Identifying a market for your offering
When you have found an offering that has a secure advantage over others, that is when you have an investable and winning idea. The way to create this convincing offering is by asking yourself if you will be entering an existing market or if you will create a new market. The type of offering you have depends upon which of these applies to you.
If you are entering an existing market, you need to know if you can supplant other players and why now is the best time to do so. Maybe you can offer a product that already exists at a lower price, or you have developed a new technology, or you can provide better solutions to users. When there is an existing market, you need not prove that there will be a market for your products or services. Instead, your risk is that you may not successfully enter and compete with the core players.
Entering an existing market
What you need to show is that you have an offering that is so persuasive that it can disrupt the market. You must prove that your offering does something new, or that there is a discontinuity that will allow you to enter the present market.
The online hospitality service, Airbnb, is an example of a startup that offered a new and different approach that disrupted the existing accommodation market. People have always needed accommodation when travelling, and vacation homes have always been available to rent. However, by introducing a simple, secure way for any host to list their houses for users to discover, rent and pay, Airbnb managed to accomplish something new – they introduced an affordable home-away-from-home to the travel experience.
Creating a new market
When you create a new market, you must identify why your offering requires the creation of a new market, why it does not already exist, and why now is the best time. The risk of creating a new market is that you do not have evidence that there is a demand for your product or service, or proof that you can offer the best solution to the customer’s problem. However, with high risk comes high reward, which tends to appeal to investors, and the advantage of creating a new market is that you can dominate early on. For instance, when 3D printing was first introduced, a new market was created since the product previously did not exist.
When it comes to offerings, understand how your competitors created their opportunity and how this will happen for you. Identifying your market will make it clear if your product or service will succeed.