The Four Laws of Survival of the Fittest

A major concern for many managers today is how to properly position their business for success in the marketplace. Through rational and calm analysis of the market, managers and their enterprises can learn how to survive and develop in the market. This is especially true for businesses that once operated in one market but gradually found themselves being pushed into another.

The so-called "market" in the early 2000s actually refers to four relatively independent but at the same time interacting market environments: kingdoms, battlefields, jungles and frontiers. Each environment has its own unique state, resulting in a market structure with its own rules, requirements, players and ways of competing. Seasoned managers can often identify these different market environments immediately by name alone.

Most products and services must be designed according to the needs and wants of customers. Likewise, successful businesses must be organized according to the demands of the market in which they want to compete. It is not enough to design a marketing strategy around the market. The entire enterprise must have a structure, culture and a set of internal systems that are in line with the market environment.

Once a business has a structure that fits the market environment, synergies emerge, creating strong support for the business and its management and employees. The order of things will change, employees will be more engaged, and everything will become more meaningful.

Four different market environments

The kingdom market has the least competition and market difficulty. Businesses that have been operating successfully for some time in the kingdom lead and firmly grasp their own market business. They are fortunate enough to produce what they find valuable: first to satisfy their own ideas, and then to consider their customers. In a kingdom-type market, customers have unmistakable needs for the products and services of the industry, which are often in short supply.

These companies rely on high profits to give them ample resources to dominate the market and often outperform newcomers. Massive advertising campaigns, patent lawsuits, short-term rapid price cuts and other expensive but highly effective tactics will crowd out any opponent trying to get their hands on the market.

Today, there are very few kingdom markets left. Boeing dominates the military aircraft construction market; Microsoft maintains its empire by steadily improving its existing products rather than introducing new ones.

The battleground market is competitive, but not too complex. Businesses in this environment focus on improving efficiency, reducing costs and waste, and trying to use clever tricks to differentiate the products they sell. Customers expect companies to continuously improve quality, and companies focus on delivering products and services to as many customers as possible, as quickly and cheaply as possible. In a battlefield environment, companies fight on two fronts: competing for sales and gaining customer favor.

Most new products slide into this market environment once they are known, accepted and used. As products became simpler to manufacture and easier to market, industry members gradually merged in pursuit of manufacturing profits.

Businesses in the battlefield environment include legendary brands like Coca-Cola and Pepsi, two companies that have been battling the soft drink industry for decades. And Nike, Reebok and Adidas compete with each other through trendy styles as a differentiator.

In a jungle-type market environment, companies face constant pressure on quality, customer satisfaction and price. Travel agencies have been operating in jungle-type environments for a long time, as are cinemas, greengrocers and pizza parlors.

In this market, most companies whose products were at the forefront not so long ago are now accepting the survival of the fittest in the market. Products previously protected by patents now compete with new knockoffs that cleverly use technology to circumvent patents. In the end, the winner comes out and the loser goes out.

Most products in frontier markets are new. Quite a few of these products have created their own niches and in some cases entirely new industries. Profits are often considerable, but entering and serving such markets is often difficult.

Operating in a cutting-edge environment is often unpredictable, risky and speculative. Yet some companies, such as Merck in the pharmaceutical industry, have developed highly successful new-product-to-market processes that allow them to get to market one step ahead of their rivals and reap outsized profits fairly quickly.

Many Internet companies such as Peoplesoft, Ebay, E-trade and Rent.net operate in this market, as are cellular companies such as Nokia and Qualcomm.

Four types of organizational strategies

The above four market environments have their own requirements on the organizational structure and behavior of enterprises. Furthermore, if businesses are to survive, succeed and thrive, they must follow their own unique strategic approach. In short, what worked for Coca-Cola would spell disaster for Amazon.com, and vice versa. Indeed, the organization of an enterprise must adapt to the market environment in which it is located in order to be dynamic and thus determine the fate of the enterprise.

Many companies lack this fit, leading to a lot of conflict and dissatisfaction across the business. As a result, it is often difficult for employees to discover the meaning of their work and to have little commitment to business goals. Businesses acted without purpose and ended up in massive internal chaos.

A company's adaptation to the market environment is rarely a coincidence. Business leaders must have a clear and accurate understanding of market dynamics in order to respond consciously and effectively.

But adaptation isn't just about responding to market conditions, it's the result of employees working together, making decisions, communicating, and connecting with each other in other ways. It also reflects how the enterprise is structured, and depends largely on what the enterprise values, what it despises, and the decisions the enterprise makes about resource allocation.

Generally speaking, companies can use four different organizational and strategic types to adapt to four basic market environments. They are: rulers, fighters, hunters and pioneers.

Organizational strategy types describe, not frame, the world. They are not clear-cut types that all businesses can apply at all times. While many businesses are typical trailblazers, hunters, or leaders, there are also quite a few, and it would seem more appropriate to call them a hybrid of two different types. There are also businesses that fit well into one type in many respects, but still have minor components of one or more other types. These types simply provide a useful framework for examining the business and its market environment, allowing business leaders to formulate their own organizational and strategic options. In addition, they are convenient and practical to help managers identify and discuss markets, businesses, and the interactions between the two. They are a set of objective descriptions that enable business leaders to agree on the status quo and the changes needed.

Leading the Kingdom: Managing from the Top Down

Leaders are primarily concerned with: being the only business that can supply eager customers with what they want; keeping an eye on potential significant competitors; continually improving their product and value of service.

While many companies strive to achieve dominance, only a few are lucky enough to achieve this goal. Companies often need a combination of hard work, innovation, smart decisions, and the right timing to achieve this status.

To be successful, a leader-type enterprise must have strict top-down management. With this structure in place, management can ensure that products reach customers on time, that there is enough innovation and that it is properly funded, and that it doesn't surprise or acquire competitors.

The adoption of a leader culture achieves best results when a business rises to become a dominant force in the marketplace. But companies that take the lead will find themselves faced with a difficult choice: either continue to grow (sometimes requiring substantial growth quite rapidly), or lose the lead. While growth is a sound strategy, the breadth and intensity of management cannot be expanded indefinitely, otherwise the size of the enterprise itself will pose a problem. After reaching a tipping point, the size and bloat of a business will impair its ability to manufacture and deliver products, meet customer demand, and generate high profits.

Paradoxically, another danger that new leaders must avoid is thinking and acting too conservatively. The ruler must always be aggressive and innovate and squeeze any worthy competitors in order to maintain control of the kingdom. Managers of a leader company should not settle for a small increase in market share, which is no longer a problem. The job of the leader corporate manager is not to win a few guerrilla battles, but to slaughter the dragon, that is, to completely conquer potential competitors.