Critical Thinking About Market Forces

Market ForcesWhen completing a Business Model Canvas, it is helpful to guide the discussion through the use of questions. When it comes to looking at market forces that will affect your business model, the following set of questions should help you in thinking more critically about your business model. These questions are broken down into five categories: market issues, market segments, needs and demands, switching costs, and revenue attractiveness.

Market Issues:

  • What are the critical issues affecting the customer landscape?
  • What market shifts are underway?
  • Where is the market heading?

Market Segments:

  • Can you define the customer segment further by demographic and psychographic characteristics?
  • Are there specific customer market segments that are growing or shrinking?
  • Are there peripheral customer market segments that deserve more attention?

Needs & Demands:

  • What are the customer’s biggest expressed/unexpressed needs?
  • What are the biggest unsatisfied customer needs?
  • Where is demand increasing/decreasing?

Switching Costs:

  • What binds the customer to a company and its offerings?
  • What switching costs prevent customers from defecting to competitors?
  • Is it easy for customers to find and purchase similar offers?
  • How recognized and important is your brand?

Revenue Attractiveness:

  • What are customers willing to pay for?
  • Where can the largest margins be achieved?
  • Can customers find and purchase cheaper products/services?

What market forces affect your business model?

What Is Disruptive Innovation?

Disruptive InnovationDisruptive innovation is not about the next new product as much as it is about transforming an existing market from being expensive and complex to affordable and accessible. A disruptive innovation is more about targeting a high profit/low margin business and creating a high volume/low margin alternative.

For example, it is very expensive to take raw materials and create steel. Moreover, to create a primary steel manufacturing production plant, like the ones developed by Andrew Carnegie, is very expensive. Mini-mills, by contrast, use steel scraps and recycled steel along with a much the simpler technology of an arc furnace to melt the old steel into new products. Originally, mini-mills produced only re-bar used to reinforce concrete, but once they were established, they moved up in the market to create pipes, wire, rolled steel, etc. They then began to challenge primary steel producers.

Amazon was a disruptive innovation. It started out as an online books store to compete with brick and mortar stores like Barnes & Noble. Once it dominated the book market, it added CD’s, movies, and finally everything else.

You’re best strategy is to build a company around a disruptive innovation in a small niche market with little competition and then dominate it. With your monopoly power, you can capture a premium value and use the margin to expand into other areas.

How can you use the concept of disruptive innovation to dominate your market?

Don’t forget to sign up for our free daily email delivery so you can get future inspirational blog posts deliver directly to your email each morning.

This article was originally published at Steve Imke’s Business Blog. To see more articles by Steve visit Steve’s Business Blog.