Drive Growth By Redefining Your Market
Definition of a market: “A medium that allows buyers and sellers of a specific good or service to interact in order to facilitate an exchange.” — Investopedia
Note that this definition is based on current goods and services. Consequently, it should be no surprise that many business leaders define their markets according to the products or services they currently sell.
It’s common, for example, to size a market by multiplying (the average unit price) x (the volume of units sold). If a billion pens were sold last year for an average of $1 each, then the market would be said to be a $1 billion market.
This is helpful for accounting purposes, but not for innovation.
A Better Way to Define Your Market
For innovation, we need a way to define markets that enable us to determine the demand for an offering that doesn’t exist yet. This is possible when we understand that customer needs are totally separate and distinct from the products and services they purchase to meet their needs.
Remember, people buy products and services to get tasks done. For example:
- People with impaired hearing buy hearing aids to improve their hearing.
- People with celiac disease buy gluten-free foods to avoid damaging their intestines and prevent uncomfortable symptoms.
- People who want more energy buy “5-Hour Energy” to, well, increase their energy.
For the purpose of innovation, a better definition of a “market” is “a group of people with a common task they want to accomplish.”
Gain a Broader View of the Competition
When we redefine our markets from the customers’ point of view as “a group of people and a common task they want to get done,” we realize that our offerings don’t just compete with other similar products and services. They compete with anything that our target customers use or do to get the same task done. For example:
- If you offer public accounting services, you’re not just competing with other public accounting firms. You’re competing with everything your target customers use to get their financial and accounting tasks done including internal accountants, software and tax attorneys.
- If you offer cardiovascular surgery services, you’re not just competing with other cardiac surgery centers. You’re competing with anything that patients use or do to treat their cardiovascular condition such as special diets, exercise, drugs, etc.
- If you’re a casual sneaker manufacturer, you’re not just competing with other casual sneaker manufacturers. You’re competing with anything that your target customers use or do to accomplish what they are trying to get done with your sneakers.
The key to success with innovation, therefore, is to determine what tasks your target customers are trying to accomplish with your offering — functionally and emotionally — and which of those tasks they consider important, but unsatisfied by current solutions.
Those tasks that are important and unsatisfied are opportunities for innovation and growth. The more important and less satisfied a task is, the greater the opportunity for innovation and growth it presents. This is how leading firms figure out where to focus and what to do to innovate, differentiate, and grow in a predictable manner.
(A version of this article first appeared in The Business Journals, September 8, 2016.)
