9 Differences Between Market-driving and Market-driven Companies

Did you ever notice that so many companies want to be visionary? Able to predict future products and services you need; but yet they also say they respond to market demand by being market-driven. Seems to me that’s an oxymoron. Can you be both market-driving and market-driven.

To disruptively break free from reactive business strategy and accelerate the agile and pivot-able strategy, we need to understand the difference between market-driving and market-driven companies. In his 2004 book, “Marketing As Strategy,” Nurmalya Kumar characterized these two types of strategies.

Market-driving companies rule the future – they push the envelope of possibility and consistently surprise customers by introducing unique value in exceptional brand new products and services. Market driven companies are doomed to fall increasingly further behind as they react to customer needs that will surely change by the time they deliver the ultimately out of date product.

The Market-driving and Market-driven Oxymoron

The oxymoron mentioned above is simply the observation that to be market-driven, you are letting the past, make your decisions. So then, how can you project a forward looking vision, envisioning a new and different future, if you are driving while looking backwards?

A Current Example

Consider Apple vs. Microsoft. Apple is a market-driving company anticipating trends and taking risk to consistently amaze and surprise customers with delivered value. Microsoft is a market-driven company missing trends and failing to take risk which forces it to react after dramatic market shifts have already occurred. Invariably, one can predict the fate of Zune vs. iTunes, or understand the relative adoption of Windows mobile vs. the iPhone. It’s not hard to see which approach is also more cost-effective.

Approach Makes Them Different

Market-driven companies perform exhaustive market research to fully understand an existing customer need. They perform multiple validation cycles with heavy documentation of requirements and written detailed specifications of features and benefits. A serially laborious process is then followed through multiple cycles of develop-and-test until a differentiated product or service is identified. For some, static well-defined market segments, perhaps this approach can still work. Procter and Gamble for many products, is a good example of being driven by these static segments.

Market-driving companies focus on a vision for the future, unhampered by traditional thinking and industry norms for product development. Market-driving companies are poised to make discontinuous leaps in innovation in terms of customer value (not just incremental capability and technology). These companies also have a mission to build unique value networks and engage in a bigger business ecosystem through technology and business model innovation. Apple’s iPod with iTunes is a good example of a value network in a business ecosystem.

9 Ways To Differentiate

In pondering what it takes, or how one can observe and more deeply characterize one type of company from another, let’s look at these key differentiators.

Market-driving	Market-driven
Disruptive	Reactive
Innovative	Incremental
Creative	Insignificant
Value	Features
Agile	Rigid
Competitive	Tentative
Decisive	Unsure
Clear	Confused
Dynamic	Static

To get a better understanding of these criteria, let’s explore them in more detail in the comparisons that follow.

1. Market-driving companies are disruptive to markets surprising customers with value. Market-driven companies are reactive to clear shifts that are late and underwhelming.
2. Market-driving companies are discontinuously innovative introducing radical efficiency. Market-driven companies are incremental in adding features to automate existing methods.
3. Market-driving companies bring creative solutions to difficult customer challenges. Market-driven companies bring insignificant responses leaving customer questions unanswered.
4. Market-driving companies create massive value to delight customers. Market-driven companies add expected features that fall short of customer expectation set by competition.
5. Market-driving companies are agile in their ability to pivot both vision and strategy. Market-driven companies are rigid, and unable to modify past decisions even for course-correcting good reason.
6. Market-driving companies are recognized as competitive by early activity. Market-driven companies are perceived as tentative, by their late reactivity.
7. Market-driving companies are decisive in quantifying and taking measured risk. Market-driven companies are unsure in researching and over-analyzing seemingly irrelevant risk.
8. Market-driving companies are clear in articulating new business model value to customers in simple terms. Market-driven companies are confused in their positioning and value messages to the market.
9. Market-driving companies are dynamic in regularly creating new and growing markets. Market-driven companies are static and can only serve existing often declining markets.

How To Become Market-driving

Like momentum keeps a freight train in motion, it’s generally easier to sustain a market-driving organization than to transform into one. It’s not easy to become a market-driving company, if  not one already. But if yours is a reactive market-driven company, expect to fall further and further behind, as the rest of the world is increasingly market-driving. Your company’s competition is taking the risk required to create the future that your company will be chasing.

To become a market-driving organization, you must first decide and commit to making the changes necessary. The transformation will require a shift in culture. Market-driving companies are led by marketing and the CMO’s leadership and backed up by forward-looking predictive data and prescriptive analytics. Being market-driving requires the right people, the right leadership, and the will to make the difficult changes. The vision for being a market-driving company must come from the top. The CEO must create and communicate a clear picture of what your company looks like as a market-driving company. It requires a pervasive strategy and continuous mentoring of management and staff throughout the organization.

Leave a comment. Which type is your company heading toward? Market-driving or market-driving?

Image credits: Djinn (hache) via photopin cc