Super Bakery, Inc.

Here's an opportunity that most seasoned managers would decline: Penetrate and build market share in a fragmented industry with little growth, commodity products, aggressive price competition, and slim profit margins. When the odds are so heavily stacked against success, why not pick a business with more favorable prospects?

The managers of Super Bakery, Inc.--a manufacturer of donuts and baked goods for the institutional food market--strongly disagree with this view. By going against such conventional wisdom, the company has established a firm foothold in an industry with a seemingly unappealing profile. Even more surprising, Super Bakery managers argue that the unattractive mature market conditions they faced--many local competitors, seemingly no growth prospects, and little innovation--were actually ideal for breaking into the industry.

For would-be entrants into mature markets like the institutional bakery industry, there's bad news and good news. The obvious bad news is: The competition is fierce, profits are skimpy. But the good news, for gutsy entrants is that the current players' assumptions are often frozen in place--out of touch with competitive possibilities.

In mature industries, rival firms measure their product offerings and their sales results on the same narrow performance criteria. Established players have little motivation to change their strategies or alter industry practices. Brilliant young Turks usually avoid such slowpoke industries, and homegrown talent migrates away.

This stodginess creates an opportunity for innovative entrants. But many start-up firms in mature industries aren't innovators. Perhaps that's because most managers of start-up competitors in mature markets got their training at established firms in the industry. Or, they may consider the adoption of current practices and strategies the quickest way of gaining the acceptance of customers.

Super Bakery followed a similar conservative course in the early 1980s but soon found that it was the quickest way to ensure failure. The willingness of its managers and employees to learn from these early experiences and change industry practices proved critical. Super Bakery's story offers three compelling lessons:

* Innovative entrants can alter the terms of competition in mature markets.

* Entrants must learn to search for opportunities to build relationships in the customers' entire environment.

* Entrants must develop strong internal capabilities to support the external strategies.

THE BIRTH OF SUPER BAKERY

Super Bakery, Inc., a company now...