by Rivi Aspler
When I saw the following image in in the latest Forrester Wave™: B2C Commerce Suites, I realized both the intensity as well as the inevitability of the consolidation phenomenon in the industry.
I also came across the article The Consolidation Curve, by Graeme K. Deans, Fritz Kroeger and Stefan Zeisel, which describes the four stages of industry and market consolidation. Just like product maturity phases, markets have their own maturity cycle and phases, and it’s important for product managers to understand the dynamics of markets as they mature.
Stages of Market Maturity
Stage 1 – Opening
“The first stage generally begins with a single start-up or with a monopoly just emerging from a newly deregulated or privatized industry. But this 100% industry concentration quickly drops off. Soon, the combined market share of the three largest companies drops to between 30% and 10%, as competitors quickly arise to create the frontier of industry consolidation.”
If you are a product manager that is trying to introduce a new product to the market, you in for a tough fight. Innovation is indeed disruptive, and people don’t like disruptions. You are probably investing as much time into the definition of the new product as to the proving its advantages over the existing substitutes.
Stage 2 – Scale
“This stage is all about building scale. Major players begin to emerge, buying up competitors and forming empires. The top three players in a stage 2 industry will own 15% to 45% of their market, as the industry consolidates rapidly.”
If you are a product manager that is working in a scaling market, you face the harsh competition of the veterans and the new players that are starting to catch up. It’s time to make sure that your competitive advantage is clear. This advantage will determine if your company will be bought or left behind as a follower after the big ones ….
Stage 3- Focus
“After the ferocious consolidation of stage 2, stage 3 companies focus on expanding their core business and continuing to aggressively outgrow the competition. The top three industry players will now control between 35% and 70%of the market. By this time, there are still generally five to 12 major players.”
If you are a product manager who is working in a market that is in the process of focusing, you are probably not working as hard as you did before 🙂 (compared to the opening and scaling stages). You are still required to make sure that your value proposition is well perceived by the market and that your competitive advantage is indeed stable (don’t rest!), but now, sales people are the ones that are front and center, trying to get as much as possible market share.
Stage 4 – Balance and Alliance stage
“Here the titans of industry reign, from tobacco to soft drinks to defense. The industry concentration rate plateaus and can even dip a bit as, at this stage, the top three companies claim as much as 70% to 90% of the market. Large companies may form alliances with their peers because growth is now more challenging. Companies don’t move through stage 4; they stay in it.”
If you are a product manager who is working in a stage 4 market, you are probably a bit bored… incremental additions to the product will do just fine…. Until that new start-up arrives, knocking at your door, that will open up the market once again.
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About the Author
Rivi is a product manager with over 15 years of product life-cycle management experience, at enterprise sized companies (SAP), as well as with small to medium-sized companies. Practicing product management for years, Rivi now feels she has amassed thoughts and experiences that are worth sharing.