Market confusion – what’s in a word?

Business strategists and marketers throw the word “market” around liberally, using it in different contexts with different definitions without explanation. This can be confusing.

I especially notice the difference moving from an investment perspective to an operational perspective. In the former, the term is often more seller-focused. For example, “who are the players in the market?” In the latter, the term is often more buyer-focused. For example, “our market is automotive companies.”

“The market is $30 billion.” (Overall bazaar, refers to the amount buyers are spending with sellers.)

“We sell to the higher education market.” (Refers to a group of buyers.)

“We can beat anyone in the market when it comes to color choice.” (Refers to a group of sellers.)

“Let’s take this RFP to the market.” (Sellers)

“The market won’t respond well to that message.” (Buyers)

Like I said, this can get confusing, especially if you’re trying to discuss something with precision, like a model for positioning.

For the sake of clarity, here are some definitions.

Market: The overall bazaar, including sellers of a product type and buyers of a product type. Buyers have some (but not all) overlapping problems to be solved (needs), and sellers have solutions with some (but not all) overlapping capabilities. The definition is typically somewhat loose, and different parties may not agree on the specifics. Analyst groups derive a lot of value from time defining and sizing markets.

Market segment: A group of buyers of the product type, filtered by one or more criteria. Needs are very overlapping.

Target market: A market segment the seller has chosen to target.

Product category: Aka Product Type. A group of products that solves a common set of problems. A product category can be broadly defined or narrowly defined (e.g, network security products or firewall products, respectively). Which is used is dependent on the context.

Competitive arena: The vendors competing to sell to a particular buyer. Over time, a company will find itself in the same competitive arena repeatedly, competing with the same sellers to meet similar buyer needs. This is likely a subset of all sellers, with many overlapping capabilities. In aggregate, this is typically a product category.

An important characteristic of these concepts is their semi-organic nature. A market needs both buyers and sellers, and the components are defined by what sellers are offering and what buyers are looking for, and these influence each other. Existing buyer needs (i.e., needs buyers are aware of) are the biggest factor in determining markets, but sellers can introduce new needs and influence the perception and priority of existing needs.

Sellers need to tread a delicate balance: get too far away from what buyers are already looking for and you risk “getting ahead of the market” and failing. Only follow what buyers are already asking for and you risk becoming a me-too product, competing only on price.

Threading this needle correctly is the goal of product strategy and positioning, which I’ll explore in a future post.

What people miss about Kevin Durant moving to the Warriors

With the first game in the 2017 NBA Finals behind us (as well as the entire 2017 NBA regular season), we can confidently say that Kevin Durant has made the Warriors a better team. No surprises there.

But what’s missing from many conversations is how Golden State has made Kevin Durant a better player. KD is playing at a higher level now than he ever did in Oklahoma. Sure, he’s not making more points, but he’s making them more efficiently, getting more rebounds, blocking more shots, generally playing better.

There’s all this talk about how unfair it is that KD went to the Warriors, how shameful it is that he joined the team that he lost to, about how there’ll be asterisk next to his championship ring since it’s not his team.

But what if that’s not what it’s about?

What if it’s just about someone who loves what they do (play basketball) and wants to do it to the best of their ability?

The Warriors don’t allow him to just win rings, etc. They allow him to play basketball at his highest level. It’s not about points made – it’s about how they are made. The Warriors were built to allow Steph Curry to do Steph things, and are based on what Draymond Green can do. And KD got lucky – he fit right into their scheme. He makes them better, but just as importantly, they make him better.

Who doesn’t want that?

There’s a saying that if you want to be successful you should maximize your strengths. You can focus on minimizing your weaknesses, but in the end, you won’t achieve your ceiling, you’ll just raise your floor. By being part of a team where your strengths are maximized, you can perform to your greatest potential. By joining the Warriors and ignoring the slings and arrows, KD found somewhere that his strengths would be magnified, and his weaknesses mitigated. There’s no surprise he’s willing to take less money to stay in that environment. It’s about more than winning, it’s about fulfilling potential and about transcending limitations.

There are some good lessons in here for the rest of us. Most people spend their careers fitting a square peg in a round hole and trying to sand down the edges. What if you found a square hole? Figure out what you do best, and find a place where that’s recognized, appreciated, and needed.

Of course people like sprawl

I just finished reading an article in the Atlantic Monthly about El Paso’s struggles with urbanization. The article suggests that there’s less demand for new urbanism because – shock! – people actually like the suburban lifestyle.

Of course people like the suburban lifestyle! This shouldn’t be a surprise to anyone. The problem with suburbanism and why we should promote urbanism isn’t because people actually like an urban lifestyle, it’s because there are hidden, long-term costs of suburbanism that are rarely accounted for. These include environmental costs, social and cultural costs, and basic costs of ongoing community service. Unlike many urban costs, these don’t come out of our pockets today, but come out in the long run.

