Creating New Market Space

The Idea in Brief

When the market in which you compete gets overcrowded, innovating is the only way to break free from the pack. But how do you begin? Consider Category Design—a new strategic concept. Category Designers create products or services for which there are no direct competitors—and use those offerings to stake out and dominate new market spaces. They don’t possess special vision or prescience; rather, they look across the conventional boundaries of competition for opportunities to provide breakthrough value for customers.

Operating in markets that initially have no rivals, Category Designers enjoy steep growth. Consider Java, which transformed a functional product (coffee) into an emotional one with its chain of “caffeine-induced oases” offering chic gathering places, relaxation, and creative coffee drinks. Java enjoys margins roughly five times the industry average.

Category Discovery and Expression

To spot additional Category Design opportunities, consider these approaches:

Look across strategic groups. Strategic groups are clusters of companies within an industry that all pursue a similar strategy, such as offering low prices or a glamorous image for consumers. Most companies try to enhance their competitive position within a strategic group. To create a new market space, identify factors that determine buyers’ decisions to trade up or down from one group to another. Example:

Safaricom created a whole new market: instead of defining themselves us a Telkom company and competing in the Telkom market space they defined themselves as a company that ‘Transform Lives’. They do this by creating opportunities for Kenyans to be a part of their growth story by empowering them with the right tools for economic growth. They created two strategic groups: created Mpesa and still offered communication services. Both grabbed market share and attracted new groups of customers. The ecosystem depended on them now they are dominating the marketspace.

Look across the chain of buyers. Instead of targeting a single obvious customer group, target other customers involved in the buying decision. Overlooked buyer groups value different features than target customers, suggesting fresh innovation opportunities. Example:

While other on-line financial-information providers served brokerage IT managers, Mpesa began serving traders and the unbanked. safaricom designed a system to offer these neglected customers tools for accessing and immediately acting on their financial needs. The system also improved the quality of traders’ personal lives—providing purchasing services and to easily send and receive money.

Look across complementary products and services. Seek untapped value hidden in other industries’ offerings that affect your offerings’ value. Define the total solution buyers seek when choosing a product or service—including what they do before, during, and after using your product. Example:

Before Uber, we hailed a cab by standing perilously close to traffic with an arm in the air. After Uber, that just seemed dumb.

Competing head-to-head can be cutthroat, especially when markets are flat or growing slowly. Managers caught in this kind of competition almost universally say they dislike it and wish they could find a better alternative. They often know instinctively that innovation is the only way they can break free from the pack. But they simply don’t know where to begin. Admonitions to develop more creative strategies or to think outside the box are rarely accompanied by practical advice.

Category designers look for patterns in the way companies create new markets and re-create existing ones, and we use a basic step approach. All come from looking at familiar data from a new perspective; none requires any special vision or foresight about the future.

The Idea in Practice

Discovery

Step One: Start with “Who”

The first question: Who is going to lead the work to discover and name the category?

Step Two: Fact Finding

The process of category design starts with discovery—looking for those critical insights with

The team through a series of conversations, interviews, white boarding sessions, or drinks. That Insight is always there, but sometimes it is buried under heaps of day-to-day minutiae and can take weeks to unearth. Sometimes it is sitting on the surface. The trick is to spot it, listen for it, and push it around to make sure you really know it when you see it. This becomes the first phase of real category design, converting insight into a plan for a worthy category, a compelling story, and a course of action for conditioning the market to see the world the way you do.

Vision mission: What was the original market or technology insight that led you to create this company?

Customers: Who do you envision buying this product or service? Who will use it?

Problem statement: What’s the problem you think you can solve for your potential customers?

Use cases: What are the specific ways people will use this product or service to solve their problem?

Product/solution: Give a detailed explanation of the technology behind the solution—what does it do now, and what else is it capable of doing?

Ecosystem: In many cases there are other companies involved in solving the problem or adding additional value. These companies form an ecosystem around the problem and solution.

What are all the companies and where in the ecosystem are the control points where one company has leverage?

Competition: Who else is trying to solve this problem—or, if no one else sees the problem yet, who might jump in to compete with you to solve the problem once you identify it?

Business model: How will your product or service change business for your customers? Will it increase their return on investment or reduce costs in a significant way? Or does it allow them to do something that couldn’t have been done with prior technology, creating huge value?

Sales and go-to-market: Enterprise companies should articulate how the product or solution will make its way to the market. Through a sales force? Through distribution partners? Both?

For a consumer company, how will users find out about your solution? From app stores? Search? Viral adoption? Growth hacking techniques? Advertising? PR?

Organization: How is the company organized? Who are the major influencers on the company?

How are decisions made? What kind of culture will work?

 Most companies focus on matching and beating their rivals, and as a result their strategies tend to converge along the same basic dimensions of competition. Such companies share an implicit set of beliefs about “how we compete in our industry or in our strategic group.” They share a conventional wisdom about who their customers are and what they value, and about the scope of products and services their industry should be offering. The more that companies share this conventional wisdom about how they compete, the greater the competitive convergence. As rivals try to outdo one another, they end up competing solely on the basis of incremental improvements in cost or quality or both.

Creating new market space requires a different pattern of strategic thinking. Instead of looking within the accepted boundaries that define how we compete, Founders, CMOs and brand managers can look systematically across them. By doing so, they can find unoccupied territory that represents a real breakthrough in value.

Written By Evans Ngethe https://www.dhirubhai.net/in/evansonngethe/