This is a modified version of a post from the current Leanlaunch Pad session.
The 4 Markets are 1) Existing, 2) Re-segmented, 3) New, and 4) Clone. His writing provides a lot of dialog on discovering your Market Type and acting appropriately. He wants you to figure out what I’m about to tell you. You want to find a way to be in the 2) Re-segmented category. You’re Toast in 1) Existing and You’re in for the long haul with 3) New. I’m not going to talk much about 4) Clone other than than one of my students worked for Groupon-China. He told me that they did a ton of experimentation to find their demographic in China. The demographic used in North America did not work for China.
The basis for the decision You’re Toast in 1) Existing are Military rules, New Lanchester Theory Steve has adapted for business. Also Geoffrey Moore’s Crossing the Chasm – Wikipedia, the free encyclopedia implies the same thing. Steve’s view is stronger because he puts a quantitative metric in your face. If you want to attack fortified positions then you need to spend 3x your competitor. In business speak if you want to attack Microsoft you will need to spend 3x them. For a startup this is not going to happen. End of story.
The basis for You’re in for the long haul with 3) New is similar except that here your customers don’t know anything about your product and thus you need to educate them and this takes time. On page 122 Steve notes that New-market entries are by far the most expensive … It takes time. You’ll become an instant success in 7 Years.
What Does This Mean For You?
It means that
- you can’t compete on existing market features and performance,
you’ve got to create new features and new meaning for performance.
- You can’t compete with an incrementally better product,
you’ve got to create a new category.
It means that you’ll probably over-shoot into New-Market territory and you’ll need move closer to an existing market to gain near term revenue.
This is why the Day in the Life of the Customer or the Service Journey is so important to you. Many of you are very close to an Existing Market and need to find a way to Re-Segment it. You’ve really really got to solve a new problem. You have to really want to solve the problem. Your intention has to be to solve the problem. The incumbents will solve all the low-hanging fruit ( the incremental solution that can be determined with financial planning). You’ve got to solve the problem in a non-incremental way to enter the market.
Crossing The Chasm
Market Type ( Part 1 )
- Pages 112–124Startup Owners Manual, Steve Blank
Market Type – Cost of Entry
- Page 115 Startup Owners Manual, Steve Blank
- Lanchester Model