Market Reality: Why What You Don’t Know Could Hurt You

A project does not exist in a vacuum, context is everything and, in particular, the needs of the business and the realities of the market in which it operates. However, chances are your project has at least one bind-spot in respect of these factors.

No more clearly is that evident that in respect to market reality and future market evolution – factors which project managers may not have realized were key to their success.

Has Your Project Got Its Back to the Market?

‘Too many projects have their back to the market‘ explained our project coaching partner. ‘The people running projects are focused more on what is happening within the organization, than what is happening outside. They are busy keeping corporate management and other internal stakeholders happy, jumping through bureaucratic hoops, securing resources, and so on’.

Test this for yourself:
Ask those working on your project to identify the obstacles and barriers that they face. Then organize the resulting list into two columns – the first is internal (to the organization) and the second is external. Typically, the ratio of internal to external factors is as much as 3 or even 5 to one, demonstrating that projects often have ‘their front to the organization and their back to the market’.

A strategy that has its ‘back to the market’ or its ‘head in the clouds’ is at an elevated risk of failure. This applies to all those projects and initiatives that flow from it. Thus, a clear understanding of the market is not just the concern of strategy, but of execution too. The question is:

Is your project grounded in a full understanding of the market
and a vision of how it likely to evolve?

What are the Dangers?

There is an element of Market Risk associated with any business initiative, with market forces (competitors, customer etc.) being difficult to control or even predict. However, those organizations that ‘have their back to the market’ are exposed to an elevated level of market risk.

Are there any market information gaps or blind spots for your project?

An internal focus is often an inevitable aspect of corporate life within large organizations. However, such an internal focus represents a risk to the success of a project or initiative because:

• The vision of project success may be out of step with the realities of the market. For example:
  • Unrealistic expectations of success/results
  • Overconfidence regarding what can be achieved and how quickly
  • Hidden complexity – e.g. an oversimplification of customer segments and their needs
  • An underestimation of what is involved, the resources required and so on.

• A project may deliver against the project plan, yet fail to deliver what the market wants. This happens when we misread or misunderstand customer needs, competitor strategies and so on.

• A shift in the marketplace can invalidate any strategy and those projects and initiatives that flow from it. Projects can be blindsided by changes in the market such as changing customer preferences competitor moves, new technology or regulation.
  
• The lack of an external reference point to challenge and stretch the project and it’s aims. Without sufficient market exposure a project team risks being in a glass bubble.

Is your project or initiative vulnerable to any of the factors listed above?

Client Story:
‘By our own internal standards what were doing with this project is quite good’ said the project leader. ‘…it will represent a significant step forward. However, our own internal standard is not necessarily high enough. The benchmark for this project should be what the best in our industry are doing – what the best in other industries are doing too. In assessing this initiative we need an external, rather than an internal, reference point.’

Does ‘Market Reality’ Matter for every Project?

Pause for a moment before you answer this question:

How much does the success of your project depend on
what is happening in the marketplace?

Some project leaders will say that the market is a secondary issue with respect to their project. This view can be a clear sign of a project that is exposed to elevated market risk. For example an IT initiative for a new backend system could be seen as being independent of what is happening in the market. After all its customers are internal – they are the other departments of the organization.  However, that is often a myopic view.

When seen from a ‘Business First’ perspective the project is not about IT or systems, but how the technology will meet the needs of the business and realize its strategic ambitions given the realities of its market. Thus, whether the project is an IT project, a marketing project or a compliance project, business needs and market reality are primary factors.

Test this for yourself:
Ask team members and others to describe the key reason for your project.  Then listen to what they say. How many are market related (e.g. customers competitors, channels and so on)? Some projects have a compelling market trend as the driver (a burning platform as it were). For others cases the link between what is happening in the marketplace and the rationale for the project may be less clear. However, there should always be a link.

Pause for a moment to consider:

Is there clarity regarding how your project addresses or enables the business to address key present or future opportunities or challenges within its marketplace?

Where the needs of the business and the realities of the market cease to matter for a project, then the project itself ceases to matter (at least strategically). Market reality and future market evolution must be a key part of the project why – the compelling business rationale or C-suite justification for a project.

To connect a project to the strategic priorities of the business, project leaders need to show how a project will enable the organization to either sustain or improve its performance within its marketplace. If a project is not going to further the business’s performance or its position within the market it is questionable whether it should be taking place.

Is Ignorance Sometimes Bliss?

