Increasing Market Share
The following post is adapted from my personal academic coursework.
Increasing Market Share
Megginson summarized naturalist Charles Darwin’s Origin of Species as stating, “it is not the most intellectual of the species that survives; it is not the strongest that survives; but… …the one that is best able to adapt and adjust to the changing environment in which it finds itself.” Many have applied the same principle to organizations. As the marketplace becomes increasingly global and virtual, businesses that can adjust endure and continue to thrive while others succumb to environments which are no longer conducive to their success. There are numerous companies such as Blockbuster Video or Woolworth’s, household names in their prime, which now litter the corporate landscape because they could not withstand the relentless onslaught of change and upheaval. However, some companies have been able to reinvent themselves and remain viable while others fail around them. Amazon may have gotten its start as a humble online bookstore, but has expanded to include just about everything under the sun either streamed to any of your devices or delivered to your front porch within 24 hours. Netflix started as an alternative to movie rentals, but has redefined an industry and now produces some of the most engaging and influential original content in media. Wal-Mart took over a lot of the market share with the advent of its Supercenters, developed a strong online presence, and has recently looked to automation and pick-up services to keep its market position strong. Like it or not, in the breakneck pace of modern industry, only the adaptable survive.
While all organizations must change in response to various conditions and stimuli which they encounter, the specific nature of these innovations varies greatly between organizations. This author’s former employer is a large international fresh produce wholesaler and distributor, a subsidiary of a large international food distributor. This organization endeavors to develop strong trust relationships with its customers and grows its business through acquiring successful distributorships in new markets and adding new customers throughout its territory. The organization divides itself into local operating companies (OpCos) which do business within a geographic region. While the larger organization is successful, each of these OpCos has its own unique business situation. Unfortunately, the organization and its parent company often approach business decisions with a one-size-fits-all mindset and neglect the needs of the individual OpCos. If the company can decentralize its decision-making and offer more autonomy and flexibility to the OpCos when necessary, then both the OpCos and the organization will be more profitable.
The Need for Change
Ultimately, the biggest change this organization needs to make is to decentralize its authority and empower its local OpCos to make the decisions that work best in their markets. Kotter identified establishing a sense of urgency as the first step in creating major change in an organization. Indeed, readying the organization for a change of this magnitude requires persuading its leaders of its necessity. However, due to the culture of this organization, persuasion will require preliminary results. While the organization will continue to push its well-intentioned agenda down to the OpCos, it will not argue with a rogue OpCo whose profits exceed expectations. Such preliminary results will establish a sense of urgency. Thus, the ultimate change requires a more immediate change at the OpCo level.
In this case, the local OpCo has been with the company for nearly 20 years. Prior to its acquisition, the OpCo was a family-owned produce distributor in Charlotte, North Carolina with 72 years of service to the local community. The acquisition included customers stretching from the mountains of southwestern Virginia to Charleston, South Carolina and including several metropolitan markets. These customers include airports, colleges and universities, convention centers, healthcare facilities, hotels, and restaurants. The organization’s competitive advantage comes from delivery excellence as determined by the accuracy of the order, the quality of the produce, and the timeliness of the delivery. Beyond this, the organization adjusts prices based on market conditions and limits expenses to remain profitable.
Despite having such a large footprint, the OpCo has a tremendous growth opportunity with the efficiency of its supply chain. Nakandala and Nau stated that “efficiency-driven strategies aim to achieve cost-effectiveness through cost reduction, waste reduction and resource optimisation approaches.” The distribution of the OpCo’s customers is very sparse. One of the organization’s operational metrics is cases per mile. In other OpCos, trucks average up to 4 cases per mile. However, the Charlotte OpCo is considered very successful when they average 2 cases per mile. Cases per mile is a huge predictor of overall operational expense, especially when considering that delivery expense includes the cost of fuel, labor, and maintenance. The farther away a customer is, the greater the cost to get to their location. The minimal number of cases these outlying customers tend to order only compounds the problem. Driving 200 miles for 1,000 cases may be financially defensible, but the same distance for ten is not.
