, customers already proactively seek us out." She says that customers seem almost relieved to find eloyalty. "Unlike many players out there, it's very clear as to what we do and how we can specifically help."

Part Art, Part Science

Market Selection is not just a project, it's an ongoing analytical process without a clean, step-by-step procedure. It's an exercise that involves a highly iterative combination of collecting information, finding the patterns, looking for clues, and narrowing the options.

Andersen Consulting, a firm believer in the power of proactive Market Selection, will be applying that philosophy as it launches start-ups through its new venture capital unit, AC Ventures. Associate partner Paul Walker of AC Ventures agrees that Market Selection is a combination of art and science, so they use both systematic and informal approaches that combine secondary research with quantitative primary research and numerous conversations with executives. "It's a constant process of discovery and refinement. The critical component is making sure you understand what it's like to stand in the shoes of target clients. Then, and only then, are you in a position to understand your potential value proposition and target market."

In an environment of constant, rapid change, how do you select and commit to a segment? Suggests Keating, "Look at your portfolio of successes to date and systematically go about an analysis."

You can't be all things to all people, so what you are looking for is the intersection of external unmet needs and your own strengths and requirements. Conduct a thorough assessment. Externally, the key factors to consider are: What broad market do you currently serve? Where is the market going? What are the unmet needs today? What are the competitive threats? What common, critical problems will the market face tomorrow? Michael Porter's Five Forces Model is an example of an analytical framework that can help you structure such an analysis.

Segment the market place according to common characteristics, as opposed to traditional breakdowns, such as industry or business function. Look for common problems and patterns, such as culture, behavior, competitive pressures, how readily they adopt new technologies, the role the Internet will play in their businesses and industries, etc. Develop profiles of particularly attractive segments.

Once you have an external big picture, take a hard look at yourself. What are your strengths, weaknesses, limitations/constraints, and general characteristics? Develop a profile of your own company. Where do you want to go from here? Obtain objective outside counsel as needed. What are your actual and perceived core competencies? Target the distinctive competencies that truly set you apart.

Eliminate To Dominate

In an industry overflowing with opportunity, Market Selection is actually a process of elimination. Now that you have conducted an assessment, identify which segments you will not serve. For example, many Internet professional services are turning away "brochureware" web site work; others have decided they will strictly work on business-to-business e-commerce initiatives, leaving business-to-consumer work to other players.

Consider eliminating market segments that:

Are of no value to your future (not profitable, strategic, rewarding, skill development, etc.)

Are slow-growth markets

Lack competitive pressure of their own or the need/motivation to change

Are commodity businesses in which buyers are not willing to pay for value

Are not a good cultural fit for what you are or want to become

Don't particularly suit your strengths

Are outliers (don't not have much in common with the other markets you serve--e.g., is the only highly-regulated segment you've served, has buyer values that are radically different from your other markets, require a very different skill set, etc.)

Solution components and skills cannot be cost-effectively transferred from client to client

Fifteen-year-old Lante Corp. has been honing its focus for well over a year. Says CEO Rudy Puryear, "We've used Market Selection principles as a guide to focus on the opportunities that align with Lante's strengths and strategic direction. They've helped us see more clearly which markets bring us closer to our ultimate objective--and just as important, which markets to pass by."

Step Up and Place Your Bets

It's impossible to do justice to such a complex topic in a brief article, but the most important thing to remember is that Market Selection is a thought process, not a business process. As you work on this, constantly test and validate your choices in the market place with objective outsiders and prospects. If your hypothetical area of focus feels risky or uncomfortable, you have more work to do.

Your objective in Market Selection is to answer three questions:

1. Who are you targeting? (market segment you specialize in, a profile of your ideal client set)
2. What is the unique market problem or challenge you solve? (boiled down to 1-3 words)
3.What is the strong, central benefit you provide that will be of high value to the target? (Think of one to two words you want to "own" that describe the business result you will deliver)

Ultimately, you want to summarize all of this into a brief one to two sentence positioning statement that becomes your guidepost for building the business. It will direct your strategy, annual business plans, investments, recruiting, offerings, marketing programs, etc.

Now you have a market dominance vision. In the next article, we'll explore a streamlined approach for how you achieve that vision - some steps you can take to begin the process of becoming the Go-To Source in your chosen market.

Some Resources and Additional Reading

For industry analysis and segmentation: GartnerGroup/Dataquest, contact John Keating at (650) 964-2400For quantitative custom and syndicated research: Survey.com, contact Roy Caudill at (408) 979-8230

For more in-depth guidance on Market Selection: Marketing Management--Analysis, Planning, Implementation and Control, Phil Kotler, particularly Part II: Analyzing Marketing Opportunities

Part 1 of this article series.

Theresa Lina is CEO of Lina Group, Inc., a strategic marketing consulting firm that works exclusively with business-business IT professional services and management consulting companies focused on the New Economy. It specializes in helping those companies achieve market dominance in their select markets.