Customers usually differ from each other on many factors – purchase rates, price sensitivity, switching costs, rationality, time to respond etc. – and these differences affect the dynamics of competition. The table below gives some illustrative characteristics for two distinct customer groups in the electricity market discussed in Briefing 57.
| Low users | High users | |
| Fraction of customers in each group | 0.7 | 0.3 |
| Quarterly usage | $400 | $600 |
Markets are often in a process of emergence, when new potential customers develop, driven by product and/or price improvements offered by suppliers, as well as by political, economic, social or technological change (“PEST”) factors. This customer development process has important implications, especially for type-1 rivalry.
Figure 1 shows market development for the consumer electronic device discussed in Briefing 46; a durable product that customers upgrade or replace – with a competitor (solid lines) and without (dashed lines). When building the market ...
Continue Reading →There are a few candidates for title of the most useful framework in strategy dynamics – and this is sure one!
The “quality curve,” lays out the quality profile of individual items within a certain type of resource. It shows how much each item – each customer, product, employee, etc. – contributes to some important measure of quality.The upper part of the following figure shows an example, constructed by showing first the revenue from a company’s largest customer, then adding the ...
Continue Reading →The previous briefing explained that accumulating resources are important.
So now we need to understand how to work out the result when it happens…
The following figure shows how to picture this idea. The box icon in the middle is the ‘tank’ containing the cash in your bank account, and the oval icons are the pumps, pumping cash in and out at some rate. If the inflow and outflow rates differ, as they do here, you know exactly how fast the resource ...
Continue Reading →At one level, Resource Accumulation may seem rather simple and obvious.
‘So what?’ you may ask yourself.
Well, it’s monumentally, massively important, and while it may be obvious in itself, its consequences are truly staggering.
The next few briefings are going to talk a lot about ‘accumulating resources’.Just to recap, in earlier briefings I explained the importance of focusing on how organizational performance changes over time, and also how to trace the causal logic that explains this performance, until that chain ...
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