“Shadow” Market


September, 2007


Frank Pucelik, President of Pucelik Consulting Group


Shadow is a shift from day to night, when borders, colors, conventions fade away. Only those can reduce the distance to success, who know the rules of «shadow» - «transition» market.


Try to survive


Being an effective leader in a competitive market is very difficult. This type of market presupposes the highest rate of growth and a large number of contradictions, which makes work of leaders inUkraine rather complicated. Today's leaders in Ukraine have to play two different sets of rules at the same time.


Both «competitive» and «closed» markets have different rules, which include professional procedures in business, social interaction skills, motivation systems, information systems. We can also add a system of leadership and system of behavioral skills to this list. The last two most vividly demonstrate the difference of two market systems because they are almost incomparable.


It is noteworthy that «transition» market (from «closed» to «competitive») does not exist in frozen form. The peculiarity of this market is that it transforms from day to day, therefore predicting its behavior or accurately describing its characteristics is not easy. «Transition» market, in our view, represents a small period in history, during which the rules of the game and market structure are rapidly changing. In Ukraine, this transition goes from the «command-and-control», «closed» market to «competitive» one. In the «transition» market there is no established system or rules except one: «try to survive here and earn as much and as quickly as possible».


Leaders of «transition» market have to work and achieve success right here and right now. In doing so, they do not have the luxury of a professional experience in the past, which could be used to meet the challenges arising in the circumstances of business. Things that worked yesterday today have a different effect, tomorrow they could even give opposite results. Often the main motivating behavior of leaders is that they call instinct, intuition or habit, and success is measured solely by short-term results achieved. They were thrown into the sea, and they must learn to swim without a coach and classes in the school pool. If companies are profitable today, their leaders feel that they had received confirmation of success as a business leader. In the end, «what if not present result is a measure of success»? And they come to the conclusion that the supreme purpose is a short-term result. Everybody forgets about the price paid for achieving this goal. This really is partly truth, but can we call this style of leadership effective?


Acting old-fashioned


At the controlled, «dominated» market, there are two levels of employees’ skills:


1. I do not know what my work is;


2. I know what my work is.


When an employee starts his career or changes jobs, usually the head of the company points out what the employee should aim at and provides short-term training or extensive professional training and only after that he specifies the employee’s activity line. The choice of action is limited:


1. the employee receives an instruction to «clear the height at any cost» with colorful descriptions of all severe punishments, which will crack down his head in case of failure;


2. top-management takes full control of the of staff behavior, guiding the implementation of each minor task.


Often a new employee is expected to work effectively several weeks after starting work, or at best a few months. This is a common practice in enterprises. Many Ukrainian leaders are confident in the following: it has worked for years and was effective, so making profit at the end of the year they can continue using such behavior and consider it efficient.


Success criteria


At «competitive market», an employee has four levels of productivity:


1. the initial stage of development or lack of interest in work;


2. first learning phase, progress towards the development of skills and competencies;


3. an employee takes the lead, but still can not work independently, although there is already interest in the result equal to the interest of his boss;


4. an employee is willing to carry out complex tasks with minimal control or direction on the part of management.


In «competitive» market, business leaders measure their success by several criteria. Final result is one of them, but not the only one. Here are other criteria, regarded essential to «competitive» market: professional behavior in the organization, management skills and skills of work with information, professional procedures and processes in business, as well as the skills required of members of a professional united team. Thus, «competitive» market outlines five criteria of success and, consequently, five areas of responsibility of a leader. A leader eager to be successful in «competitive» market should be able to manage all five criteria described.


“Transition” market does not exist in frozen form, therefore predicting its behavior or accurately describing its characteristics is not easy.


“Transition” period difficulties


We are still in the «transition market». What are the rules to play for our leaders: the rules of «competitive» or «command-and-control» market? The answers to this question are changing every day. Can our leaders quickly switch from one system to another several times a day? Can they manage using past experiences and understand what to do if the old skills are not working? The questions are many. But this is only a small part of everyday challenges for our leaders, emerging regardless of whether they know the answers or not.


One of the difficulties faced by the leaders of the Ukrainian business is the need in equally thorough understanding of the two market systems. They need to develop the ability to almost immediately switch from one set of business skills and assumptions to another, in order to adequately respond to emerging challenges. This kind of skill is necessary to adapt to rapidly changing conditions of the market. Leaders must continue developing their businesses and their personnel in accordance with the requirements of the competitive market. They should be «learning machines» to outpace their competitors, to manage the development of their company and to respond adequately to changes in the market. This is not easy, so not so many competing companies can surpass the leader in the above-mentioned areas. Business leaders so far are competing at the track with amateurs, who do not know the proper running style. They seem to be running, but they will quickly get behind a real professional! Will all of them get to finishing line?