This is tied to a larger American problem of mispriced goods. Capitalism is a wonderful system, but relies on a few fundamentals, including transparency, competitiveness, and accurate pricing. When goods are not priced correctly, we can’t act rationally. And suburbs are not priced accurately.

No wonder, then, that people love living in them! You get unbeatable convenience, room, and an easy lifestyle for much less than its worth. Unfortunately, our communities will pay the price in the end.

I found this post on new enterprise versus old enterprise software sales interesting:

The basic gist is that the traditional top-down enterprise software sales model (“old enterprise”) – characterized by executive-level contacts and long sales-cycle – is being joined by a new model that starts from the bottom and goes up (“new enterprise”). The author goes on to describe some patterns he’s observed, concluding that it’s really driven by the customer.

I don’t have fully fleshed thoughts on this, but a few things spring to mind:

  • As SaaS becomes more prevalent, more types of software will be available in the “New Enterprise” model.
  • Siloed data continues to be a problem – this is really only fixed by a top-down approach. It can be alleviated, however, by more open software. Different topic, but I expect “openness of data” to be a corporate requirement in the future (i.e., don’t buy software that tries to lock up our data).
  • The most successful companies will be those that can master both, using a bottom-up approach to support an eventual top-down sale. Winning products need to work (and be compelling) on their own, and support the complexity that a full-enterprise sale requires. Right now, most companies seem to be good at one or the other.


Packers lose NFC championship because of stupid coaching

After the Packers loss to the Seattle Seahawks, tons of ink was spent analyzing what happened. I believe most of the analysis suffers from “availability bias”: our tendency to treat recent events (the things most “available” in memory) as the primary cause. We tend to look at the last major play or two and give them outsized credit – the Seahawks’ two-point conversion, or their successful onside kick, for example (and we blame the individual players involved).

The outcome of a game, of course, isn’t because of a single play or a single player. It’s the result the entire game – and in this case, it’s the result of game-long conservative coaching.

I wrote off the game after the first series, when Green Bay didn’t go for a TD on fourth and inches. Obviously that series worked out (recovering a fumble on the kick return), but it was representative of an overall conservative outlook. The final score wasn’t the result of poor play by the players – especially poor Brandon Bostick – but poor coaching. It’s tempting to identify a single play or two, but if your gameplan rests on a single play or two, it’s not a good game plan.
The dagger for Green Bay was self-inflicted and came early in the fourth quarter, when the Packers had two three-and-out series in a row. In both, they basically tried to run it up the middle for no gain or a loss of yards, and eventually kicked it. After the first, they got an interception and another chance. A lot of columnists are blaming the guy who intercepted the ball for going down instead of running.
It’s a key play, but there is green in front of Burnett for yards and yards and if he had continued to return it, he might have at least put the Packers in field goal position. All he had to do was get around a couple of offensive linemen and get a block on Russell Wilson and the game may have been over.
Sure, he could have gained a few extra yards (or more). But the real blame lies with the Green Bay offense (and coaching), which took over and decided to do the same thing for three more downs, finally punting it away. The safety got an interception; that’s outstanding. It’s not up to him to put points on the board; it’s up to the offense to capitalize on his great play and put the game away. Green Bay has Aaron Rodgers and an elite offense; instead, they just handed it to Starks (not even Lacy) for lost yardage each play. If we have a problem with the defense – who just intercepted the ball! – not playing aggressively enough, we should have a much bigger problem with the Green Bay offense not playing aggressively after having time to think about it.
One might argue that their defense had played very well all day, so it makes sense to leave it up to them. But the truth is that Packers were very lucky – Seattle has one of the lowest turnover ratios in the league, and to suddenly turn it over a zillion times is uncharacteristic. Part of that can be attributed to a Packers defense that had them dialed, but there’s no way that turnover ratio is sustainable. Russell Wilson isn’t some third string yahoo. He’s one of the league’s best quarterbacks, leading one of the league’s best offenses. There’s going to be a regression to the mean.
Anyway, that’s what it comes down to for me: a conservative game plan and conservative play calling. You don’t win championships like that. The gameplan has to set up players for success, not count on them to make miraculous plays.
Can you imagine what Bill Belichick would have done with this? Not only would he have gone for it on fourth and inches, but he would have made every effort to put a dagger in Seattle’s heart, running up the score. You can call it classless, but it wins games. When your opponents are reeling and on their heals, you finish them off. You don’t lollygag around and wait for them to gather their wits. Overall, Seattle is a better team than Green Bay – Green Bay needed to get lucky and be smart. They got lucky but weren’t smart.