Consolidation in any industry presents risks and real opportunities for companies, I think especially for those smaller entrepreneurial ventures trying to establish themselves. In manufacturing, it is a way many improvements get made to our favorite products.
'Consolidating' in a market means increased competition from all the players as market dynamics play out. Larger, well-funded competitors will seek to acquire, to achieve innovation. Nimble startups in the meantime can capture significant market share and grow revenue by developing a strategic approach; In this post, we’ll explore how an entrepreneur can benefit by leveraging consolidation to achieve growth - as a startup.
Define Your Target Customer
Laser focus on who your ideal customers are and what unique value you provide them. Clarity allows you to hone your product offering and go-to-market strategy to meet their needs better than larger competitors who are likely will struggle with merging disparate customer segments. Take the right amount of time to research your target customer - deeply - understand what problems they face, what processes or workflows you can improve, and where the consolidation is impacting them most. Use this understanding to shape a compelling and differentiated product and messaging.
Pick Your Battles
While larger competitors duke it out pursuing broader opportunities, identify underserved niches and micro-segments that may be less of a focus for them. For example, geographic expansion may be stalled as merged companies rationalize regional resources. Find specific customer profiles or use cases that are being underserved and position yourself as the expert in catering to those needs. Winning over these niche audiences can establish valuable beachheads that act as prototypes and references for expanding to broader segments.
Leverage Your Lean Manufacturing Agility
The bureaucratic nature of consolidating companies often leads to organizational paralysis, freeing up opportunities for agile startups. Identify parts of the customer journey that are being neglected amidst the integration chaos - perhaps onboarding, support, or new feature release cycles have slowed. Invest in excelling at filling those gaps for customers with your ability to be nimble and responsive. As you build trust and credibility capital in these areas, you can start expanding your footprint across other segments of the journey.
Incorporate (more) Lean Approaches
The adoption of process strategies like lean manufacturing has fueled much of the market consolidation across industries. Startups today look to leverage lean and agile philosophies across the board to drive efficiency and focus on value-add. Applying lean principles will allow you to iterate and pivot faster than LARGE, less agile consolidation-weary incumbents.
Turn Industry Connections Into Partnerships
Market consolidation inevitably leads to talent moving. As companies merge and restructure, the people in the organization have to contend with the fallout. Frustration, lack of vision, and finances will impact their interest and ability to stay on during M&A. Executives tap into a network to connect with influential figures who have recently changed roles or even left the industry. Aligning with key leaders who lend expertise or connections in parts of the market now in flux can provide insider knowledge and validation.
Explore creative partnerships where these industry veterans can invest in, advise or even join your startup to win over customer segments they previously serviced.
An oft-overlooked growth strategy for startups in consolidating spaces is getting acquired by one of the major players. Incumbents are often looking to add talent and technology capabilities through acquisitions as they integrate. If you target your offering and positioning appropriately, you can make your startup an attractive acquisition target. This path can provide quick growth capital and leverage the customer reach of the acquiring company if you negotiate for some autonomy to run the acquired business. So don’t rule out “getting bought” as a viable strategy in a consolidating industry.
While market consolidation brings chaos and uncertainty, it also brings opportunities. Established players are distracted by managing lengthy integrations and dealing with organizational complexity. Nimble startups can leverage this moment to deliver focused solutions to overlooked segments, win customers through superior agility and responsiveness, and lock in strategic partnerships. With the right strategic approach, consolidation can be used as a launchpad for exponential growth by those entrepreneurial ventures positioned to ride the wave.
The key is having clarity of your target customers, niche positioning, value proposition, and leveraging your structural advantages of speed and focus. Consolidation forces greater discipline in business strategy for startups - something that can pay long-term dividends even after the dust settles. With the dynamics only increasing in many sectors, the time is now for new ventures to seize the day.