Using Crisis to Shape Your Market

Reviewer

Dr. Lourival Carmo Monaco Neto, Postdoctoral Research Associate

Article

Don’t adapt, shape! Use the crisis to shape your minimum viable system – And the wider market by Suvi Nenonen and Kaj Storbacka

Journal

Industrial Marketing Management 88, 2020, Pages 265-271

Summary

Even the worst crisis offers some silver linings. These moments of turmoil can be used to both highlight even the minor weaknesses of your organization and rapidly fix them, as well as make more dramatic alterations to your business model. These are prime examples of ways your organization can emerge better from difficult times, but more than just evolving as a company, crisis offers opportunities to also improve your market as a whole.

This concept leads to the idea that instead of saying companies should be more resilient and flexible, they should analyze their markets to help shape and evolve them. This can be achieved by timely and proactively working to put market-shaping oriented strategies into place. An important aspect of this task is knowing when and when not to act.

Markets are malleable and can change according to many forces that have the potential to drive them in one direction or another. They also tend to search for stability and become less malleable in this state; therefore, they demand much more energy to break their inertia. A crisis does precisely this — shakes markets and breaks their inertia. This makes nudging an already disrupted market into a specific favored direction far easier than stirring a static one into motion in any direction.

It is also important to remember that markets are a human construct. As market actors start to view various elements of the market as stable, the market becomes increasingly so. In moments of major market disruption, a learning capability is required of agents involved in said market. Such learning requires proactive unlearning of key organizational processes and questioning of an organization’s assumptions about itself and its environment. This makes the search for new and better solutions for the market possible.

There are eight steps in the market-shaping process:

1. Act now, or actively wait?

Companies must attempt to understand when the market will be in its most malleable condition to find the correct time to put the desired market-shaping strategy into place. In order to do this, they must understand what the possible futures look like and check to see if circumstances (triggers) that will require acting now or waiting for a better moment to act will present themselves. If it is identified that the opportune time is now, the company should proceed. However, if the circumstances point toward waiting to act, this does not present a free pass for companies to do nothing. Companies aspiring to shape their markets should make all necessary preparations for action while they wait for the market to be ready to be influenced, be it a golden opportunity or a sudden-death threat.

2. Be a shaper, or be a supporter?

Regardless of the optimal timing decision, companies must determine whether they should be leading the eventual market-shaping initiative or playing a supporting role. The shaper will be the agent that orchestrates the efforts to achieve the vision of this new market. This role comes with costs and benefits in the same way being a first-mover into a market has its pros and cons. The supporter role may allow the company to spend less resources in the market-shaping process while still benefiting from the shaped market. This role is also able to influence how exactly the market-shaping unfolds. The key point to understand here is that market-shaping is a collective endeavor.

3. Develop a scalable vision for the future market

With a crisis, a sense of frustration toward the current situation often emerges. This frustration demands an exercise of imagining different scenarios (visions) by modeling possible and alternative ways to solve the identified problems. Such market-shaping vision is usually based on a deep understanding of customers’ and other stakeholders’ value drivers, an ability to comprehend the entire market network and prioritizing the (long-term) value creation for customers and other stakeholders over the (short-term) value capture for the market-shaping company. It is also important for the vision to be scalable, as it needs to reach a critical mass to actually impact the market.

4. Outline the minimum viable system linked to this vision

This minimum viable system is the smallest and simplest system able to support any market-shaping vision. It is important to understand which actors are needed in order to realize the market-shaping vision in its most streamlined form. Having a clear vison of the company’s network is fundamental in knowing which agents are related and how.

5. Drive changes in market-level properties

In order to shape a market, a strategy must create changes in market-level properties. These changes can be categorized in three themes: a) exchange, typically related to modifying business models: developing the offering, adjusting price or pricing and modifying matching methods for supply and demand; b) the actor network, associated with modifying the focal company’s own supply network, modifying various customer-side features and modifying the availability of competing offerings; and (c) the institutional transmitters related to the market (e.g., representations that symbolize the market, as well as the formal and informal norms guiding actor behaviors). It is also important to note that these changes cannot be done as separate efforts; they must be done either simultaneously or sequentially.

6. Ensure that value is quantified and shared

In order for companies to gather around a new market vision, there has to be value present that can created, captured and shared by all involved. The value propositions created by this new market state must be detailed and quantified for all shaping agents.

7. Inviting actor engagement to implement

As in any strategic effort, implementation is a crucial moment. With market-shaping strategies being collaborative efforts, shaper companies must have an orchestrated approach as these strategies require engaging other actors to join the common change process. This can be done by providing platforms or events that allow for emergence, creating room for interactions and building interdependence among actors in the minimum viable system.

8. Defend against possible retaliations from threatened market systems

External associated markets may pressure the minimum viable system, especially if these associated market systems face reduced growth, profit or power as a result of the market-shaping strategy. In this sense, forms of managing, or even avoiding, possible retaliation by actors occupying negatively affected market systems must be part of the designed market-shaping strategy. This can be done by allocating resources in institutions such as associations.

What this means for Food and Agricultural Business

Although the agribusiness sector has suffered fewer overall impacts from the current pandemic than some, the impacts we have faced have not been minor. Many companies experienced trouble serving their customers in the ways they had always done before, negatively impacting their business. A prime example is the U.S. beef sector, which saw a large number of animals unable to be sold for processing due to lack of processing capability by slaughterhouses. This resulted in reduced selling prices, and on the opposite end of the value chain, a lesser offering of meat to the end consumer, leading to increased buying prices.

Much has been discussed about ways to develop resiliency in food chains, such as deglobalization and reducing the length of supply chains, but very little has been said about transforming the agricultural and food chains in ways that could aid them in emerging from this crisis better than they entered. It is fundamental for companies in our sector to understand the need to do things better and take advantage of crisis-generated opportunities to reshape the way the market is structured. Right now, most people have been forced to rethink how they relate to pretty much everything around them. Using this broken inertia to change business relationships is a once in a lifetime opportunity.