The Market Leader, and Other Ambiguities and Distortions

The Market Leader: Assumptions in our language hide danger, by Mark Chussil

A language anchor is a word or phrase that reflects our beliefs or attitudes and that unconsciously influences our strategic thinking and decisions. (See [link to Exalted Numbers] for more about numerical anchors, including budgets.)

Take these phrases, please.

• Our customers.
• Stealing market share.
• Market leader.

Our Customers

Our customers may simply refer to the people who bought from us this year. It is a matter of fact: Wilbur bought our product and is our customer, Orville did not buy our product and is not our customer. Often, though, “our customers” in context means the customers who we expect to buy from us. It is that expectation that makes them “ours” and thus creates an anchor.

“Our customers” are not ours; we don’t own them. Yes, we use branding, loyalty programs, contract-termination fees, and discounts for bulk or repeated purchases to encourage them to stick with us. Even so, customers usually have other options and are not obliged to buy from us.

One unintended consequence of the our-customer anchor: We assume a kind of momentum or assured base to our sales. (Notice those sales trend lines in your forecasts?) In effect, we think we can count on “our” customers. If we keep doing what we’ve been doing (offer our product), they will keep doing what they’ve been doing (buy our product).

Another unintended consequence: We view a loss of sales (i.e., a loss of customers) as a surprise and / or a failure. How could you lose “our” customers, we accuse, as though all it takes to get them back is for you to remember where you misplaced them.

Stealing Share

Our competitors will probably try to steal our market share. We don’t steal theirs, of course. We “gain” share or “earn” share. “Stealing” is so distasteful. You’ve got to be vaguely evil to “steal” share. Their shameful theft justifies our righteous indignation and vigorous counterattack. They started it, after all.

Phrases such as stealing our share, taking our customers, or attacking our market imply certain beliefs about competitors. I previously wrote at modest length about “monsters.” Your competitors want to make a living, just like you. They’re not monsters, and neither are you.

The steal-share language anchor can distract you from your business’ raison d’être. Is the purpose of your business to beat the competition, or is it to attract and satisfy customers? A business that attracts and satisfies customers may gain (steal?) market share. However, actions taken to attract and satisfy customers, which have the consequential effect of gaining market share, may be very different from actions taken specifically to beat the competition.

Incidentally, in a sense we prefer that they steal share as opposed to us losing it. We figure that a person can be noble and competent even if he or she is victimized by a thief, while we figure that only a careless or incompetent person loses something as valuable as market share. (Note, though, that a budget anchor can cause a competent manager to lose share.)

Market Leader

“We are the market leader.” That phrase often befuddles me. What does it mean? We go first? We have the highest price? We have the lowest price? We have the biggest share? We have the most-innovative products? We speak and they obey? We are the most respected? We are the most venerable? Says who?

“Market leader” implies a kind of hierarchy: If we lead, others presumably follow. Curiously, though, I have only rarely heard managers describe their businesses (or themselves) as followers.

The market-leader language anchor can instill overconfidence. Since we’re the leader, we’ll know before something big happens. Since we’re the leader, no one would dare challenge us. Since we’re the leader, if we’re not doing something, that something isn’t worth doing. Since we’re the leader, the followers watch us and politely take their places behind us. Since we’re the leader, our plans will work.

Tangled Anchors

Those language anchors interact with the budget anchor. Here’s the sequence:

1. We build the expectation of sales into our budgets. After all, we’re the market leader, and our customers will stay with us.
2. If our dastardly competitors steal our customers, then we don’t make our numbers.
3. The shortfall leads to a cut in budgets. We didn’t make as much money as we thought and we’ve got to shore up our numbers.
4. The reduced budgets don’t help us retrieve our customers, recover our share (as opposed to stealing theirs), and reassert our leadership position.
5. We achieve a new shortfall. Return to step 3.

It’s a vicious cycle that we see all too often with venerable companies. The language anchors feed unrealistic budgets, and the budget anchor prevents us from retaining or regaining our rightful position. It’s hard to break the cycle without jettisoning the anchors.

Raising The Anchors

We don’t purposely create anchors any more than we purposely cause any other kind of trouble for ourselves. Anchors are common and unconscious because they come from being human.

So, short of renouncing our humanity, how can we reduce the prevalence and influence of language anchors?

Basically, avoiding anchors is simple, quick, easy, and cheap: Know they’re there, and look out for them. Here are some specific suggestions.

• Don’t merely bask in proud, aggressive, or reassuring words; listen also for the assumptions below. The “our” in “our customers” is an assumption about customer perceptions and loyalty, just as “last year’s budget was correct” and “this year is like last year” are assumptions behind a flat budget.
• Research in social psychology demonstrates that it’s easy for people to fall into groupthink. Fortunately, research also shows that even a single person who questions the group or offers a different opinion can greatly improve the likelihood that the group will develop sound decisions. Have a designated contrarian. Or ask everyone “what do you think are the best arguments against the direction we’re discussing?”
• Rigorous thinking and quantitative models can help uncover qualitative anchors. For instance, remember the principle of competition that all markets have 100% market share. It will help you find and defeat the market-leader language anchor, because your market-share gain must be accompanied by someone else’s market-share loss. (Imagine them presenting a chart showing a decline in their market share to their bosses.)
• One reason business war games (qualitative and quantitative) lead to important insights is because by their nature they challenge anchors. It’s harder to believe that no one can steal your share if a group of your colleagues comes up with a compelling plan to do just that.

A note of caution, based on ACS’s extensive experience with quantitative models and business war games. Not all models and not all war games will uncover or challenge anchors. A model or war game may actually reinforce anchors if it’s not designed well. Be wary of:

• Models that show numbers only for your business, and not for your competitors.
• Models that drive sales numbers by using trend lines, benchmarks, or extrapolations from the past.
• War games that don’t have teams to role-play your competitors.
• War games that don’t involve some kind of confrontation between the strategy one team devises for your business, and the strategies other teams devise for your business’s competitors.

Our language reflects how we think. Don’t let your thinking anchor your business.