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Let’s talk about how it’s possible for a well managed company to lose market share



In September of 2013 when making the announcement that Nokia had been acquired by Microsoft, Nokia's then CEO Stephen Elop said these now famous words at the end of his announcement "we did not do anything wrong, but somehow, we lost."

And their loss was spectacular. In 2007 the company was valued at $150bn. The sale in 2014 to Microsoft was for $7bn.

There is no doubt that Nokia was a well managed company and they technically "did not do anything wrong."

For anyone that has had the privilege of being inside a well managed company, it is like observing a work of art. Well managed companies focus all their resources on meeting the needs of their established customers and by so doing keep their competitors at bay.

This is the way well-managed companies should operate.

However very few businesses understand the extraordinary power customers wield over the fate of a business. In their piece in the Harvard Business Review entitled Disruptive Technologies: Catching the Wave Jospeh L. Bower and Clayton M. Christensen ask this question:

"But what happens when customers reject a new technology, product concept, or way of doing business because it does not address their needs as effectively as a company's current approach?"

Here is the scary reality. Focusing 100% on current customers and markets is risky business. What a paradox! Again from the Harvard Business Review quoted above:

"In fact, the processes and incentives that companies use to keep focused on those main customers work so well that they blind those companies to important new technologies [or new ways of doing business] in emerging markets. Many companies have learned the hard way the perils of ignoring new technologies [or ways of doing business] that do not initially meet the needs of mainstream customers."

The message is clear: Companies also need to be aware of what is happening at the peripheral of their mainstream customer base.

For businesses that have already stretched their mental bandwidth from focusing on delivering to their mainstream customers (as they should) this is a challenge.

So what can a business do?

Bower and Christensen make this suggestion:

"To avoid allowing small, pioneering companies to dominate new markets, executives must personally monitor the available intelligence on the progress of pioneering companies through monthly meetings with technologists, academics, venture capitalists, and other nontraditional sources of information. They cannot rely on the company's traditional channels for gauging markets because those channels were not designed for that purpose"

So there are ways to prevent a well-managed focused company from losing. You just have to have a clear strategy in place.

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