Deadlocks and Dominoes are two very common attributes of markets I often help clients understand. Both are periods of time in the development of the market. Deadlocks are time periods where the status quo prevails for a long time without major changes by any players. Dominoes, on the other hand, is a period bursting of intensive change by many stakeholders. This post explores both.
Consider this chart that was developed for a Priiva client whose products are dependent on overall market adoption of a new technology. The analysis concluded that the market has stalled because most players are waiting on the other, for something, before acting. If you studied computer science, this is called a deadlock or a deadly embrace . In everyday language, this is the “chicken or the egg” paradox. That market structure was visually depicted in the graph below.
Each bubble in this deadlock picture is a market stakeholder, or “player”. The arrows indicate who is waiting on who. The green shaded aggressive players will act unconditionally without waiting. The yellow-shaded players are “Hesitant” and will act conditionally. The blue-shaded players are “Followers” as they also act conditionally, but unlike the yellows, few others are conditional on them.
Deadlocks mean the market will develop slowly. Deadlocks can be broken if parties are willing to coordinate and make decisions concurrently. In this market example, a success by any early adopter is actually the key to breaking the deadlock for everyone. This is a “rising tide” game structure whereby the success of one is the success of everyone.
In traditional markets, we’re taught to beat, punish, or kill competitors. However, in a “rising tide” market, all stakeholders should engage in short-term coordination and cooperation, as that is vital to long-term market viability. Said differently, a market must first be viable for customers to buy and competitors to compete.
Dominoes is a period of time of cascading change where most players don’t like the status quo. All players believe making their next move, either offensively or defensively, is better than the status quo. This can be triggered by a big strategic move by an influential player that causes all other players to react. It can also be the result of new technology, with all players hedging to get some toehold should that technology prove to be successful.
Consider the world of mobile payments. We are on the threshold of dramatic change and rapid adoption of mobile payment technology. Increasingly, consumers will start making payments with their digital wallet (i.e., their smartphone) instead of a plastic credit card in their wallet. Printed receipts will stop being the norm and be over-taken by electronically assessable receipts stored in a secure and organized cloud service.
As that consumer adoption occurs, supply chain players in payments will be fearful of being left behind and will act aggressively and quickly to get a toehold in the new world order of payment processing originating from smartphones. And all the while trying to leverage and protect their current position. I expect to see a frenzy of chessboard moves by banks, merchants, credit card issuers, and giant and regional merchant acquirers that sit behind those credit cards and settle all those payments
Playing to Your Advantage
Strategy leaders must understand if they are in a period of Deadlock or Dominoes, play to their advantage, and sense when that market phase concludes. Your positioning, partner strategy, new product introductions, and many other operational initiatives depend on it.