The tyranny of the served market: The negative relationship between market orientation and performance among design-driven organizations

Abstract

As design has been slowly embraced as an element of business research, a number of well-established organizational strategy concepts have been called into question. This article empirically examines the relationship between firm performance and market orientation (MO), one of the most commonly employed variables within business strategy, among design-driven firms. Our findings suggest that the positive relationship between MO and performance present in most business strategy literature does not appear to hold among organizations with a strong strategic focus on design. Design-driven firms seem to actively downplay MO, resulting in a statistically significant negative relationship between the concept and its three sub-factors: customer orientation (CUST), competitor orientation (COMP), and inter-functional coordination (INTER) on two measures of firm performance, project-level success and competitive advantage. Drawing on related literature and follow-up interviews with firm managers, we rationalize these results as evidence of design-driven firms efforts to avoid the so-called ‘tyranny of the served market’ where a narrow focus on current customers and established competitors within incremental markets can lead to myopia and limit innovation. The implications of this study may be to provide support to managers of design-driven organizations to de-emphasize MO’s narrow focus on close industry rivals and well-defined customers as well as much-needed empirical support for anecdotal accounts of how many traditional business strategy variables, such as MO, may be insufficient, or at least incomplete explanations of design-driven organizations.