Albu On Strategy

What Business Are You In?

Our title this month is a simple question, but not always easy to answer and often overlooked by business leaders as they consider their future. Today’s business environment is characterized by fast, sweeping change and uncertainty, and many business leaders are facing a steep uphill climb to grow their businesses. These challenges might have been caused by commodization of maturing markets or disruption, and changing consumer behavior. No matter the cause, they may feel like they experienced the “boiled frog phenomenon” (If you put a frog in boiling water it will jump out, but if you put the frog in cold water that is slowly heated the frog will not perceive the danger, and will eventually die). The result – these leaders were too late in adapting to the changing market place, and because of their delayed efforts, they are now facing a risky “step change transformation” to improve performance.

The bad news is that based on research by the Boston Consulting Group, 75 percent of step change transformations fail to restore long-term growth and competitiveness (bcg.perspectives, 12.20.2013). So, the better remedy is to avoid a step change transformation from the start. Yet, many business leaders fall into the trap of not pro-actively altering their business when faced with a changing marketplace.  We are all familiar with once leading companies like Kodak, Blockbuster, and Research in Motion who were unsuccessful in adapting to a changing marketplace.  These companies were so focused on short-term performance that they overlooked the changes taking place around them.  They were experiencing healthy short-term financial performance, which provided a false sense of security.  They waited until performance was already declining before they reacted, rather than adapting to or driving change as it happened.

How should business leaders avoid falling victim to the “boiled frog phenomenon”? They need to answer the question, ‘what business are you in’. The biggest mistake leaders make in answering this question is to only look at their traditional competitors, which leads to too narrow a definition of the business and marketplace. A broader view will include non-traditional competitors – companies solving the same problem as you, but simpler, easier, or cheaper – they play on the fringe of your industry. For example, the newspaper business is not just a content business, it is also an advertising business. Therefore, newspaper competitors include anyone targeting newspaper revenue sources (e.g., Craiglist, eBay,, and Google).   

To answer the question ‘what business are you in’ correctly, you need two things: One, understand who your customer is, and two, what problems are you are solving for them. The results can be powerful. By getting your business definition and competitive set right, you can pro-actively start identifying emerging changes in the marketplace and the companies that threaten your business model.

As in the “boiled frog phenomenon”, change usually happens slowly, and it is not until change reaches the tipping point that most companies recognize the need to adjust their strategy.  By asking ‘what business are you in’ and actively monitoring market and competitive moves you will have a greater opportunity to adapt to market challenges.

We are always interested in your thoughts and comments, so please e-mail us about your experiences. We’d like to hear from you.

Posted in Leadership, Newsletter, Strategy Development.