Business systemics LO5775

Johanna Rothman (
Wed, 21 Feb 1996 20:57:23 -0500

Replying to LO5727 --

At 8:30 PM 2/19/96, Rol Fessenden wrote:

>Johanna asks me to read the books, and I ask back -- how does the market
>size grow? In my view -- admittedely limited -- the market does not
>change dramatically from day to day. If I decide to buy a computer, I
>simultaneously decide to cut back on apparel, car, and furniture
>purchases. If as a retailer I sell one additional shirt to a Chinese
>citizen, then I have taken demand from another company because that
>citizen had a clearly defined fixed amount of disposable income. Help e
>out here, Johanna. I am stuck. Even if I discover a brand new market --
>let's say for pants -- I think I must be taking demand from another
>company because ther total demand in the world is pretty much fixed.

I disagree that the total demand in the world is fixed. It may be fixed at
current prices, but even then I disagree. There is demand that is not
being met. I have money that I would gladly pay for specific services and
products, if they existed.

I'm no economist, but here goes. A company's management focuses on a
developing market. That market grows until the company (and competition)
satisfy the demand for thir *current* products. At this point, demand is
at least growing very slowly. However, there is demand for related
products that is not being met. (If there was no unsatisfied demand, no
one would develop new products.)

These related products may be loosely related or closely related. If
close, it is easier to evaluate the system, identify the constraints
preventing you from reaching that new market, and get rid of the
constraints. If the product is loosely related, it is less clear how to
identify to management why the new venture should be started.

Let me give you some high tech examples, because that's what I know. An
example of tightly related products: Interleaf has a product that helps
provide ISO 9000 documentation. It is based on the core of Interleaf, but
is a one-off product- a way to meet the demand of a highly segmented
market. Interleaf is still a document management company, but has a niche
in the ISO market.

An example of loosely related products: Automatix, a robotic vision
company was started as an independent company because Computervision
management could not see the value of developing a CAD system and then
providing the manufacturing automation for the parts. That market is still
segmented today, because the CAD manufacturers have not gotten into the
automation business. A gross generalization: The CAD manufacturers think
of themselves as information manipulators, not as product "manager"
manufacturers (product information and build information).

Other books I've read on this recently are Geoffrey Moore's _Crossing the
Chasm_, and _Inside the Tornado_. They discuss your perspective that
markets do not change drastically every day. (You are correct.) New
markets grow very slowly, and then they explode (his tornado).

>In summary, where are we? I hope someone can give a credible reason why
>demand can increase without causing a decline in another company. The
>jury is out on layoffs. Some -- I know of no research that describes how
>much -- is generated by arbitrary cost reduction goals. Another chunk is
>a result of another company or business stealing market. Some is caused
>by increased efficiencies.

I believe that layoffs are a management failure. Management has either
risked too much, or has not looked at their markets and determined how to
expand. I have never seen layoffs of individual contributors increase
productivity, or increase the market. (I have seen management layoffs
increase productivity :-))


Rothman Consulting Group, Inc. URL:
voice:617-641-4046 fax:617-641-2764
Management Consulting for High Technology Product Development

-- (Johanna Rothman)

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