Three Tests to Separate Opportunity from Folly
Using weighted ranking for structured decision making requires the participants in the process to establish what factors make various outcomes better or worse choices. This list of criteria needs to be the same for every potential outcome, so in the case of choosing a new industry for a company to enter, the list of considerations must embrace the reality that the presence of opportunity is not the same thing as being a good fit. After all, no company can compete effectively in every industry:
- How fragmented are the industries under consideration? Entering an industry dominated by one monolithic competitor (or even several large ones) may present a steeper challenge than entering a highly fragmented one, and the size of your company compared to those rivals will also play a role.
- What is the outlook for growth in each industry? Understanding this decision criterion will depend on the geographical and demographical aspects of that growth, relative to your company’s regional and demographic capabilities. Projected growth data in the US, for example, is available in terms of both revenue and employment from the Bureau of Labor Statistics.
- How well do the industries match with your company? Key components of this factor include whether the products look like those your company sells (or could sell), the dominant sales approach in the industry (direct or via a sales channel, for example), and the amount of entry capital required, relative to your resources.
This is the second installment in a series of three blog entries for competitive intelligence professionals about using weighted ranking to make structured decisions. The first post, “Three Guidelines for Choosing New Horizons,” gives an overview of the process and introduces the process of identifying potential decision outcomes. The third post, “Four Directions to See Which Way the Wind Blows,” shows how potential outcomes are matched to decision criteria to achieve a result.
By Sean Campbell
By Scott Swigart