Thursday, November 19, 2009

Creating More Pies

  • Our competitor has 40% of the total market share!
  • There are so many competitors going after the same market share!
  • How do we increase our market share of the business?
  • How much market share can we target to gain?
  • Total market share is...
Instead of looking at market share pie charts with dread and the usual concerns, how about creating more pies?

The pie chart has been used in countless business presentations for a very long time. The earliest known pie chart is generally credited to William Playfair's Statistical Breviary of 1801, and has been criticised as the most ubiquitous statistical chart in the business world and the mass media (Wikipedia). But most people would argue it's effectiveness in presenting market share or comparison of various segments represented by the pie chart "slice".

Perhaps a more plausable disadvantage plaguing the pie chart is how it is causing modern executives to "think within the pie". The pie chart in all it's simplicity has created a restricted focus on how to operate and improve within the circle of the pie itself. And maybe the analogy of "thinking outside the box" should be changed to "thinking outside the pie".

Thinking outside the Pie

So, how do we think outside the pie? Basically "thinking within the pie" means focusing on the segments (or slices) within the pie - and usually the desire is to expand our slice (or market share, dominance, percentage of sales/revenue/profit. But this enless drive to "expand our slice" will reduce another slice within the pie, and when the competition awakes to their slice being eaten away, will introduce drastic counter-marketing plans to win back a portion of our slice or even someone else's slice of the pie...and this process repeats automatically everyday in a competitive environment. Eventually some slice gets eaten up completely through organic or hostile takeovers. While new entry to the pie chart just consumes someone else's pie share again.

Several strategic alternatives (to create more pies) I am suggesting here includes;
1) A strong strategic partnership to grow the overall pie chart. Does this violate antitrust or other (competitive) trade laws? I'm not sure exactly where to draw the lines, but what I am saying is to promote a healthy collaboration to share knowlegde, technology and technical expertise - which we have seen so many examples in business partnerships. So, how does this help the company to improve the market share pie chart?

Before we go any further, it is imperative for us to overcome the old mindset and limitations of the pie chart and represent business growth within the pie chart itself.  We need to think out of the pie and find ways to expand it as a whole. A delicious 5.0kgs cheese cake can be sliced into 10 slices of 0.5kg each. But expanding the cake to 10.0kgs allows each person a fulfilling slice of 1.0kg.

A caution to over-ambitious companies whose focus is only on ensuring a larger slice of the pie; the slice, or pie chart you are operating in may be made irrelevant by aggressive companies that choose to expand the total market share instead.

2) Creating more pies. This is simply line extension or product (use) expansion strategy, or the blue ocean strategy - how to create uncontested market space and make competition irrelevant. Again, thinking out of the pie creates new opportunities for existing products and endless market opportunities. For example, lobbying for automobiles to be compulsory-insurred allows insurance companies to expand their property insurance market segment. Business practices also create new pies, for example ISO and other quality certifications creates new pies for consultancy businesses.

Honda grows soybeans in Ohio so that it can fill up cargo containers being shipped back to Japan is an example of creating more pies. The "pie" here does not need to be limited to the same market - that is operating and thinking within the pie.

3) Overcoming limitations. So, if I had only 1kg of flour, how can I create 2 pies with limited ingredients? Well, again, the focus here is not to think of limitations. While limitations are real issues, we can still overcome them simply by focusing on a wider picture. If you wanted to, or had to create 2 or more pies with the 1kg of flour, naturally, you would find some ways by adding other ingredients to create more pies. This means the present limitations only applies when you don't change your scope, and insisted on only 1 chicken pie, when you could have both chicken and beef pies.

This idea works powerfully with positive thinking. Continuous positive thinking will put you in a driving gear that's attuned to absorbing new and creative ideas from all over. I'm not going to cover the science of positive thinking here, but to share a good quote I've heard, "positive thinking does not always guarantee positive results, but negative thinking always gets you negative results". The more your immense yourself in a thirst and hunger for positive and creative ideas, it will come to you, because naturally you are actively seeking out to overcome your brains blind spots and seeking out those ideas.

So, what pies can you create today?

I believe this concept can be applies in almost every situation. Even in expanding 24 hours a day! Delegation or outsourcing of certain activities creates more time, or more pies. So the next time you look at a pie chart, don't fret or fear it, but remember this, "how do we think out of the pie?" and how to "create more pies?".

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