gartner-magic-quadrant

What Is The Gartner Magic Quadrant And Why It Matters In Business

The Gartner Magic Quadrant is a framework looking at the competitive ability of four types of tech providers in a rapidly growing market. It looks at four profiles: challengers, leaders, niche players, and visionaries. This framework provides an overview of industry players to potentially identifying those players with the ability to create new market segments.

Understanding the Gartner Magic Quadrant

The concept behind the Gartner Magic Quadrant comes from Gideon Gartner, who was one of the top Wall Street analysts in the technology sector. Gartner and the company he founded have historically released Magic Quadrant analyses on companies in the technology sector, giving awards to the best performers.

The quadrant itself seeks to divide any industry into four different sections: Challengers, Leaders, Niche Players, and Visionaries. Then, respective companies are placed in the quadrant according to their ability to execute (represented on the y-axis) against their completeness of vision (on the x-axis).

Let’s look at each of the four quadrants in more detail.

Challengers

On the quadrant, challengers have a high ability to execute with low completeness of vision. These organizations may be profitable and influential in the short-term, but they are not unaware of the future direction of their company, products, market, or industry.

Leaders

Leaders pair high completeness of vision with high ability. They are those that are dominating their industry and have good long-term prospects for remaining so. 

Niche players

Niche players do not have complete visions, but they don’t have the ability to realize a vision in any case. As a result, they are unlikely to outperform others to gain a competitive advantage through innovation.

Visionaries

As the name suggests, visionaries have high completeness of vision. In theory, they recognize the future direction of a product, market, or industry. But they lack the ability to make their visions a reality. 

Applications of the Gartner Magic Quadrant

Provides a detailed overview of industry players

It’s important to understand that Gartner Magic Quadrant reports act like a recommendation site for businesses looking to hire for large technology projects. In much the same way that Yelp lists highly regarded restaurants, Gartner reports review and present relevant tech industry players. 

Upon receiving the report, the hiring business can quickly assess each “applicant” in terms of their vision and ability to carry out that vision. It also gives the hiring business a broad overview of the market and also of the competitive positioning of each technology company. Perhaps most importantly, the business can match its specific needs with the strengths or abilities of an applicant company.

Has the ability to create new market segments

Gartner Magic Quadrant reports can sometimes lead to the formation of new market segments if the company deems them important enough. 

Once defined, these new markets legitimize and boost the credibility of newer companies who may otherwise have been overlooked. This has obvious flow-on effects for sales, revenue, and profit generation. It also drives innovation and growth in the sector itself.

Gartner magic quadrant example

While Gartner releases regular reports on hundreds of industries each year, we will examine the 2021 report for the digital commerce industry.

Who are some of the challengers, leaders, niche players, and visionaries?

Challengers

  • Shopify – the SaaS platform for small to medium-sized businesses reported 40% year-over-year growth in 2020, with its API and Shopify Plus features used extensively by larger businesses. However, Gartner noted that Shopify’s total cost of ownership (TCO) may not be the cheapest on the market. Clients have also reported the difficulty in working with Shopify during contract negotiations.
  • BigCommerce – another SaaS platform for small and medium-sized businesses that is cloud-based. BigCommerce has several clients with over $100 million in GMV and a strong presence in the United States. What’s more, the popularity of the platform is growing steadily in the Asia/Pacific and EMEA regions. Gartner cautions that BigCommerce has limited search engine and personalization functionality which may require third-party integration. The B2B offering is similarly basic and as a result, will likely not appeal to serious enterprise clients.

Leaders

  • Adobe – a company that has an established foothold in all major geographic regions and a diverse range of industries. Adobe Commerce is used by several clients with over $1 billion in GMV and is particularly favored by midsize companies that want a robust but customizable solution. Adobe’s global presence is seen as a major strength since it has a large number of service partners across all major markets. The characteristic modern and intuitive Adobe UI is also seen as a benefit. Looking forward, Gartner notes that the company’s low release cadence and lack of platform scalability may be cause for concern.
  • Salesforce – another leader in digital commerce is Salesforce, a company that offers various B2B, B2C, and B2B2C solutions. Like Adobe, Salesforce has a truly global presence but with important partnerships with companies such as Alibaba in the Chinese market. To that end, the Salesforce platform offers exemplary localization capabilities with over 100 currencies supported. Despite its varied product range, however, it’s important to note that some platforms were acquired from other providers and as a result, are based on different underlying technologies.

