Successfully Entering New Markets
Entering new markets can unlock significant growth opportunities for scale-ups and large enterprises. Despite their size and scale differences, growing entities and established enterprises leverage similar – and relatively limited – resources such as people, time, budget, and “network capital.” Taking a strategic and mindful approach ensures the efficient use of these valuable resources and allows for a good pace of market capture.
This article presents a framework for entering new markets, emphasizing a results-driven mindset, business models grounded in a deep understanding of customer problems, and lean execution. This is meant to be a high-level foundational read for readers to incorporate or expand into a playbook.
Craft Your Success Framework
Before venturing into a market, it helps to pause and specify the ‘why’ and ‘what will make this worthwhile?’ This will allow you and your leadership team to be well-aligned, make it easy to decide on markets and pathways, and – equally importantly – reject options that don’t fit. In short, it brings clarity and focus while avoiding friction, expensive rabbit holes, and post-market disappointment. Here are additional details, with examples.
Criteria: What are the primary goals for considering a new market? Here are some examples.
Additional revenue streams: Netflix’s expansion into original content production.
Strategic presence: Google with Android to ensure mobile search dominance; Meta’s Llama 3 against OpenAI.
Expanding brand presence: Tesla with solar and battery storage, emphasizing sustainability.
Assets: What can you leverage that uniquely gives you an advantage?
Financial assets: Amazon’s ability to fund aggressive market entries and absorb losses if necessary.
Customer stickiness: Apple’s ecosystem of devices and services creates a strong competitive advantage and customer lock-in, e.g., what happened with their wearables.
Brand loyalty: Nike’s expansion into digital fitness platforms.
Speed: OpenAI’s success with ChatGPT, in spite of Google’s vital contributions to AI.
Weaknesses: It’s always good to be self-aware. Here are some examples of when things didn't work out.
Inability to move fast: Intel’s slow response to the rise of GPUs, now dominated by NVIDIA.
Overreach: Uber’s expansion into markets without fully understanding local regulations and cultural differences, such as its struggles in Southeast Asia.
Mine for Problems, Use a First Principles Approach to Solutioning
Before diving into solutions, identifying the most pressing problems in a new market can provide expansive clarity to hone in on the ones most relevant—those that, if solved, meet your Success Criteria and are within your wheelhouse for in-house or inorganic (e.g., acquisition-based) solutioning.
It is also crucial to understand why those problems have not been solved. Talking to stakeholders—customers or adjacent actors—is a good way to understand these problems. While there may be plenty of unmet needs, there are usually clear reasons why: “This has always been this way” (plenty of examples in healthcare), “tech hasn’t been there” (e.g., prior to cloud or AI), “market wasn’t ready” (e.g., streaming prior to Broadband), etc.
Then, apply First Principles Solutioning. Examples include:
Aerospace: SpaceX reimagined space travel by questioning the assumption that rockets could only be used once. With reusable rockets, SpaceX dramatically reduced the cost of launching into space, making it more feasible and economically viable.
Healthcare: Companies like Flatiron Health revolutionized oncology data analytics by addressing why clinical data collection had always been fragmented and inefficient. Their solution created a unified platform for oncology data.
Streaming and Broadband: Netflix’s shift to streaming (yes, they provided DVDs at one point!) was based on the understanding that widespread broadband availability had reached a tipping point, making it feasible for consumers to adopt streaming en masse.
By utilizing a First Principles approach, companies can strip down complex problems to their core components and build innovative solutions that are not only effective but also difficult for competitors to replicate. You can then figure out how to capture the value you are creating: business model, pricing structure, moat expansion over time, etc.
Lean Execution
Much has been shared about Lean, so this will be brief. Adopting a lean approach allows you to test your ideas quickly and efficiently, minimizing waste and reducing risk. Start with a minimum viable product (MVP) to validate your solution in the new market. Based on the feedback and data collected, iterate rapidly to improve your offering and expand your presence.
Principles:
MVP: Launch with a foundational solution to test key assumptions.
Iterate: Continuously improve your solution based on real-world data.
Efficiency: Focus on essential features to minimize costs and risks.
The one thing to add is the Kano principle. To elevate your offering, in addition to solving the major issues for customers, adding a couple of new valuable features that they haven’t thought about can delight customers.
Examples of Leveraging the Kano Principle:
Tesla's Over-the-Air Updates: Tesla offers software updates over the air. This has delighted customers by continuously improving their vehicles with new features and performance enhancements overnight.
Slack and Third-Party Tools: Slack, introduced integrations with a wide range of third-party tools like Google Drive, Trello, and Salesforce, allowing customers to centralize workflows and reduce the need to switch between multiple apps.
Incorporating and revisiting Positioning - the context in which a market should see the Company’s offerings - is also an important part, and is assumed to be part of the regular process. If not, it should be.
Conclusion
Successfully entering new markets requires a strategic approach that balances a deep understanding of customer problems with lean, efficient execution. By crafting a success framework that includes clear criteria, leveraging unique assets, and being mindful of potential weaknesses, businesses can position themselves for successful market entry.
Using First Principles Solutioning enables companies to address core problems with innovative solutions that competitors may struggle to replicate. Meanwhile, embracing Lean principles ensures that your market entry is cost-effective and responsive to real-world feedback.
Finally, incorporating delightful features can differentiate and elevate your offering and create a lasting impression on customers. By following this framework, you can navigate the complexities of entering new markets and set your business up for sustainable growth and success.
