First, the constraint may not be demand, but supply. ‘Market forecasts’ are useless here, because markets will grow as fast as providers enable incipient demand to be expressed. People would, for example, flock to decent restaurants in emerging markets, if only they existed. This creates a huge imperative to expand fast – if you don’t, others will capture the opportunity first. You may not even need to offer anything special, just something acceptable (but beware the Starbucks error!) – you can always uprate it later, giving consumers a continuing reason to spend with you. 

Secondly, there will be intense competition to capture such new opportunities, so ‘managing’ competitors is vital. Many rivals will be rubbish, but they can still mess up the market for you – discounting to grab market share, for example, or building excess capacity that will never pay for itself. In the process they destroy profitability, and destroy your investment case. So you need to kill weaker rivals (see how), and deter others . I used to think strategy should be kept secret, but it can be best to be very public about your plans, explain just how powerful you are, leaving the implied message “Yes this is a great opportunity, and yes we are doing very well, but look at just what we have built to give us this power – so don’t even think you can take us on, or you will just get killed.” 

Lastly, recognise that you are not just competing with others in your market, but with other entire industries. Your restaurants may be empty if consumers decide to spend instead on durables, or on low-cost air travel when airlines offer services in your local markets. Tracking how consumers actually are deploying their rising income as this range of spending opportunities widens helps clarify the scale of your opportunity and how to promote your business against alternatives.  

Retail sectors like this make good examples because they are easy to recognise, but the same principles apply in all kinds of other fast-growing markets. Following these principles makes it possible to ‘design the future’ the way you want it to be.   

As commonly understood, and indeed as explained in Michael Gladwell’s popular book, it’s all about the take-off of self-reinforcing effects. But there’s a much more powerful source of tipping points – threshold effects. To take a simple example – a service team can cope just fine if calls are 80, 90 or 99% of its capacity to respond, but at 101%, performance collapses. There are many other examples, including economic cases – e.g. when the Indonesian economy fell back by a few percent in the late-90s downturn amongst the Asian tigers, demand for new cars fell – not by a few percent, but by more than half!

So .. just how much damage could a 3% increase in sub-prime mortgage defaults do to the US financial system? [see Randall Dodd, Subprime: Tentacles of a Crisis] .. depends just how close key parts of the system had been taken to critical thresholds, and hence to powerful tipping points. Greenspan made a further point – that he [and we] had assumed banks sought to protect their investors from risk, but that seems not to have been the case over the last 5 years - instead, they took us all just that bit too close to those thresholds.