Create your own market

Palm Computing wasn't the first company to use general-purpose technology to develop a personal digital assistant (PDA), but it was the first to create and define the market. Three of Microsoft's challenges failed to shake the handheld computer's dominance.

The unique feature of the handheld line of products is the combination of user interface and service. Compared with Microsoft's products, Pocket PC products are easy to use, stable, have long battery life and easy software installation. Excellent technology guarantees the play of these characteristics, but how to choose the technology and show it to the user is the key to the final difference. When the Pocket PC's founders chose the interface, they noticed that it was the application, not the calculation, that made the difference. A product is not just something people hold in their hands, it includes all the ways customers use it.

One reason most companies fail to market is that they tend to focus only on off-the-shelf solutions: the products they are selling. They are always looking for a market that matches their existing products and miss out on new market opportunities. This leaves a lot of room for companies that choose to develop new markets by focusing on problems rather than products.

Amid various unresolved problems, new markets emerge. When perceived needs and emerging solutions converge, new market developments emerge. "New", meaning that it didn't exist before, so it's not easy for some companies to develop a new market and become a dominant player.

Developing new markets requires tapping and fulfilling market potential. Potential may be a need that has not yet been recognized by a large group of users, or a need that has been recognized but not met. Either way, need means potential. Some of these needs are basic living needs. For example, a breakthrough solution to urban mobility could create a new market. Other needs, such as entertainment products, may also expand an existing market or develop an entirely new market. Potential new markets are not waiting for you to discover, they are waiting to become reality.

Developing a new market and becoming a dominant player is not easy, but getting organized can make things easier. New markets usually mean: unknown customers and unknown products; known customers and unknown products; unknown customers and known products; known customers and known products. You can start from these four areas.

Unknown Customers and Unknown Products

For many managers, there is nothing more exciting than chasing new customers and new products at the same time. The best pictures can be drawn on white paper, which entails maximum innovation, fun, and infinite satisfaction.

Trying to understand potential customers is a challenge in itself. You can define them: what do they expect? What are the characteristics? What are the needs and questions? Then, you can come up with possible solutions. The same exciting thing comes from creating an entirely new product. You can decide what the product is for, what it looks like, and how it solves the problem you define.

Consider a specific example: Mosaic/Netscape Communications. Maybe now you think this is a failed company, Netscape is no longer the most popular browser and no longer exists as a company, it is now just a brand of America Online. But when Netscape started, it took advantage of the Mosaic web browser developed by the University of Illinois and saw its commercial value.

To be successful, Netscape needs to make millions of people their customers, who have never used a browser. At the time, most people didn't know what the World Wide Web was, let alone became interested in it, installed it and used it.

When Netscape launched the beta version of the Netscape browser, the entire product was incomplete. However, as a new product, this is enough. Netscape created a new market and dominated it for several years, until Microsoft came along.

The initial success of Netscape seemed unlikely -- a brand new product, a group of potential users who didn't know why they would use such a product. In order to drive the market, Netscape even gave customers free access to the new product, the first step was really difficult, because Netscape didn't even know who they should give the product to.

The reasoning at the time was that the World Wide Web was fascinating and people were willing to take the time to learn how to use it; once people discovered the benefits of the web, companies were willing to use the web to promote ideas (such as advertising) and products (such as e-commerce); while Netscape's browser helps users make choices, and businesses buy this software to communicate with individual users. Netscape allows individual users to use it for free, while corporate users pay for it. This assumption finally held, and Netscape captured a new market.

Known Customers and Unknown Products

Knowing your customers is a sensible investment of time and money. Find out what they care about most, and you'll know what to do when you're developing your product.

While Netscape was struggling with who their potential customers were, Frederick Smith had built the first product program for FedEx. His clients, the obvious ones, are the Federal Reserve banks scattered across the United States. These banks are easy to identify because they mostly advertise.

Smith's original plan--passing checks for the bank--was unsuccessful, not because the customer made the wrong choice, but because he did not communicate with prospective customers prior to developing the product plan to find out who they were How to do business. In the end, Smith and his company identified different categories of customers and created a new market for "overnight delivery."

