BASIC STRATEGY GUIDE: STEP 10
Activity One (Steps 1-12):
Segment customers, both by size and by need, to identify targets for the Company.
Step 10: Compare the Company to the industry on the components of volatility
Volatility has four component parts. Positive volatility occurs when the Company gains new volume from Get In and Increase Use events with customers. Negative volatility occurs when the Company loses sales volume to another competitor through Get Out or Decrease Use events.
This analysis enables the Company to be more exacting in choosing its target segments and in designing the product and service improvement program necessary to serve those segments well. By analyzing the Company’s performance against the industry on each of the four components of net volatility, the Company further defines its areas of strength and weakness.
What to Watch For:
The company’s Net Volatility, as well as its components of volatility, may vary greatly from those of the industry.
A strong industry leader may increase its market share because it has less Negative Volatility than the average in the industry. Its Positive Volatility may not exceed that of the industry. This is particularly true in Hostile markets.
In a Deteriorating market, when customers defect from the companies ranked first or second in market share, they will usually do so by Decreasing Use rather than by Getting Out.
In a Developing market, the leading companies will beat the industry average, especially in the “Get In” form of Positive Volatility.
Develop a good understanding for the reasons the Company out performs or under performs the industry on each component of volatility. Pay particular attention to the Company’s net volatility in its tentative target segments, where these target segments are defined by positions on the Size/Role Matrix.
For helpful context on this step:
Symptoms and Implications: