What does it take to build a new market? What is the advantage of creating a new market?
A new market should show that your product isn’t merely better than its competitors, but that it’s in an entirely different league. Creating a new market for your product is the only way you can become a market winner.
Continue reading to learn why creating a new market is your best option, according to Play Bigger.
Defining Market Design and Market Winners
Let’s first define the authors’ concept of market design and the market winner. It’s worth noting that the authors’ work experiences come primarily from the tech industry. However, they stress that you can apply these lessons to any business. (Shortform note: The authors are likely correct in asserting that lessons from the tech industry can apply to more traditional companies, simply because the distinction between tech and non-tech businesses is becoming increasingly fuzzy. Most modern companies—like Goldman Sachs, GE, and Exxon—classify themselves as “tech companies,” at least to a certain degree.)
What Is Market Design?
Market design is the act of creating an entirely new market for your product, claim the authors. You do this by devising a novel solution—not a solution that’s just better than other solutions—to an existing or not-yet-existing problem, often completely altering peoples’ lives and lifestyles and rendering old markets obsolete.
The authors cite Uber as a company that created an entirely new market and solution—ride-hailing services—to solve a problem consumers didn’t know they had: the challenge of finding a taxi when you need one. In Uber’s case, it made traditional taxis (the old market) much less appealing and completely changed how people get around.
When you engage in market design, you craft the market to specifically highlight your product’s unique advantages and the problem it solves, contend the authors. No other company that enters the market will succeed as well as you because the market isn’t designed to accentuate its advantages—it’s designed to accentuate yours. This is in many ways easier than competing in a market that’s saturated with recognized brands and that’s not set up to highlight your product’s assets or the problem it solves.
Furthermore, when you establish a new market based on a new or existing problem, you won’t need to work hard to convince consumers to buy from you, claim the authors. Once they recognize the problem your market will solve, consumers will clamor for a solution—it’s human nature to want to solve a problem, even if it’s one they only just now realized they had. And since your company will be the only one offering any solution in that market (because you’ve only just established it), they’ll turn to you exclusively.
However, if you create a new market for your device, you can succeed in it because you can design the market to highlight your product’s unique features—its relatively low tech capacity. You might thus create a “low-tech devices” market: a market for products that have more limited capabilities than standard smartphones, to solve the problem of tech overwhelm. And once consumers recognize that they, too, have tech overwhelm, they’ll buy only from your company, because you’re the only company around that can solve that problem for them.
The Advantage of Market Design: You Can Become a Market Winner
Designing a new market for your product gives you the greatest chance of becoming a market winner: the most recognized and trusted brand in a market, write the authors. Market winners often become synonymous with their entire markets and usually consume 70 to 80% of the market’s profits and value. Because customers recognize these companies so well and identify them so closely with their market, it’s nearly impossible to compete with them. You want to become a market winner because you’ll be an indomitable force.
Why Is Market Design Hard?
As great as its benefits are, market design is also difficult for three reasons:
Reason #1: You Must Build Your Company, Product, and Market Simultaneously
According to the authors, to design a new market and become its winner, you must build your company, market, and product simultaneously so they support and reinforce each other—a colossal challenge for any company. When you can do this, a flywheel effect occurs, wherein one part of the company boosts the next part, which boosts the third part, which boosts the first part, and so on. When this flywheel composed of company, market, and product spins fast enough, the company builds so much momentum that it becomes the unbeatable market winner.
For instance, you might build your low-tech devices company, market, and product simultaneously by encouraging developers to think in a minimalistic way and to make only limited use of tech in their work because this approach is aligned with the product you’re selling. You might also choose to employ more marketers than developers because your company’s challenge won’t be the development of the product—in your case, relatively easy—but rather the marketing of a product that’s intentionally less advanced than others on offer. These choices about the company in turn improve the product and market design, which loop back and further improve the company—thereby starting a flywheel.
Reason #2: The Tendency to Settle for ‘Better,’ Not ‘Different’
Additionally, there’s a strong pull to create a product that’s better—not different—in an existing market simply because doing so is easier than creating a different product in a new market, write the authors.
This is because, at some point in the inception of a new business, the daily demands of running it begin to take priority over the bigger-picture concerns of market design and aligning company, market, and product in service of building a new market. What’s more, businesses experience financial pressure to make a profit now by catering to existing customer needs and problems instead of bringing in greater profit later by creating a whole new market. All this leads to the tendency to simply build a good-enough product that can compete in an existing market but won’t ever make you a market winner.
For instance, when setting up your low-tech device company, investors may pressure you to add high-tech features to your product so it can compete with other smartphones, and customers might also clamor for such features because they want a product that’s akin to other products they’re familiar with and don’t realize they have a problem of tech overwhelm. Heeding these voices, however, would prevent you from establishing a new market for low-tech devices and making yourself its winner.
Reason #3: Consumers Hesitate to Embrace New Solutions
The final reason designing and winning a market is hard is because it’s difficult to get consumers to embrace a new solution or market, write the authors. Humans have a natural tendency to want to maintain the status quo, and it takes significant effort to shift consumers’ thinking from acceptance of the way things are now to an understanding of how things could be improved.
When you design your market, as we’ll discuss in the next part, you’re responsible for shifting consumers’ mindsets from the status quo to embracing the new possibilities your market and product provide. At your low-tech company, you’ll need to show consumers how the status quo—constant smartphone use—is a problem and how life could be better if they weren’t so engrossed in their phones.
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