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In this guest blog post, Founder Institute Mentor and Innovation Evangelist Dr. Pavan Soni outlines how entrepreneurs can introduce their product to their market while simultaneously creating a whole new market for their product.

While there is significant literature, both from research and practice, on the best means of navigating the "fuzzy front-end" of innovation, there aren’t many tips on how to take a concept to the market. The concern becomes even more thorny when the undertaking is to create a new category, where not just the product, but the very concept did not exist before. The entrepreneur in question is simultaneously creating the pie and trying to carve and secure a piece of the pie. A case of "category creation". Remember, cab hailing for Uber, or online book selling for Amazon (they were the second though), or for that matter, the more recent Bitcoin frenzy. These were category creators, and eventually led the market. Is there a science behind these successes?

This article offers a five-step approach for a category creator to introduce themselves into the market while creating one. These tactics are equally applicable for tech and non-tech businesses. The way these steps are presented is in the form of a ladder, where each step takes you closer to being a dominant player in the category and create enduring customer habits.

1. Accelerate Concept Over the Offering

Thought leadership is one of the most enduring and legitimate means of creating an identity. For the category creators, being a reliable champion of the cause and concept can set the company apart and more so, if it is backed by researched and well written work. Think of the McKinsey and Company creating and maintain its lead in a rather nebulous area of consulting through McKinsey Quarterly, or the World Economic Forum maintaining its identity over several decades through its publications (mostly available for free).

When creating a category, it is not prudent to wait for the offering to take a good shape before the entrepreneur begins advocacy. The advocacy, grounded in solid content can increase the acceptability of the eventual offerings, and may even help an early validation. In India, YourStory did the same with creating meaningful content around the surging entrepreneurial community along with special editions on women entrepreneurs, and regional start-up springs.

Of course, the case study of DropBox is all too famous on how an intro video on the value proposition of this cloud storage platform went viral much before the product went out, and the company still retains a sizable market share. If one looks at the video, it remains rustic as per the present standards, but does a fantastic job in demonstrating the power of the concept, followed by an equally intuitive product.

So, start with the mind and then comes the market.

2. Identify a Niche

The real risk of being a category creator is the threat of being bulldozed by the late-entrants with deep-pockets. It has happened to the eCommerce marketplace and is currently unfolding in the co-working spaces (at least across Indian metros). No one remembers, or even cares about the first company to have setup a co-working space in Bangalore, which has now become dotted with this new-age working model, and this is driving down the average profitability of the operators. This is a phenomenon which is fast getting saturated before even reaching its deserving peak, thanks to limited differentiation. What if the one company which would have championed the concept could have created a niche, say, of that of affordability, convenience, technology or business support, or the sheer fun element?

Identifying a niche must be based on some credible competence. It can’t be arbitrary. Some of the sources of competence could be the intellectual property, the value chain from sourcing through manufacturing and delivery, the talent supply chain, locational and historical advantages, the network effect of the founders, or the investors on board. The identification and creation of niche is not so much as a matter of what’s outside as much as what’s inside (the company).

One institution that has done a phenomenal job in a rather overlooked market is TED, and more recently, through the franchise of TEDx. Started as a by-invitation-only gathering of thinkers and doers, the brand is now ubiquitous across university campuses and city centres, and stands for the discovery of talent and powerful narratives, and does so in an almost autonomous manner. The super-niche has lasted for over three decades even with the massive proliferation that it has seen.

Once created, the niche than must be constantly guarded, and here, two approaches are advocated- cultivating scarcity, or saturating the niche.

3. Cultivate Scarcity or Saturate the Niche

Niche is a very precarious state to be in. From the very start, the upside is set in terms of total addressable market, and the downside is ambiguous, especially if the moat isn’t strong enough to deter the competition. Situated in a well identified niche, the entrepreneur has two choices- either to create scarcity of supply over demand, or create excess supply over demand , namely, cultivating scarcity or saturating the niche.

The success of Xiaomi in India is a telling case of the success of artificial scarcity. Notwithstanding the superior product and the aggressive price points, the very traction was created because of the truncated supply. The category in question is affordable and quality smartphones. The choice of channels, the exclusivity with online retailers (Flipkart in India), and even the auction-like windows of placing an order, not only created hype around the product, but also helped the company created a robust identity for itself in less than five years of its launch in the market. All this done with a very thin marketing budget and negligible offline presence in India. Contrast this with the billions of dollars of push another Chinese smartphone maker- Vivo- is making, and, that too, towards a compromised outcome.

Another strategy of remaining profitable in the niche is to saturate it, whereby an oversupply met demand leaving little incentive for a subsequent entrant to make any money. The Café Coffee Day in India, with its 1500+ stores, has managed to retain its head-start by dotting most large cities and even tier-2 towns in India. The case of IndiGo airlines in India, which has carved a niche for its on-time performance, has managed to saturate office hours route between major metros with a flight operating on a given route almost every 45 minutes.

The approach of scarcity helps in the context of negative network externality, where more of access leads to less of a demand, whereas the approach of niche saturation works well under the construct of positive externality, where more of access leads to more of demand. Choices must be made prudently.

4. Make It Sticky by Design

While the entrepreneur plans to stick to the niche, how does she ensure that the customer too hangs around for long enough? So much for the thoughts and the niches, now the focus moves to the offering. Some of the most enduring products which have managed to corner a substantive share of a rather competitive market are those with intuitive design and functionalities. Whether those were the products of Apple (all were category creators), or those from Amazon, stickiness remains a factor of product and experience design.

One of the success stories from India is Paytm, the mobile wallet. The company was one of the several mobile wallet operators to begin with, but thanks to a highly intuitive product design (especially, the QR code) the company remains a clear market leader, must after demonization. With almost all and more of cash back in the Indian economy, consumers and businesses alike are surprisingly stuck to the product. The original problem the outfit was set out to solve was of managing change, especially while consumers engage with small shopkeepers. The problem continues even today, and the two parties are happy trading over Paytm. The case with Bookmyshow, another category creator, is no different despite some serious competition the portal has witnessed lately.

The ability of the focus firm to secure a niche is only as good as the product, in terms of its features, design, and eventually its habit-forming abilities.

5. Help Build a Habit

Over the years, Google has graduated from being a meaningless name to a household tool in most parts of the world, and today, is almost a part of one’s routine. With its spread from search, to videos, maps, mails, and mobile operating systems, amongst other offerings, the company has secured a firm footing in people’s lives and habits. This can partly be attributed to great design, but also to offering customer benefits on a sustained basis. Benefits of not value for money kind (most people don’t anyways pay anything to google, expect their attention), but rather in terms of their daily productivity, convenience, and in serving their social, and intellectual urges. That’s how habits are formed over time.

If once-startups like Netflix and Amazon Prime Video have managed to give a run for money to traditional content consuming platforms in markets like India in about two years, there is always a case on the realms of possibilities. Even the juggernaut of Reliance Jio thrives on habits that people have formed with cheap mobile data and longer battery lives.

The power of habits come from them being irrational and highly inelastic. A clever mix of promotion, positioning and designing, along with offering performance benefits on an ongoing basis can create an enduring setup. Which only depicts that go to market is as scientific as product innovation and must be treated with same respect and rigor.

If you want to learn how to build a product that people love, then join the Founder Institute today!

About the author

Dr. Pavan Soni is an Innovation Evangelist by profession and a teacher by passion, as well as a Mentor for the Founder Institute. He is the founder of an innovation and strategy consulting, Inflexion Point, which engages with start-ups and enterprises in systematically supporting their competence creation and growth. More on his work is available at www.inflexionpoint.net.

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