Platt Perspective on Business and Technology

Global marketplace diversity as business ecosystem niche space – 2: business niche viability and marketplace strength

Posted in strategy and planning by Timothy Platt on July 23, 2011

This is my sixth installment in a series on marketplace diversity in Business Strategy and Operations (see postings 160-162, 167 and 172.) This is also my second posting within that series to look into how an ecological systems model, based on the concepts of niches and niche space might be applied to a business and marketplace context as a source of new insight. In Part 5 of this series I built an initial foundation for that by defining four key terms as they would apply to a business and marketplace context:

• Business ecological niche,
• Business niche space,
• Niche width and
• Realized niche width.

My goal in this posting is to continue this discussion, more fully elaborating on these terms and how they would be used in developing a richer insight to the business context. I begin by referring back to a biological systems example that I touched on in Part 5, of two insect species that seem to have very different niche requirements for everything else, but that in fact need the exact same type of wall crevice to lay their eggs in. As I noted there, this means they are significantly and even crucially competing for a same ecological niche for at least a key portion of their life cycles, even if all else is different in what they do and what they require to do it. Now consider two businesses that offer very different products to the marketplace. But both types of product would sell in large part through convenience stores and these stores have limited shelf space – which their products compete for. Now these two businesses show to be highly competitive with each other for a crucial area of their niches, and for a crucial portion of their business cycles.

• In a business ecology context, competition for resources, and for marketplace position can and does include any and every potential area of overall niche overlap, and even where overlap would fall outside of more conventional competitive analysis considerations.

And this can and does include areas of potential conflict of interest that might be more easily overlooked, and certainly where the businesses involved appear at first analysis to simply be of different, non-competing industries.

With that in mind, I raise two other core issues that immediately come to mind as areas where this type of model might offer fresh insight.

• Niche viability, and analysis of factors that would go into determining the capacity of a business to survive and thrive in a given marketplace and local business ecology, with its current realized niche width and with the niche width it could realistically develop into.
• Niche diversity, and parameters and factors that would lead to determination of how many businesses, and of what range of overlap and diversity can be supported in a given marketplace and with a given current economy.

I am going to focus on the first of these bullet pointed issues in this posting and will turn to the second of them in a subsequent series installment.

Business models are not always sound.

• They can have gaps and inconsistencies.
• They can be built around questionable premises and assumptions, both as to the existing marketplace and for levels of consumer interest and demand there.
• They can be accurate or off the mark in their analysis of the value to the marketplace of the products and services to be offered.
• In that, the qualities and features that a business would build its offerings around might seem distinctive and significant to the founders but they also have to appear as offering unique and significant value to the customer and from their perspective too.
• And a similar marketplace appreciation that differences offered mean unique value proposition offered, should hold for any other customer-facing aspect of the business that it would use to set itself apart with as a source of unique value in the marketplace.

What I am writing of here, are in fact the significantly meaningful details of a proposed business’ niche, where “significant” means variation in a given parameter means change in the effectiveness and marketplace strength of the business. In that, viable niche determination is all about distinctions that make a quantifiable, measurable difference in the vitality of the businesses observed. Not all businesses build towards viable realized niches. They find themselves competing to in effect be 37th best out a field of 40, or they fail to adequately plan, execute, benchmark and adjust at all as a consistent, strategic process.

I am going to expand a bit on this set of issues as a starting point in my next series installment and will then move from discussing niche viability to discussing niche diversity and local business ecosystem diversity – and determination of the unique business capacity that a marketplace and business ecosystem might be able to carry.

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