Basis of Competition
As a market matures, the basis of competition among products changes. There are four stages. First, in the early stages, customers are looking for a solution that works. We call this functionality. Next, customers are focused on the quality or reliability of a solution. This is generally a larger portion of the market than the functionality phase. Third, the mainstream of the market is looking for customization or convenience in using and acquiring the solution. Finally, not surprisingly, the last phase is all about price.
As an example, if we look at the PC market, early PCs could, say, do word processing, but it was cumbersome and the early machines weren’t particularly stable. In the next phase, we saw Compaq and a few others that sold machines that were more stable, more reliable. Eventually, as PCs became reliable, we saw the emergence of Dell, whose value propositions was convenience and customizability in ordering, delivery and service. This finally gave way to companies like Acer who gained market share on the basis of lower prices.
By using this lens, a company can see where they are in the evolution of a market and plan accordingly.