Change is a trigger for innovation.
The covid induced crisis that hit the world’s economy, has made firms of all sizes to reconsider their positioning strategy in the market. Businesses are expected to reshape themselves in the new world and a lot of it is already happening.
With changing times fuelled with uncertainty, the firms are pushed to make a difficult call, To pivot or persist?
To Persist- Focus Driven Strategy
The Law of Focus (here) states that for a firm to etch its presence into the user’s mind, the firm must focus on a strategic word that would resonate with the product. For instance , say “fast food”, and Mcdonald as the first point of recall.
This captures the essence of a focus driven strategy. Michael Porter defines focus strategy - the one where the firm strives to build and develop its product/ service to cater the needs of a particular competitive market segment. Under this strategy, the firm continues to keep focus on its present markets (specific consumer, product line, or geographic location)
The ability to cater through a focus strategy requires:
Although the payoff of targeting a niche category might be less than a growing market, the limited competition can help build a monopoly.
To sustain a monopolistic position, it's imperative to build a competitive advantage. These can be achieved through
To Pivot- Diversification Strategy
Simply put, diversification strategy is defined by adding new products in new markets. When a company plans to diversify it can do so in two forms:
Eg- Forward diversification- an ecommerce firm begins to deliver directly to customers, removing the delivery companies.; Backward diversification- Netflix began as a media distribution platform, now creates its own content.
Conclusion: These are unprecedented times and obviously both big and small companies are affected, with the smaller businesses being more impacted because of their limited resources. But smaller companies and startups are also nimbler and able to quickly transform themselves to tap new opportunities.
The product needs to evolve, as the customers and market requirements are changing.
Pivot, persist or coexist!