An example of one of the most obvious and critical difference between «closed» and «competitive» markets is a simple decision-making process. At the «closed» market, leaders make decisions according to their own strategy, where the process and reasons are a mystery for an outside observer. Leaders of «closed» market believe that these decisions are usually based on resources, capabilities and knowledge developed in their brain. Such leader has wide experience, understands what is happening in his business, and always follows his «business instinct». Of course, he believes all of this is important. If the leading motive of your business is control (as in most closed markets), while efficiency, quality and profit are not so significant, then this behavior of the leader can be recognized normal. But how should decisions be made when the main criterion is not only profit, but the company’s authority, product quality, rebound on resources spent, etc. Why can decisions based on «business instinct» alone be so devastating in a competitive market?


Most people, who make individual decisions, use the following resources: a set of memories, which they consider appropriate in this case, their thoughts about the purpose, as well as their own preferences. Such preferences emerge from inner feelings or from some of their thought processes. This process of internal selection can rarely be controlled by consciousness. This may be the result of a random comparison, carried out by the unconscious of the person based on many (sometimes thousands) of past memories, starting from early childhood. When we decide where we want to have dinner tonight, the described method can be quite acceptable. However, it is doubtful that you can take the same solutions effectively in business. If your decision affects only your life, then do so easily, because it is fixed in our subconscious that it is only you who is concerned about the decision. But does it work in business in «competitive» market? No, it does not!


Other rules of the game


In the company on «competitive» market, everyone is part of the team. And every decision affects each employee of the company. Everyone has ideas, information or expertise that could be useful for the success of the decisions made by others. In the «competitive» market, information is the key to success. When making decisions, the leader in the «competitive» market must gather information (knowledge) into one unit, take into account the issue of psychological ownership and profit price (in literal and psychological sense) for all employees of the business. Decisions in the competitive business are based on «decision making points», which correspond to four questions:


is this idea worth attention as a potential project or a specific solution to the existing problem;

is there all the necessary information to solve this problem or accomplish the project;

is this project worth getting to the stage of developing an action plan;

will this project be implemented by the company.


Until there is positive answer to each question (with appropriate information and background), no company in the «competitive» market will continue work on the project, task or issue. These questions should follow gradually, the time between answering them depends on the complexity of each project or task, but the ability to follow the «decision making points» is an obligation for all employees at the «competitive» market. Without such skills, without having this decision-making process as a standard procedure in our business, we often return to the habits of the past «command» experience, thus destroying basis necessary for success in business of «competitive rules».


Yes, today in the transitional market, we can still use the old set of rules and policies, old habits of doing business and achieve success. We can even make money, sometimes very big money. This is the biggest danger to the Ukrainian business leaders. Because of making account of short-term profits only, they believe that:


1. «This is not America». The objective laws of economic development in the Ukraine do not work and will not work;


2. the leader in this market must be tough: fear means respect;


3. outdated business procedures and repressive measures are applied due to the «Ukrainian mentality»: all people here are thieves, drunkards and idlers;


4. «We have been doing this for years and this is how we can succeed».


Such opinion is dangerous because it is only half-true and it ignores some important realities of today's market:


1. Ukrainian market is changing faster than any other market in history. What we did two or three years ago, now often looks ridiculous;


2. we could earn much more if we paid attention to learning and led the market, rather than simply reacting to the actions of our competitors;


3. many companies that used to be market giants now represent a sorry sight, or do not exist at all, though they had strong belief in the above-mentioned. They were destroyed by their own inefficiency, internal and external corruption and, of course, competition. Some of them did not have enough «black money» or «relations» they were so proud of and that is all: game over.


«Decision making points» is just one example of simple basic procedures, disregarding which could destroy companies in our market. In fact, there are more procedures like this, and we need to learn them, develop new business skills every day to reach the level of the strongest competitors and win.


In conclusion


Can today's leaders in our market meet the challenges, which the leaders in the competitive business often face? Of course, they can. They only need desire to learn, source of quality information and professional educational business structure. The benefits for the leader who has decided to learn the necessary skills are very high, both for him personally and for his company. For powerful and efficient companies, Ukrainian market is still kind of an unplowed field. Choose your teachers and information sources carefully and you will be able to succeed even at a market as complex as Ukrainian. The choice is yours. You can lead your company and create the market you want, or seek for excuses for your failures. The market is changing. Now you know the direction of development. And it is up to you to decide whether you want to lead the way or let someone lead you.


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