The Needed Change
Unfortunately, such poor operational decisions are not the exception, but the rule. The bulk of the customers are dispersed across the outlying portions of the OpCo’s territory. For instance, on a typical day, the OpCo runs 7 local routes, 4 mid-range routes, 12 distant routes, and 3 routes from a domicile location. More than half the OpCo’s business is with high-expense, low-profit customers. Some routes even routinely operate at a loss. This results in the OpCo’s profits being far lower than they should be based on sales volume and market conditions. This is why change is so essential to the OpCo’s long-term success. The OpCo must grow its customer base and the number of cases shipped, beginning locally and expanding throughout the territory.
Implementing the Change
Kotter identified eight steps for creating major change in an organization.
Establishing a Sense of Urgency
Kotter recommended removing sources of complacency to establish a sense of urgency. While the organization’s chief financial officer establishes fiscal goals for all the OpCos, the OpCo management typically deems these as “unrealistic” and is instead satisfied with any growth at all over the prior year. Nakandala and Nau’s accurately described the distribution of fresh food as being characterized by “high demand-and-supply uncertainty and inflexibility in production, as well as quality requirements of food products affected by food perishability.” However, using this uncertainty as an excuse for ignoring financial targets is a source of complacency. Grenny et al. stated that “influencers are crystal clear about the result they are trying to achieve and are zealous about measuring it.”
Rather than settling for year-over-year growth, the OpCo and organization would do better to measure the OpCo’s growth against the growth of the local population. For instance, according to Chemtob and Off, Charlotte’s population grew 20% over the past decade. The OpCo should deliver at least enough cases to match the population growth to keep its market share. Did the OpCo ship 20% more cases over the same decade (2% growth each year)? If the population grows 20% in a decade, then the OpCo must grow cases at a rate of 3% annually to have any real growth in its market share. Considering the competitive nature of the local market, anything less than 5% annual growth underperforms within the local market, and indicates a crisis.
Creating the Guiding Coalition
Proverbs 15:22 (NKJV) states that “Without counsel, plans go awry, but in the multitude of counselors they are established.” Kotter expressed the same sentiment this way, “No one individual, even a monarch-like CEO, is ever able to… [create change]. …A strong guiding coalition is always needed—one with the right composition, level of trust, and shared objective.” This change, growing the cases by 5% annually, will require a guiding coalition from the human resources, procurement, sales, shipping, transportation, and warehouse departments in addition to the OpCo president or operations director. Participation from each of these departments is imperative because any of them could derail the change effort for the entire OpCo. Additionally, Bradley et al. found that “diverse membership was critical for both discovering the root causes of problems and fostering team ownership of the problem and potential solutions.”
Developing a Vision and Strategy
Kotter stated that effective visions are imaginable, desirable, feasible, focused, flexible, and communicable. This is in keeping with Malachi 2:2 in which the Lord told the prophet Malachi to “Write the vision and make it plain on tablets, that he may run who reads it.” While the guiding coalition will help clarify the vision, they would likely come up with something like this: “We will earn and keep our customers’ trust by delivering high-quality produce on time with excellent customer service.”
Communicating the Change Vision
Communicating the change vision is an important function of leadership. Men et al. stated that leadership “motivates employees in change engagement” and that leaders “are important agents for transformation, and they are charged with communicating the significance of change to employees, role modeling desired mindsets and behaviors, openly engaging others and getting personally involved.”
Kotter identified seven elements in effectively communicating a change vision. Essentially, these elements suggest communicating clearly, often, consistently, and openly. Of these, the greatest challenge is frequency. Frequency within the OpCo includes not only verbal repetition of the vision, but visible repetition as well. While a poster in a hallway will catch some attention, small visible vision statements on one’s person (e.g. a T-shirt, hat, or bracelet) or in one’s environment (e.g. posters, screensavers, etc.) are powerful throughout the workday. In the case of this particular vision, the three key points—quality, timeliness, and customer service—make it easier to communicate quickly and regularly.
