Friday, January 13, 2006

The Myth of Market Share - Richard Miniter

Subtitled "Why Market Share is the Fool's Gold of Business" it is full of sound research and some interesting case studies. Published in 2002, it obviously didn't make it to any bestseller lists, but it's a very worthwhile read. At 172 pages the investment of time is worth the return.

Miniter gives some background on the genesis of the theory that market share and profit are closely tied together and how this came to be a commonly accepted fact. He makes a sound case for focusing on being a profit leader rather than a market leader and backs that up with facts, figures and examples.

My post-it flags marked some well phrased thoughts that sum up his position beautifully:

"Profit leaders think about customers, not competitors, and think about next quarter's opportunities, not justifying last quarter's market share." (Pg. 12)

"Market share is not an advantage, by itself. It is the result of a sustainable competitive advantage, not the cause." (Pg. 15)

"What the profit leader knows can be distilled into two statements: A market-share strategy leads companies to set their sites on the past, not the future; and market share is about the competition, not customers." (Pg. 159)

He does make exceptions for the importance of market share in two arenas: network markets (think fax machines, phones, email where many people have to have it in order for it to have value); and double sided markets (Visa needs both cardholders and participating merchants). But those exceptions are very narrow and specific within the context of his theories.

There is an excellent chapter on mergers that echoes a lot of what Jack Welch says about mergers & acquisitions in his new book Winning. In fact there are quotes from Welch and references to GE throughout this book. Some of the most interesting material for me was case studies of two companies I was not familiar with: F. Hoffman-LaRoche and Europe's Ryanair. (He also examines Dell's strategy, but some of that material is dated having been written over 3 years ago.) The strategy Hoffman-LaRoche used to turn around their business is very relevant to issues we are dealing with as well. They chose to focus on "customer delight" and revamped how they interacted with their client base. There is some very good information on how they raised outstanding customer satisfaction to the core of their strategy, and how they decided to handle inquiries coming into their company to acheive that.

All in all, a very good book but not likely to change the minds of those who believe market share is the goal. Miniter quotes Donald Potter of Windermere Associates on that subject twice: "It is like trying to change someone's religion."

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