Neil Tambe

I'm a Detroiter who happens to enjoy writing, national parks, orange juice, the performing arts, and fanciful socks. More than anything though, I aspire to be a good husband, father, and citizen.

Irrational Manager / Market Share Fallacy

Today, my strategy professor made a very wise point: only the irrational manager puts increasing market share ahead of increasing profits. A business intends to make profits, which gaining market share doesn't necessarily do. Increased market share may lead to increased profits, yes, but it's not a guarantee. So any strategy to increase market share should be rooted in an intent to increase profits.I think this also applies to the social sector. Lots of times, in my experience, social sector organizations measure themselves by serving more people or increasing the amount of programs they have. That's fine, but only as long as those increase actually make their communities better in a meaningful. Having more programs isn't intrinsically valuable. It's rare, in my experience, for social sector organization to make this connection (between programs and impact) clearly. This construct mirrors the irrationality of irreverent market share gain in the private sector:

  • Increased Market Share = More Programs
  • More Profits = More Impact

More programs doesn't mean more impact, just as more market share doesn't mean more profits. Not-so-good Managers in both sectors don't understand this fully. Increasing market share or programs makes you look like a better manager / executive, but it doesn't mean you are a better manager / executive.

The anecdotal difference, I think, is that founders in the private sector are crazy about profits whereas founders in the social sector seem more likely to be interested in their "market share" than their private sector peers.