Empowering Broad-Based Action
Another benefit of this vision’s simplicity is that it is empowering. While a particular employee may not have control over everything within the OpCo, he or she can certainly implement some aspect of the vision each day. Take for instance a hypothetical delivery driver who was involved in an accident. While he or she may no longer have control over the quality of the product or what time the delivery will happen, he or she can still provide excellent customer service upon arrival. Many people contribute to product quality and timely deliveries and everyone can offer great customer service. This vision empowers action throughout the OpCo.
Generating Short-Term Wins
While the overall goal of consistent 5% growth in cases over the prior year may not happen right away, Kotter noted that short-term wins help keep everyone’s eyes on the goal until it is realized. In this case, there are a few short-term wins for which the guiding coalition should be looking. First, celebrate the measurable aspects of the vision as short-term wins, “Our on-time deliveries are up 10% from last year!” Second, acknowledge milestones between the starting point and the overall goal, “We shipped 4% more cases than the prior year every week this month!” Finally, draw attention to the fringe benefits of the change effort, “Our quality control efforts have reduced our recovery runs by 18% compared to last year!”
Consolidating Gains and Producing More Change
The OpCo has struggled to consolidate its gains in years past. The sales team has brought in lots of new business, but the operations team lacked the personnel to sustain the growth. Subsequent personnel increases proved too late to be effective and when the sales team brought in more business, the personnel levels had dropped again. Kotter’s seventh step addresses this downward spiral by using the short-term wins as fuel to produce more change. In this case, the greatest need is more drivers. Hiring additional drivers requires a significant increase in operating expense, but is justified by the early wins.
Anchoring New Approaches in the Culture
Kotter’s final step in leading organizational change is to embed it in the culture. The risk is that if the change relies too heavily upon the coalition, then it will be lost as the coalition dissipates. However, if it is a cultural phenomenon, then it will outlast the individuals who initiated it. In the case of the OpCo, anchoring the three key points of the vision into the culture seems simple enough. The challenge is to develop a culture so hungry for growth that the OpCo refuses to settle at 60% of the market share. The key to this is also in the vision, “earn and keep our customers’ trust.” The members of the OpCo must believe that they are the best answer to their customers’ needs. If they do this, this hunger for growth will anchor itself in the culture.
Bradley, E. H., Brewster, A. L., McNatt, Z., Linnander, E. L., Cherlin, E., Fosburgh, H., Ting, H. H., & Curry, L. A. (2018). How guiding coalitions promote positive culture change in hospitals: A longitudinal mixed methods interventional study. BMJ Quality & Safety, 27(3), 218-225. https://doi.org/10.1136/bmjqs-2017-006574
Chemtob, D. & Off, G. (2020, May 21). Charlotte growth pushes it past San Francisco to become 15th biggest city in the US. The Charlotte Observer. https://www.charlotteobserver.com/article242897996.html
Grenny, J., Patterson, L., Maxfield, D., McMillian, R., & Switzler, A. (2013). Influencer: The new science of leading change. McGraw-Hill Education.
Kotter, J. P. (2012). Leading change. Harvard Business Review Press.
Megginson, L. C. (1963). Lessons from Europe for American Business. The Southwestern Social Science Quarterly, 44(1), 3-13. http://ezproxy.liberty.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fscholarly-journals%2Flessons-europe-american-business%2Fdocview%2F1291571627%2Fse-2%3Faccountid%3D12085
Men. L. R., Yue, C. A., & Liu, Y. (2020). “Vision, passion, and care:” The impact of charismatic executive leadership communication on employee trust and support for organizational change. Public Relations Review, 46(3), 1-12. https://doi.org/10.1016/j.pubrev.2020.101927
Nakandala, D., & Lau, H. C. W. (2019). Innovative adoption of hybrid supply chain strategies in urban local fresh food supply chain. Supply Chain Management, 24(2), 241-255. https://doi.org/10.1108/SCM-09-2017-0287
The Holy Bible, New King James Version (1982). Thomas Nelson, Inc.