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February 8, 2006

Excerpts: Let Go to Grow -- Part II

By: 800-CEO-READ @ 3:34 PM – Filed under: Management & Workplace Culture

COMMODITY MARKETS DEFINED
Where are the growth engines for businesses today? How do firms avoid the commoditization that is occurring across so many industries? The answer may surprise you: Commoditization forces the growth engine and is the ally of the growth business, though it will remain the enemy of the fixed-structure company. Its time to reinvent your organization.
Here are the modern realities of business:

Profitable growth is difficult

It has always been difficult to build profitable growth and even more difficult to sustain a profitable growth path. Only a tiny fraction of firms have ever succeeded in doing so. The pragmatic reality is that most long-term business growth barely keeps up with economic growth, and revenue increases hover around the national inflation rate.
And getting exponentially more difficult
Even if youre managing to keep up with the ever-increasing pace of competition, it is getting exponentially more difficult to grow profitably as the interaction of deregulation, globalization, and Internet-based technology fuels more and more competitive intensity. This is not a linear evolution but a compounded and accelerating steep curve. Each of these critical forces fuels competition; globalization of manufacturing and labor, Internet-enabled electronic commerce, Internet-enabled supply chain management, and the deregulation of telecommunications are obvious instances.
When these changes interact and feed on one another, entire competitive ecosystems lose their traditional identity and levers of control. At this point, there are very few industries that are not being reshaped by these changes, forced through the stages of creative destruction. Telecommunications, travel services, consumer electronics, auto manufacturing, computers, banking, software, and the music business have all been reinvented in the past decade. In some instances, deregulation is the pivot; telecommunications is the most obvious instance. In others, it is globalization, as in consumer electronics and auto manufacturing. In still others, the Internet subverts the status quo; travel services are an example. Once any of these forces gains critical mass, the others come into play, creating a new level of competitive intensity that accelerates. Almost inevitably, the three forces converge at some point; the Internet is in many ways part of the globalization of labor supply and in itself a form of deregulation in its removal of protective barriers to entry, control of channels, and constraints on the flow of information on prices and services.
This content is excerpted from Chapter 2 of the book titled, "Let Go to Grow: Escaping the Commodity Trap", authored by Linda Sanford, with Dave Taylor, copyright 2006 by International Business Machines Corporation, ISBN 0131482084, published Dec. 2005 by Prentice Hall Professional. Reproduced by permission of Pearson Education, Inc. All rights reserved.