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| Issue 54 |
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Ari Manor, CEO, ZOOZ
On strategic development in practice
When and how should you change industries?
If the industry you are currently in, meaning the market
in which you are competing, is too competitive and
crowded, and you don’t foresee any significant growth
there for you, the time may have arrived for you to look
for other industries in which you can grow. Before you
go about doing so however, take into account that even
if the grass on the other side seems greener, it’s not
always that way. Therefore, before deciding to expand to
a new industry and market, you have to thoroughly
examine the new market - its growth rate, the
competitors, the degree of profitability, the entrance
obstacles that you must overcome, and to what extent the
new industry leverages your abilities.
Here are several options and related remarks for entering a new market:
- Expanding to new territories: Expanding to new geographical regions or market segments and niches in your industry is not considered entering a new industry, but you should definitely consider this before you set your sights on other industries. The experience and knowledge that you have gained in your current industry will serve you well if you expand to new territories and grow within them. For example – a company that does business in Israel needs to consider whether it will be easier and/or financially worthwhile if it expands to Europe, rather than starting to do business in new industries in Israel.
- Marketing new solutions in the current industry: Offering new solutions that you have not offered to date, to customers in your industry. For example – products at a different price and quality than what you have offered to date. This option is also not considered entering a new industry, but it is important to examine it before you think about other markets. This option may increase your growth, and strengthen your presence in your current industry. For example, according to the
Pincers Strategy, you offer goods and services at two price tiers – premium (prestigious) and basic (popular), thereby attacking your competitors from two directions – above and below. Moreover, if you manage to combine advantages of both groups of competitors from your industry in one solution, you have joined the highway that will lead you straight to a Blue Ocean with no competition. For example – the first FOX stores combined two types of sales points – a market stall and a branch of a retail fashion chain, and succeeded in selling cotton shirts to all of Israel in tiny stores (various sized stalls) with branding and integration and location in the shopping malls (like fashion chains). A more detailed description of this appears in the first part of
- Entering an industry that provides complementary goods and services: For example, a car manufacturer or importer can expand and offer car financing services, and/or car rentals, and/or leasing, and/or parking lots. When you implement this option, it’s important to take into account how the competitors in the complementary industry will react, and whether theyú may invade your base industry in response (such as starting to provide cars), or withhold services from your customers (such as refusing to fuel their cars). On the other hand, if you offer a wise and attractive combination of your solutions and complementary services, you may have joined the highway to a Blue Ocean – that competitors in your industry and in the complementary industry will not be able to compete with. An example is Bagir, which developed a technology making it possible to launder a tailored suit in a regular washing machine. The competitors in Bagir’s industry (textile manufacturers) cannot imitate Bagir because their technology is patent-protected, and the competitors in the complementary industry (dry cleaning services) are not set up for manufacturing suits. A more detailed description of this appears in the second part of
the same article.
- Entering alternative industries: In the transportation industry, for example, a car manufacturer can enter industries that offer alternative transportation solutions: motorcycles, bicycles, busses, trains, etc. In such a case, it’s important to first acquire the required complementary skills in order to succeed in the alternative industry, since the standardization, production processes, target population, marketing emphases and marketing and distribution channels may differ. The safest and most convenient way to penetrate an alternative market is by acquiring a company that is already active in the alternative industry, and using that company as a bridgehead to penetrate the alternative industry.
- Entering an entirely new industry: Start offering solutions that have no connection to the solutions that you have offered to date. Here you will find it difficult to leverage the abilities and knowledge that you acquired in your industry. Therefore, the best way is to manage it like an investment portfolio – carefully examine business opportunities, refuse the majority, and acquire suitable companies with technologies you understand that operate in a growing and attractive market (profitable, not too competitive). For example, when
Noga Engineering, which manufactures industrial work tools using a chip processing technology, acquired the dental implant company
MIS, it very wisely acquired a company that also manufactures using chip processing technology, which operates in a huge global and rapidly growing market (20% + annually).
In summary: Before you penetrate a new industry, you should examine other opportunities in your current industry. If none exist, and you’ve identified another attractive industry – acquire a suitable company that will be a bridgehead for you into the new industry.
see this column about the book Double-Digit Growth
For additional articles on strategy:
For more information about identifying strategic growth directions:
For supplementary information on Growth Strategy,
Innovation ideas not yet realized
Ideas for innovations in cooking pots
following ideas were developed using various thinking tools, and do not exist at present (to the best of our knowledge):
- A telescopic pot whose volume can be increased by 2, 4, 6 liters… (and shrunk back when the extra volume is no longer required).
A pot with a flat lid and inverted handle (that allows easy and stable stacking of other pots and containers in the fridge).
- A pot with a timer built-in to the side of the pot or the lid (to see how long we have been cooking for).
- A self-stirring pot (with a battery or steam operated rotating handle that can be removed from the lid).
A pot on wheels (that can easily be turned on the stove, or moved around on the counter or table).
- A vacuum pot (with a lid that sucks out the oxygen in the pot and keeps the contents fresher for longer).
- A cboard pot (where you can write the contents on the side of the pot with an erasable marker).
- A calendar with prizes – you scratch each square as the day arrives and see if you have won a prize (like the lottery scratch cards).
- A steam-whistle “singing” pot (the steam exits through the lid / nozzle with apertures that whistle a tune).
- A bottomless pot that fits onto another pot instead of a lid and prevents boiling water from spilling over.
A tip on effective management
What did the snake sell to Eve?
The question “what do we sell?” forms the basis for every company’s marketing strategy. For technology companies, the answer to this question is not always self-explanatory and clear to everyone. The difficulty arises from a blurred boundary between technology and these companies’ products.
I’ll give what I think is an excellent example, as it so happens from the Bible.
"You will not surely die," the serpent said to the woman. "For God knows that when you eat of it your eyes will be opened, and you will be like God, knowing good and evil." (Genesis, 3:4,5).
What is the product in this example? What is the snake selling to Eve and why did she “buy” what he was selling? The simple answer – an apple – is incorrect. Eve would not have taken the risk for an apple. The snake is selling Eve the ability to differentiate between good and evil – and she is willing to pay a great deal more for this.
In the above example, the “technology” is the apple – an edible fruit. The “product” is a fruit that enables its consumers to differentiate between good and evil. The product’s value, the target population, and the marketing methods are derived from this.
And if we’re talking about apples, I’ll give another example: Apple (Mac) products. Yes, they technology based, but not one that is particularly unique or new. The iPod is a terrific example: Apple did not market the technology – “a hard drive with an application to manage audio files” – but rather a product that changes the way consumers buy and listen to music – or in their words “1,000 songs in your pocket”. This product belongs to a group of complementary services / goods – iTunes.
Would Apple and the iPod have succeeded so well if they would have sold a technology? Is technology their main asset? Does it constitute a competitive advantage? I think that the answer to all three questions is NO.
And what about you? Does your company market its technology or products? How does it affect your sales processes? How you deal with competitors? What are your assets – are they strictly or mainly technological? How do these assets affect how you define your product?
More on technology and technology-based products to come in the next issue
- The column was written by: Neta Weinrib, an expert on marketing technological products. Information about Neta appears
- More information about marketing assistance for technological products appears