Niche players

  • Oro – a B2B eCommerce and CRM platform headquartered in Los Angeles, California. Oro is a niche player because it has a specific B2B focus with requirements for an integrated CRM system for sales teams. Having said that, Oro supports multiple B2X models, including business-to-government (B2G) and business-to-employee (B2E). It also offers a modular and extremely customizable workflow that supports multiple use cases. Gartner suggests that Oro is unlikely to outcompete others because of a lack of partners in distributed order management (DOM), third-party logistics (3PL), and CRM.
  • Kibo – a provider of single-tenant and multitenant SaaS with a reporting dashboard and an integration platform. Kibo primarily operates in the B2C space with most customers based in North America, and the platform excels in personalization features such as product and content recommendations, product collections, and native search results. Many of these features are free, which provides an important point of difference. Gartner notes that Kibo’s reliance on the B2C retail market in North America may hinder future growth.

Visionaries

  • Oracle – Oracle offers single and multi-tenant commerce platforms with on-premise and cloud-based options. The company’s B2B and B2C commerce capabilities are used by enterprises in a diverse range of industries, with many clients enjoying features such as sales force automation, subscription management, and ERP. The cloud-based product also offers Design Studio, a tool enabling businesses to create a customizable storefront that can be targeted to various customer segments. Despite its visionary status, Gartner identified that the cloud-based platform was adding customers more slowly than its competitors. What’s more, it can only be deployed with Oracle’s own cloud infrastructure. This may limit the company’s attractiveness to clients wishing to use AWS or Azure, for example.
  • VTEX – this company has a similar product offering to Oracle and is particularly dominant in the Latin American retail market. VTEX’s point of difference is extra functionality that extends beyond digital commerce. Features include marketplace operations, intelligent search, personalization, and a low-code, serverless development platform. There is also a diverse ecosystem of apps with over 400 available via the API and plug-ins. At present, VTEX’s platform is only available on AWS. This may hinder its ability to gain a foothold in the North American market if brands and retailers desire a non-Amazon-based solution. Gartner also noted that since most clients have GMVs under $50 million, enterprise prospects may have problems identifying comparable reference customers in their specific industry. 

Key takeaways

  • The Gartner Magic Quadrant is a measure of a company’s vision for future growth, measured against their ability to realize that vision.
  • The periodically released Gartner report is an industry-standard publication that allows businesses in search of new talent a holistic and detailed view of the technology sector.
  • The Gartner Magic Quadrant can uncover new markets or perhaps new attributes with which to judge those markets. Potentially, this legitimizes newer players and leads to growth and innovation in the sector as a whole.

Connected Strategy Frameworks

Porter’s Five Forces

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Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces.

SWOT Analysis

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A SWOT Analysis is a framework used for evaluating the business‘s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.

BCG Matrix

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In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.

Balanced Scorecard

balanced-scorecard
First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.

Blue Ocean Strategy 

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A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.

GAP Analysis

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A gap analysis helps an organization assess its alignment with strategic objectives to determine whether the current execution is in line with the company’s mission and long-term vision. Gap analyses then help reach a target performance by assisting organizations to use their resources better. A good gap analysis is a powerful tool to improve execution.

Scenario Planning

scenario-planning
Businesses use scenario planning to make assumptions on future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts at better strategic decision making by avoiding two pitfalls: underprediction, and overprediction.

Read alsoBusiness Strategy, Examples, Case Studies, And Tools

Other related business frameworks:

The FourWeekMBA Business Strategy Toolbox

Tech Business Model Framework

business-model-template
A tech business model is made of four main components: value model (value propositions, missionvision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

Blockchain Business Model Framework

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A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.

Business Competition

business-competition
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.

Technological Modeling

technological-modeling
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.

Transitional Business Models

transitional-business-models
A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.

Minimum Viable Audience

minimum-viable-audience
The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.

Business Scaling

business-scaling
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.

Market Expansion

market-expansion
The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.

Speed-Reversibility

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Growth Matrix

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In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).

Revenue Streams

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In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.

Revenue Model

revenue-model-patterns
Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.

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