Don't Make These Mistakes When Entering a New Market

There is a lot of hair in India. That was the blinding insight that started our quest to develop a disruptive business in India's men's grooming market. Our idea was to port the efficient, affordable QB House model that is popular in Singapore and other Asian markets to India (QB House is detailed in the section titled "Remember: Quality is Relative" of The Little Black Book of Innovation). We would launch a series of single-chair kiosks that offered high-quality hair cutting, shaving, and related grooming services at affordable prices. We saw a wide open market, what is sometimes called a white space, blue ocean, or greenfield market.

Whatever your color of choice, pioneering new markets feels exciting. Who wouldn't want to do what hasn't been done before? Think of all the rewards awaiting innovators that follow in the footsteps of organizations like Google and Cirque de Soleil.

However, companies should approach unpopulated market spaces with a dose of caution. Before you invest big to attack white space, ask why the market is uninhabited. Perhaps a technological constraint, regulatory barrier, or entrenched behavior stopped its development. That suggests an opportunity. But there are three, less promising possibilities:

1. A stated customer need isn't a real customer need. As I've written, one of the dirty little secrets of innovation is that consumers lie. They don't even accurately report behaviors they follow today, let alone things they might do in the future. This isn't out of malice; our brains just aren't good at this task.
2. Powerful stakeholders can inhibit the adoption of a new idea. While it is easy to point the finger at regulatory barriers, any market that has multiple stakeholders can have a powerful constituency whose needs stand in the way of innovation. Consider the delicate balance between patients, family members, physicians, hospital administrators, and insurance providers in healthcare.
3. The fundamental economics of a space or an idea aren't attractive. As Intuit founder Scott Cook memorably quipped, "For every one of our failures, we had spreadsheets that looked awesome." Just because the numbers work in a spreadsheet does not mean they will work in real life. Many companies hoping to tap into the so-called fortune at the bottom of the pyramid have learned that it is awfully difficult to build an economically viable business targeting consumers who make less than $1 a day.

The third area ended up being the killer for our men's grooming business. The business model that worked on paper didn't work in the marketplace. To get to reasonable revenues, our single-chair kiosk needed what we called a "hero barber," one that would draw in and retain customers. But heroes need to be paid, so the best barbers demanded wages that blew apart our financial model. A branded store with multiple chairs might have been a viable model, but given other priorities we decided to shut the business down.

Before targeting a white space do a simple thought experiment: put yourself in the shoes of its natural "owner." As Innosight Ventures Partner Pete Bonee explains it, "Ask yourself, with some degree of discipline: Why hasn't this been done before? Who are the people who might have done it? Did they try? Why did they or didn't they? If the business opportunity is obvious to us why hasn't it been obvious to other smart people? What do they know that we don't?"

If your success is predicated on everyone else being too dumb to spot this wonderful opportunity, proceed with caution. That white space might just be fool's gold.


by Scott Anthony
http://blogs.hbr.org/