http://www.bizjournals.com/boston/news/
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 existing 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 according 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.
Purpose branding
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.
A better definition of a market for the purpose of innovation is “a group of people with a common task they want to accomplish.” 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
5-Hour Energy is an excellent example of purpose branding, that is, branding according to the task it helps consumers get done. The name tells us what it is designed to accomplish. 5-Hour Energy was launched in 2003 and passed $1 billion in sales on 2012. Now, despite dozens of competitors, the company still holds over 90% of the market for energy shots.
Selling a solution for a common task
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, emotionally, and socially — and which of those tasks customers consider important and 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.
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