Is a market disruption headed your way? How can you tell?
Intel’s Andrew Grove advises you to stay alert to potential market disruptions before they hit with full force. He discusses six potential sources of drastic change, and he advises how to keep tabs on them.
Read more to learn how to see market disruptions on the horizon.
Develop Your Threat Radar
Drawing on the work of Harvard business professor Michael Porter, Grove identifies six forces that shape your business environment: existing competitors, potential competitors, regulations, customers, suppliers, and complementors.
Your company likely interacts with most, if not all, of these forces already and deals with their normal fluctuations. However, a market disruption—a drastic change in any of these forces—could push your business into a strategic inflection point. Below, we’ll clarify how for each term.
The Six Sources of Potential Market Disruption
1. Current competitors: Competitors can force a strategic inflection point if they’ve developed a product, technology, or marketing strategy that could dominate the market and start cutting into your share. Pay attention to your rivals: If a competitor starts hitting a growth spurt, you need to understand why.
2. Future competitors: Most businesses have a firm grasp on their current competition, but don’t consider future competitors. Startups or smaller companies might find a winning strategy, or international firms may start exporting products across borders—cutting into your market share with their product or strategy. Keep an eye on your industry’s promising newcomers, as you would for your established rivals.
3. Government policies: New laws and regulations can upend your business model. Taxes can weigh down your budget if you haven’t planned for the extra expense. Tariffs and embargoes could leave you scrambling for a new supplier if your supply chain relied on international imports. In short, government policies can play an enormous role in the markets and resources your company can access. That’s why it’s crucial to keep tabs on the laws and regulatory agencies relevant to your industry. To do this, you’ll need a legal team that understands how policies could impact your business before they take effect.
4. Consumers: Consumers have a lot of power over your company. Changes in consumer preferences could expand your revenue or cause it to dry up completely. Pay close attention to what your customers want so you can keep them coming back to your product. Also pay attention to new consumer trends as they develop so that you can anticipate and meet their needs by successfully bringing the right product to market at the right time.
5. Suppliers: Most businesses depend on a wide range of suppliers for raw materials, labor, finished parts, and so on. Your suppliers face the same market disruptions you do and may try to hike up their prices. Small fluctuations in prices are normal, but a giant, unexpected price hike might torpedo your budget.
6. Adjacent businesses: Adjacent businesses are those selling goods that complement yours. For example, a flashlight company and a battery company are adjacent businesses: The battery company coordinates its designs so the batteries will work in the flashlight. But if adjacent businesses suddenly stop selling compatible products, your products could quickly become obsolete. Keep an open channel of communication with firms in your adjacent businesses. You’ll need to anticipate changes in their products to stay compatible and competitive.
|Auditing Your Business Environment|
Grove identifies where to look for potential market disruptions on the horizon. However, his advice of simply “keeping tabs” on these forces may not always be feasible. After all, this is a lot to pay attention to at once.
This is why some companies have opted to undertake a formal audit of their business environment. By standardizing the process of examining the state of each of these forces in detail, you lower the chance that there’s something you missed.
This often takes the form of a list of targeted research questions to make sure you leave no stone unturned. Below are some examples of research questions for each of the six forces. These are all things that are good for your company to be aware of anyway. But you should really sit up and pay attention if you conduct multiple audits over a period of years and notice a dramatic change in the answer to any of these questions.
1. Current competitors: For each competitor, ask yourself: What is their strategy? What are they doing better or worse than anyone else in the field? What are their strengths and weaknesses? Who are their primary customers? What kinds of financial resources are they able to leverage? Who are their major partners? Are they doing anything interesting or new?
2. Future competitors; Write out a list of potential competitors. Consider both promising newcomers and established international firms that may start moving in on your market. For each one, ask the same questions as for a current competitor. Additionally, and most importantly, consider how much they’ve grown recently.
3. Government policies: To anticipate regulatory and legal changes before they take place, you’ll need to consider the political environment. What kinds of laws are on the table? What laws are currently under debate? Additionally, consider your legal exposure. Look at court cases involving regulations in your industry—what were the rulings?
4. Consumers: Are customers in this industry typically loyal to one brand, or do they switch back and forth? What kind of disposable income do your customers typically have access to? Do their patterns of consumption change seasonally or move up and down with the economy? What are they typically looking for in a product?
5. Suppliers: What are your company’s most important supplies? And how flexible is your supply chain? In other words, what supplies could you easily find from a new buyer, and for what supplies are you dependent on one supplier? Can you foresee any disruptions in their industry?
6. Adjacent businesses: What are your adjacent businesses? For each company selling complementary goods, ask yourself: What are their overall strategies? What are their plans for the future? Are there any reasons to think they might change up their product line? Consider their competitors, their suppliers, and their customers: Are any of your complementors hitting a strategic inflection point? If so, how would you react in their shoes?
Keep Your Ear to the Ground
To keep tabs on these forces, Grove offers three pieces of advice:
- Listen to a wide range of perspectives. Everyone in your organization has access to different information based on their interactions with customers, suppliers, business partners, and coworkers. Any one of them could be the first to sense something has changed.
- Take your employees’ warnings seriously. When someone brings an issue to your attention, treat it with serious consideration—it could be your first warning of an impending crisis. Grove found that at Intel, employees sought him out to warn him of the memory chip crisis before he realized the extent of the problem.
- Pay close attention to changes in the messenger’s tone. If someone who’s normally even-keeled when discussing market changes suddenly starts sounding anxious or worried, it may be a sign that they’ve identified your next strategic inflection point.
|Get People to Speak Up With Psychological Safety|
Grove’s advice to keep your ear to the ground and listen carefully to all warning signs—regardless of where they’re coming from—won’t be possible to follow unless employees feel a sense of psychological safety—that they won’t be punished or humiliated for their concerns or mistakes.
Experts offer six important pointers for cultivating psychological safety in your teams.
Foster personal connections: Your staff will be more comfortable speaking up or sharing bad news when they feel a sense of personal connection to their managers and coworkers. Try to find things in common with your employees and designate time for your teams to socialize and bond with each other.
Value feedback: Your employees will feel respected and encouraged to speak up if you demonstrate that you value their input on matters large and small. As Grove advises, actively solicit feedback from your employees to show them that you want to hear what they have to say.
Anticipate your team members’ reactions: When handling conflict, criticism, or uncomfortable topics, you may unintentionally undermine your employees’ sense of psychological safety or willingness to take risks if they misinterpret your feedback as an attack on their competence or character. You can minimize this effect by anticipating your employees’ reactions as you prepare for meetings—have a plan for what to say if they don’t take your feedback well.
Approach problems with curiosity: If an employee is not performing well, begin from a place of curiosity rather than blame when you discuss their performance. Instead of leading with criticism, talk to your employee to figure out what’s going wrong.
Turn conflict into collaboration: Conflict among team members can also undermine psychological safety. If someone feels their side or perspective is “losing,” they may doubt the fairness of the process and disengage from the team. They may also feel scorned and focus narrowly on “winning” at the expense of other important goals. Try to frame debates as collaborators seeking a mutually desirable outcome.
Check in often: You can maintain a sense of psychological safety by periodically assessing your teams’ feelings through anonymous surveys. This will provide a sense of whether your efforts at creating a sense of psychological safety are working.