Edwin Land is more systematic in his work with known customers. The idea for a photo shoot came from a question from his daughter: Why can't I see the photo right away? Rand is targeting a small group of known customers: photography enthusiasts. His Polaroid company was a huge success and later entered other consumer markets.

In the first 20 years of the rapid development of the photographic photography market, Polaroid has never stopped occupying the professional and amateur photography market. Its key marketing strategy is to build credibility through the recognition of professional photographers. At the same time, companies use patents to prevent other companies from entering the market.

High stakes always go with it all. You may find a lot of customers, but you have to get the product into their hands, like Polaroid and FedEx do.

Unknown Customers and Known Products

Another way to avoid the risks of new products is to find new outlets for old products. Starting with an old product is no easier than developing a new product and a known customer, but the odds are good.

In the 1990s, when Nortel Networks was busy building new digital infrastructure and Nokia and Ericsson were focusing on new handsets, Motorola took a different approach. They use strategies that combine known products with unknown customers to reap the fruits of their investments in legacy products and infrastructure.

Twenty years ago, it was natural to choose developing countries as customers. With hundreds of millions of people in these countries, and where wired phone service doesn't fully meet market demand, cheap wireless networks become attractive. With wireless technology, government departments can avoid investing in wired networks, and the savings are considerable.

Motorola's strategy for developing new markets is to use existing products to serve unknown customers. But that's not easy for a company like Motorola. Different dial tones, specifications, powertrains, and political reasons make providing mobile phone service an ongoing challenge. But those issues instead created an experienced and focused team.

This example is similar to the use of AZT in the treatment of AIDS. AZT, a drug used to treat cancer, was shelved because it didn't work very well, and doctors stumbled upon it as a temporary use to prevent HIV infection. Choosing AZT greatly reduced the risk of buying the drug patent rights for Burroughs Wellcome, which merged several times to form today's GlaxoSmith-Kline PLC, or GlaxoSmithKline. Although the adverse effects of AZT have long been identified, the initial development has been completed. But claims that the drug could cure AIDS spread widely among patients and doctors, and the company brought AZT to market in the 1980s, creating and dominating a new market for antiretroviral drugs. GlaxoSmithKline currently has an enviable 40% market share in the anti-AIDS drug market.

Known Customers and Known Products

The most obvious strategy for most good operations managers is to create a new market based on a known product and a known customer. If you understand both situations, you can greatly reduce the risk.

In most supermarkets, you can find Tide products in 6 different packages on the detergent aisle. For the Canadian market alone, Tide's website lists 17 products: bleached, non-bleached, optional bleach, deodorant, no deodorant, and no dyes and fragrances , liquid, powder, flake, a wide variety, and so on.

Each product is an extension of a product line. Technology allows product lines to extend to attractive market segments and more users. It also enables product managers to extend the life cycle of a product, thereby capturing more revenue from customers.

For a product as established as Tide, extending the product line is the key to continuing its dominance. Good product management teams do this very well. But maintaining the dominance of an old product is not the same as creating and dominating a new market.

If you want to develop a new market, you need to leverage your knowledge of your product and customers as much as possible. But at the same time, you may also be constrained by inherent knowledge. Experience is a boon for product line extension, but it can be a hindrance for developing new markets. Relying too much on experience puts you in close quarters with your opponents in a competitive environment, draining you too much energy in a market segment where you could excel.

The development of a new market is not a blind cat meeting a dead mouse, but a new understanding of the market potential, finding the right solution, and using an effective method to bring the product to the market in need. It's a tough process that requires innovation, marketing skills, careful planning, and responsiveness. But the good news is that if new markets were really that easy to develop, fierce competition would have already begun.

The original text is excerpted with permission from Peter Meyer's Creating and Dominating New Markets, published by AMACOM, a division of the American Management Association. The author registered copyright in 2002. Translated by Hong Jing.

The English version of this article is available from McGraw-Hill Education (Asia) in Singapore.

Peter is the principal of Meyer The Meyer Group, a consulting firm that helps companies develop and capture new markets.