The term ‘functional stupidity’ is a more technical way of saying that ‘ignorance is bliss’. It could be used to describe a situation where knowing or thinking too much about the market could be unhelpful. For example, it could result in:

• More questions than answers
• Certain key assumptions being unraveled & calling the project into question¹ 
• The emergence of some uncomfortable truths
• Analysis paralysis – raising questions that delay the project getting started
• Divided opinions – it could provide ammunition for project skeptics

In the event of the above a project leader or sponsor might rightly think ‘let’s just get stuck into the project and study the market in more detail later’.

Are there any potentially discomforting market truths
that people might prefer to evade, rather than face?

Client Story:
‘This project, because it is cross-functional and highly political, has lost its way’ said the project leader in a tone of frustration. ‘There have been so many compromises made (in an attempt to please everybody) that it could end up with nobody being satisfied’ he added. ‘Moreover, the final output is likely to be significantly behind what the business needs to succeed over the next 3, 5 or 7 years. The market is moving ahead at a much greater speed. What we are producing reflects the past rather than the future and we risk being left behind’.

Is ‘Market Reality’ One of Your Project’s Business Fundamentals?

‘Market Reality’ is one of the 9 interconnected business fundamentals of any project. Looking at projects and initiatives as the vehicles for the execution of strategy, these business fundamentals can be seen as the chassis. That is the most foundational aspect of a vehicle (upon which everything else is built), that gives the vehicle is strength and determines its handling/performance.

In racing the car’s chassis is adjusted (height, suspension, roll, etc.) to the requirements of the specific track being raced. So, it is with the chassis for a project – all those factors shown on the model (strategic ambition, project confidence, business impact, business urgency, etc.) are adjusted based on the realities of the market.

‘Market Reality’ is to be found at the bottom of the ‘chassis model’ alongside, or, to be more precise, in juxtaposition with ‘Business Needs’.  This is important because the two must be reconciled. The aspirations of management will ultimately either fail or succeed based on marketplace realities – such as customer, channel and competitor reactions. Ensuring that business needs and aspirations (called ‘strategic ambition; on the top of the chassis) are grounded in the reality of the market is key.

Here is another way to look at it:   The foundation of a project is business needs and market realities. Think of these are dynamic, rather than static – like two tectonic plates sometimes sifting in the same direction, other times in opposing directions. A project that sits atop these two – rigid in its setup or execution could well come tumbling down when the plates shift.

Project Confidence must also be reconciled with Market Reality. That is because so many of the assumptions underpinning a project are based on a specific understanding of the market and how it is likely to evolve. Boosting confidence often requires more and better information about the market.

Market Reality is connected to all the 9 Business Fundamentals of a project. That includes the other parts of the chassis including, business urgency, business unusual (a proxy for complexity), budget/investment and business impact.

To what extent are the fundamentals of your project (from strategic ambition to
business impact & business urgency) informed by the reality of the market?

Is Your Project Future-Proofed?

A project may start with an accurate assessment of market needs and conditions, but lose touch along the way. Thus, by the time the project is finished the needs of the market may have changed significantly. The underlying VUCA level (Volatility, Uncertainty, Complexity & Ambiguity) is a key factor determining how market related risk needs to be managed.

How complex and dynamic is the market that your project/initiative aims to serve?

It is important that projects taking a longer term view even if they are short term. A project or initiative must be future-proofed, taking account of possible future trends and priming the organization to address emerging market opportunities or challenges.

How does your project/initiative address market opportunities & threats
(customers, channels, competitors, technology, legislation , etc.)?

It goes without saying that anticipating change is not easy. One strategy guru likens it to ‘seeing around corners’. The failure to anticipate change or to spot it early means that there is not enough time to maneuver – to respond to the change – often resulting in a crash²).

The trend towards agile is based on a recognition that change is accelerating and that shifting business and market needs demand a more dynamic approach to projects and initiatives. A project plan and its associated Gantt chart is based on a business and market needs at a particular point in time. There is no point in sticking to a plan that reflects an out-of-date picture of reality. In particular, those most complex of all projects – labelled ‘business unusual’ require engaging with uncertainty in a new way³.

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What Factors Pre-dispose Projects to Market Blindness?

