Digital technology, healthcare, electric vehicles, renewable energy… Many emerging and existing markets offer windows of opportunity for latecomers to catch up to market leaders. However, to capitalize on these opportunities, companies must identify upcoming windows of opportunity and understand how to implement a successful catch-up strategy. New research into the Chinese electrical vehicle market provides us with insights to better understand how to identify and capitalize on windows of opportunity.
Professor Jie Yan is the Director of the Grenoble Ecole de Management DBA China program and a professor of innovation and Entrepreneurship. He is the co-author of a recent research paper in collaboration with Jie Xiong, an associate professor at ESSCA School of Management, and colleagues from Rennes School of Business. Their publication ,"Closing the gap: the Chinese electric vehicle industry owns the road", offers new insights to better understand windows of opportunity and how to capitalize on them.
What is a window of opportunity?
In our case, windows of opportunity generally refer to a moment in market development when there is an opportunity for latecomers to play catch-up. Windows of opportunity can be categorized into three groups: policy related, market related and technology related. A window of opportunity arises when there is an important disruption in one of these three categories. For example, in the Chinese electric vehicle market there was an initial policy disruption that opened the way for a window of opportunity. Initially, the Chinese electric vehicle market was activated by policies designed to welcome major foreign automobile companies and encourage them to develop electric vehicle subsidiaries in China (50-50 joint ventures with Chinese firms for local production and technology transfer). When Chinese policy switched to focus on providing support for Chinese companies to grow, this created a window of opportunity. Chinese automobile companies were latecomers in the Chinese mainland electric vehicle market. However, thanks to this switch in policy these Chinese latecomers were able to overtake the subsidiaries of major foreign automobile companies in order to become the leaders of the Chinese electric vehicle market.
How can companies identify and capitalize on a window of opportunity?
First, managers have to pay attention to any major disruption in terms of policy, market demand or technology. For example, companies that quickly identified the impact of the COVID-19 crisis (e.g., government policies and recommendations to encourage telecommuting) were able to seize an opportunity to take the lead in markets related to the digitalization of services. Once you identify a potential window of opportunity, the question is how to implement a successful strategy. As each window of opportunity is uniquely defined by factors related to its sector, it's difficult to reach a general consensus on the best strategic approach. However, some fundamental guidelines can be helpful:
- Managers have to consider internal resources and external demands. Does the company have the knowledge, talent or strategic partners required to match the demands created by a window of opportunity. In order to successfully capitalize on an opportunity, the company must first have the right resources available.
- Managers have to identify the long-term goal of the window of opportunity. In the example of the Chinese electric vehicle market, one long-term goal was for Chinese automobile manufacturers to become the leaders of the Chinese market. This sets the framework and timeframe for the window of opportunity, which would be very different for example if the goal was to become a global leader. Managers have to consider how far their wish to go in pursuing a window of opportunity. This is essential to define the timing and requirements of a catch-up strategy.
- Managers must see windows of opportunity as dynamic systems. A discontinuity in one of the three groups (policy, demand or technology) will result in changes in the other two. For example, the Chinese government policy to encourage electric vehicles created changes in the market (e.g., through incentives to support the purchasing of electric vehicles) and in technology (e.g., local Chinese manufacturers acquired new knowledge and technology thanks to government promoted joint ventures with leading international automobile firms). If managers and businesses only have a static perspective of any one of these three factors, they will most likely miss out on the potential window of opportunity.