Innovators and entrepreneurs often approach opportunity from the wrong vantage point. Instead of focusing on existing markets and taking away market share from competitors, these industrious companies would be better suited to develop new markets, not compete for share in existing ones.
Take the example of some high-profile disruptors in recent years. The iPhone, when it was introduced in 2007 didn’t just disrupt the existing cellphone market. But Apple’s approach was not to worry about the existing smartphone market, which was dominated by Blackberry and very focused on functionality.
The iPhone emphasized simple, beautiful design and mainstream functionality. It allowed people to play music and games, interact easily with friends, and the device had an innate cool factor to it.
The iPhone created a whole new market for mobile devices that are now seemingly ubiquitous. In 2007, there were 17 million smartphones sold. In 2016, there were 1.5 billion sold. Apple has held a 15 percent to 25 percent of that share during that time.
Airbnb had a similar effect on the lodging industry. While Craigslist and other apps offered inexpensive places for people to crash, the market was a niche one until Airbnb appeared, appealing to more than broke college students.
What are the key traits of high-growth businesses that take a market discovery approach? Here are two.
1. Finding New Purchasers
Airbnb and iPhone brought new people to their markets. In the case of Airbnb, this came from the inherent trust in tying Airbnb accounts to Facebook accounts at first. For iPhone, the product leveraged the Apple brand name and reputation. In each case, the product or service provided rapid adoption by consumers who previously may not have been interested.
2. New Buying Occasions
Repeatability and frequency of purchases are important considerations for driving revenue growth. By introducing a mobile app and making it easier for hosts to display and promote their available spare rooms or couches, Airbnb provided an easy way to monetize over and over the available spaces.
Newly identified markets can provide an exceptional opportunity for companies looking to introduce new products or services.
New Approach to New Markets
How can companies develop a business strategy with new markets? Here are five steps:
- Define. Companies need to identify to whom they will sell their product or service, including the demographics, locations, and personas of potential customers.
- Analyze. Market research is still the bread-and-butter of growth. Businesses need to understand the potential for growth, demand forecasting, competitors (real and potential), and barriers to entry.
- Internalize. Companies need to understand the feasibility of entry on the core competencies of the workforce. For example, does the company have the right sales channels and teams ready to deploy towards the new market? What will it take to get the infrastructure, employees, and systems in place to launch in new markets?
- Prioritize. There may be many potential markets from which the company will need to choose.
- Develop. Once the market has been determined, the business plan, investment needs, and implementation will need to be created and launched.
Disruption comes in many forms today, from new technologies, creative innovators, and evolving customer expectations. Knowing how to establish the right markets for these business leadership opportunities is a critical component for long-term success.