The Copernican Theory of Fragmented Markets
There are many companies a
The managed services market is never without its intrigue. Vendors, application developers, tool providers, platform aggregators, managed service providers, solution providers, and end customers all swimming about in the fragmented, highly competitive, primordial soup that is a growing market. Now, for the challenge…
There are many companies among us who are vying for the managed service provider or solution provider business, that prescribe to a vision that is hindering the explosion of opportunity in this market. Vendors, application providers, peer group organizers, and service providers are among this group.
We, the above mentioned suspects, are not the center of the solar system or universe. The Sun does not rotate around us, nor do solution providers, managed service providers, or end customers. So why do we keep acting like they do?
This may come as a shock to some of you. Possibly even bruise egos. Some of you may accuse me of heresy. Perhaps you should sit down, maybe take some water.
What’s Next
Fragmented markets must eventually organize. They cannot, by nature, remain fragmented if there is a legitimate growth opportunity to be had or if scale is required to obtain that growth. Why? Because singularly focused applications or companies, or specific tools that deliver a specific value, are in-of-themselves unable to deliver the growing ease-of-use and broader applicability that the scaling market will require of them.
If I’m an ice cream shop and I make the best vanilla ice cream in the world, how long will it be until a customer asks for chocolate or strawberry? What do I do then?
- Do I learn how to make chocolate or strawberry ice cream?
- Do I send them to a partner who makes and sells those flavors?
- Do I buy and integrate a partner who makes those flavors?
- What do I do if the customer starts to ask for adjacent products like milk shakes and sundaes?
- What if they ask for a gluten free, dairy free, soy free chocolate malt? Then what?
The point is the universe doesn’t revolve around my vanilla ice cream shop. It doesn’t matter if I make the best vanilla ice cream in the world. Customers will eventually demand I diversify my offering into additional flavors or confections. My customer will start to demand more “functionality” from my company in the form of product breadth, an elegant customer experience, and the convenience of getting all of those things in one place.
Food for Thought
What are you doing about offering different flavors?
- What is your plan for milk shakes and sundaes? Can you grow without offering those things?
- Can you stay singularly focused and niche forever?
- Do you see strong growth opportunity or are you already at war in a market share fight?
Beware — market share battles in nascent, fragmented markets should be a clear wake-up call: It’s time to revisit the long-term strategic plan.
“Geocentric Companies” – those organizations that believe they are the center of the universe and their customers revolve around them – are everywhere in this fragmented managed services market. Can you spot them? Once you convince yourself that your customers are beholden to you, expect trouble.
“Heliocentric Companies” – those that believe the universe revolves around their customers – are the ones that emerge from the fragmentation and assume leadership positions, sometimes for the long-term. They separate from the pack by offering the breadth and customer experience required to sustain growth and long-term value to their customers.
What kind of company are you? More importantly, what are you doing about it?
Justin Crotty is Vice President Services North America at Ingram Micro, Inc. He oversees Ingram Micro Seismic. Monthly guest blog entries such as this one are part of MSPmentor.net’s 2009 Platinum sponsorship. Find all of Crotty’s blog entries here.
Hi Justin.
May I say, a great article. I wrote something very similar on our own HoundDog Blog this week.
It was from a slightly different angle, ie: my thoughts on how MSP software should be designed from the MSP’s customers perspective rather than the MSP themselves … and some ideas on what that should be.
Chris Martin
HoundDog Technology
Easy, Afforable TOOLS for IT Support
Justin: I must admit, I selfishly want MSPmentor to be the “center” of the managed services media universe. Hopefully that means we serve readers well and keep putting their interests first. And I suspect readers will give us an earful (or stop visiting…) if we lose our way.
But I guess my point is this: Whether you’re building a media company or technology company, entrepreneurs often think about how to ensure their businesses become the center of a universe.
On the upside, that can lead to great customer service. On the downside, it can lead to closed-minded business practices.
Chris: Good to hear from you.
Readers: You can find Chris Martin’s blog string here.
There is certainly nothing wrong with wanting to provide best-in-class service, serve your customers in a world-class fashion, or be viewed by your customers as a terrific partner. We all approach our businesses in that way.
The key thing to remember, however, is that your customers’ businesses are more important to them than you are, regardless of what you do for them.
It is that view of the world that can make you a world-class provider of whatever solutions or services you provide. It can also give you the right perspective when developing offerings, solutions, or programs that will suit your customers.
Justin, I really enjoyed this article and agree with the customer centric aspects. I’d like to challenge the need to un-fragment in a market though. No doubt scaling has some benefits but losing business dexterity/nimbleness is often a part of the price paid for scale.
One of the reasons why smaller is often better is the ability to be nimble in shifting markets, adding offerings like the flavors you suggest, adapting to your marketplace more quickly, easily and painlessly.
My field has a few very large players and is very fragmented after that and I think it will stay that way because little nimble independents like me can shift into niche programs for tech (like I have), generalist programs when needed (like I have), startup or troubled credit programs (like I have) and oddball financing programs (like I also have).
Stu
Stu@southernlendingsolutions.com