The risks of being blindsided by the market are greatest:

• For hierarchical organizations where signals from the market can take a long time to reach the top of the organization.
• Where functional boundaries prevent the effective sharing of information or dialog about what is happening in the market.
• Organizations that struggle to keep pace with change – their more rigid and bureaucratic ways hinder speed, agility and collaboration and innovation.
• For organizations whose success has made them complacent about change, but who paradoxically may have the most to lose from it.
• Organizations that suffer from acute urgency and short term thinking – unable to raise their heads beyond the day to day busyness to see what is happening around them or is coming ‘down the road’

Do any of the above apply to your organization?

If yes, then take care, your organization is a greater risk of ‘turning its back’ to the market.

How to prevent being blindsided by change?

Here are some of the ways you can avoid being blindsided by changes in the market. As you read the list, identify the ones that are relevant to your project:

• Know your market. Identify market information gaps and questions regarding the market today and tomorrow. 

What are the key questions you would like answered about your market?

• Ongoing market feedback – Put a system in place to gather ongoing market intelligence. For example, what sources of information will be scanned on a regular basis?

• Listen to the market:

What has the market to say about your project or initiative? 
More specifically, what would your partners, competitors, customers and channels say?

Test this: Ask your team what they think customers, partners, competitors or others are saying about your project.

• Get Explicit: Make any market based assumptions explicit. Engage with a range of possible market scenarios. Find ways to test both assumptions and scenarios.

What are the top 3 Market assumptions upon which the success
of your project is predicated?

• Go Granular: A high level or aggregate market analysis often hides more than it reveals.  A granular view is key.  That means exploring the market segment by segment, also looking for sub-segments.
  
• Spotting changes before others requires being able to pick up on weak and sometimes contradictory signals. Knowing too much can be a challenge, as it requires curiosity ahead of certainty.

• Listen to the outliers – There may be more than one market reality.  With varying perspectives on the market it’s opportunities and challenges and it’s future evolution. Often those who first spot future trends are the outliers – lone voices in the wilderness. The contrarians whose views ‘go against the grain’ and can be easily discounted.

How diverse & potentially challenging are the perspectives that have
informed/inform your project?

• External validation – gauge market reaction from customers, industry experts, channel partners and so on. Put real world market intelligence / exposure ahead of market research reports.  That is first hand experiential knowledge of the market that goes beyond market reports. Leverage market testing and rapid prototyping.

Has there been sufficient external validation of your
project/initiative? Has it sufficiently robust?

• Back from the future thinking – a project should work back from a vision of the future of the market. But, arriving at this vision requires entertaining multiple alternative scenarios.

Has there been sufficient external validation of your
project/initiative? Has it sufficiently robust?

• Think Agile – embrace change and disruption. Trade certainty for curiosity – accepting that it is not possible to have all the answers. Moreover, some element of intellectual humility may be required in order to say ‘I don’t know’.
• Make organizational learning is a key measure of your project’s success. Projects are an opportunity to try new things and test market reaction to them, to look outside for solutions, as well as an opportunity for those working cross-functionally on projects to share knowledge and perspectives. Harvesting this learning is key.

What has your organization learned, so far, as a result of
your project / initiative learned? What else is it likely to learn?

• Create a forum for sharing insights from the market. Add it to project review meetings by creating a slot for people to share what has been learned about the market (customer needs, competitors, etc.)
• Risks: Include market related factors in your list of project risks and perform sensitivity analysis of key market variables (e.g. forecasted growth rate, average spend, etc.).

What are the key market-related risks facing your project/initiative? What trends or developments in the market (e.g. competitors, customers & channels) could most impact on your project/initiative?

Client Story:
The market facing business units within a large financial organization have, for several years, complained about the quality and the cost of internally sourced order processing and fulfillment services. 

A multimillion dollar back-end systems overhaul aims to improve order turnaround and cut cost by up to 20%. Sounds great, but is that what the business needs or the market demands? Not according to industry analysts whose data suggests that new entrants enjoy costs that are up to 50% lower than that of some legacy players, but with similar quality levels.

Thus, the project’s objectives could be seen to deny market reality. Even after the significant investment is made and the gains realized, the transfer cost of internal fulfillment services could still be as much as 30% above the industry’s most competitive players.

Test the level of market awareness & curiosity: A situational analysis begins with a set of questions to be answered, with this in mind ask the members of your team to choose at least 4 rows in this table.

Market Variable (C3PESTLE)	Key Question	Key Assumption	Key Trend
Customers
Competitors
Channels
Political
Economic
Societal
Technological
Legislative
Environmental