It is common for companies developing new product to think about beachheads and concentric markets. In theory, the beachhead is a very specific market that you can satisfy with a very specific product. Once you have successfully launched a product into your beachhead market, you should be able to start attacking the “concentric” markets– ostensibly larger markets in which your beachhead is a subset. Each concentric market will be larger and might have new variables and parameters that need to be taken into account, but in theory your product and organization are well-equipped to rapidly expand to capture this new market.
As an example, let’s say that we are creating an app and supporting hardware for the iPhone that allows competitive rowers on the Charles River in Boston to track their performance and map their race or practice in real time with new metrics and visualizations. Once we have established this product in our target market with competitive rowers in Boston, some “concentric” markets we can begin to tackle would include local recreational rowers, or new geographic areas– let’s say we want to sell this product to all rowers in New England. From there, we could sell into other water-sports that do performance tracking like kayaking or paddle boarding, and could look at expanding into the national market. Each of these expansions allows us to tap into a bigger market while maintaining the core principles and features of our product, and expanding them slightly to serve different users.
In short, we have been able to tackle concentric markets by relying on our core technology and product features without changing too much (picture Amazon moving from selling just books to other selling all products). This is a highly effective approach to growing a business, and if we’re looking at our target markets laid out in an amorphous space that represents our current business capabilities and technical product features we get a nice concentric chart. Growth through each market, technical development, and organizational capability leads neatly into the next.
However, this type of mindset can lead to challenges if we assume that market concentricity is always accompanied by smooth product design and business capability transition. A new market that is perceived to be concentric, or easily-captured, can sometimes require a major shift in a company’s product features or underlying internal structures and you might be forced to make large leaps into new technologies and adjacent business capabilities. In some cases, it is certainly possible to overcome this type of dramatic shift based on the size, adaptability, and technical strengths of your company, but what seemed like an easy expansion route for the company may come with some speed bumps along the way.
If we return to our target markets laid out in an amorphous space that represents our current business capabilities and technical product features, we might end up with a chart that has a handful of disjointed, adjacent markets. To reiterate, nothing is full-stop preventing any business from capturing all of these different markets to capture the concentric economic and customer-base markets, but making such great technical and logistical leaps from beachhead to beachhead can be an operational challenge unless the technical and operational bridges between these markets can be built in advance.
At our water-sports-tracking company, we may decide we want to create tracking devices for all maritime vessels and provide a fleet monitoring capability on top of all the new metrics we can provide our users. In theory, these are both concentric user-bases for our existing products, but they both open different cans of worms that represent dramatic changes in terms of technical expertise and business capability. To name a few worms: 1) How do we integrate our product mechanically and electrically into a ship or boat and is that a universal interface? An iPhone running on battery is fine for a short workout, but not a month-long journey across an ocean on a freight-liner. 2) How do we operate a fleet monitoring system from a software and customer support side? 3) How do the new waterproofing and environmental standards for our products impact our manufacturing and assembly practices? The list could go on for a long time…
With all of this said, though, how can you tell when you are looking at a fiscally concentric market that has underlying technical and operational risk? I am sure that many, many books can be written on this topic, but a few questions that I find quite revealing are:
- Does this new market…
- require a fundamentally different business model from our current operation?
- require the creation of a new team within our organization?
- affect our successful operations in our current markets?
- Does a product that caters to this market…
- require any major technical breakthroughs relative to our current products, and can our team achieve those?
- take a long time to develop, and is that ok?
- shift our current manufacturing and assembly practices dramatically?
- If we succeed in creating a product in this new market…
- will our company fail to uphold our original mission and goals?
- does it limit our future growth opportunities?
If the answer is “yes” to most of the questions above, then it may be worth evaluating the decision to go after the new market– you may be approaching a new organizational beachhead for your company rather than absorbing a concentric market. Concentric markets should not be conflated with concentric product development and company growth!
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