Companies facing the increasing competition of a growing market often turn to new products, trying to use their established customer base to their advantage. MicroVoice, for example, is launching new products for its newspaper customers, such as services that distribute stock-market information to readers by phone. Still, Miller estimates that 80% to 90% of the company's 1994 sales will come from its core personals business.
12. Are you ready -- organizationally and psychologically -- for extraordinary market turbulence and change? Consider the case of George Archuleta of Alantec. As recently as 1993, Archuleta's competitors were primarily emerging companies similar to his own. Then Alantec's market got hotter, and larger companies acquired four of its competitors. This past summer one of Alantec's big-company strategic partners announced a merger with one of Alantec's rivals, effectively putting an end to the strategic alliance. Now Archuleta must look for new distribution methods while facing much larger rivals.
In some fast-changing markets CEOs structure their companies to exploit rapid change. Glenn McCusker of Viking Components (#126), in Laguna Hills, Calif., for example, makes add-on memory for personal computers. McCusker has organized his business so that as soon as a manufacturer introduces a new computer model, Viking begins work on an add-on memory product for it. As a result, McCusker claims his company can get its product to market in as little as 10 days after the manufacturer's introduction. Why is such breakneck speed so important? McCusker estimates that he has only about a three-month window between the time a manufacturer brings out a new model and the time memory for it becomes a commodity. That's a strong incentive to move quickly.
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Growth in a Mature Market
The pie is now finite. Stake out your niche and defend it
All good things must come to an end, including periods of rapid growth in an industry. When a market's expansion levels off, that market is said to be mature, with little new growth in demand. Sometimes a mature market will be dominated by small local enterprises (hair salons are an example), but if not, mature markets are often inhospitable to new entrants. That's particularly true if small companies must compete directly with large ones in a zero-sum game -- one in which the large companies' marketing and distribution clout is an important advantage.
Pluses: A proven market that's easy to identify
Minuses: A constant battle for market share
Why would anybody try to grow a company in a mature field? Sometimes entrants into such a field are classic cases of entrepreneurs inspired by an idea. For example, Ralph Marlin & Co. (#179), in Hartland, Wis., manufactures U.S.-made men's apparel, particularly ties -- the kind of mature or even declining market that would make venture investors shudder. But founder Mark Abramoff wasn't thinking like a venture capitalist when he launched his company; he says he thought up the idea for a novelty necktie with a fish on it while he was sitting in a bar with friends. Less than nine years later he has a $13-million specialty-apparel business.
Then, too, there's the "I've been in this business my whole life" explanation. For Dan Basler and his brother Douglas, of Oakville Forest Products (#459), in Oakville, Wash., the moment of truth came when they saw their employer -- their father's sawmill -- sold at auction in 1985. Dan was 33, his brother was 26, timber was what they knew -- and, as Dan puts it, "we had a lot of years left to work." Eight years of hard work later, the business they started, Oakville Forest, is a fast-growing $7.3-million company in a distinctly low-growth industry.
A mature market may not be the ideal place to grow, but growth can certainly be achieved. Here are some thoughts on how:
13. Do you really have a significantly "better mousetrap" to offer the market? If so, can you protect it? In the brutal world of the mature market, in which existing competitors would love to make what you make, only faster and cheaper, a patent or a license can be a plus. MicroFridge, of Sharon, Mass., together with its manufacturing partner, got a patent on one aspect of its combination microwave/freezer/refrigerator unit. And becoming a licensee of a famous name, as Ralph Marlin has done with some of its novelty ties, at least reduces the number of direct competitors.
14. Can you identify a submarket in your industry in which your small size can provide an advantage? In that market, how can you solve customers' problems in ways larger companies can't? Such a market can provide a little protection from the competitive storm. Abramoff of Ralph Marlin achieved most of the company's growth in specialty markets. He supplies museum shops and sports shops, developing ties (and sometimes other apparel) that fit his customers' markets; for example, he might provide ties featuring impressionist paintings to art museums. Similarly, Bob Bennett, president and CEO of MicroFridge, identified university dorms as a major market. His strategy: to make the purchase of MicroFridge units one step in university administrators' efforts to increase their residence-hall occupancy rates. Bennett views MicroFridge's contacts with college administrators as a major strategic asset, and the company plans to develop new products specifically tailored to dorm-room use.
15. Is a new method of distribution a possibility? In any case, have you prepared for distribution obstacles? Menderes Akdag has grown Lens Express (#284), in Deerfield Beach, Fla., to $34.7 million in sales by developing a nontraditional distribution channel for ordinary contact lenses: direct mail. Such lenses are normally sold through eye doctors or eye-care chains, but Lens Express's founders realized that mail order was an option for replacement lenses if no new prescription was needed. Lens Express has encountered plenty of resistance from the traditional distribution channel: according to Akdag, many doctors refuse to release prescription information for patients who want to use Lens Express. To this day, Akdag reports, the company cannot buy its lenses directly from the major manufacturers.
