TSN #15 - Building in a an existing market, or building a new market?

Hey! 👋

Creating a new market or attacking an existing one? This question is definitely one of the tougher ones to crack, especially when starting.

For the past couple of weeks, I’ve been building an idea list for new businesses (36 & counting). Yup, way too many so I had to create an evaluation criteria of some kind.

New vs. existing market keep coming up as an important question, so let’s look at it in more detail.

Also, I’ve recently updated my recommendations list, if you are looking for some summer inspiration, check it out.

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The Allure of the New

We've all dreamed of being the next Steve Jobs or Elon Musk, creating something the world has never seen before. It's exciting, it's sexy, and it's... incredibly difficult. Let’s do a little comparison:

Creating a New Market:

• Pro: Potential for massive growth and industry disruption

• Con: You're essentially trying to convince people they need something they don't know they need. Plus, you need a lot of money to survive long enough until the market “catches on”.

Remember Pets.com back from the dot-com bubble? They tried to create an online pet supply market before people were comfortable buying dog food on the internet. They lasted 2 years.

Entering an Existing Market:

• Pro: Proven demand and established customer base. Easier to study pain points and judge whether services in that market are good enough.

• Con: Potentially fierce competition, some market are served better some not so well. But you can research it.

My favourite example, Rolling Suds. They didn't invent power-washing, they just made it better, did what they promised & scaled into being the biggest company in this segment worldwide.

The Comfort of the Familiar

It always scared me to look into market where competition already exists and you are not first to the show. With my idea generation exercise I’m shifting more into exploring existing market with existing demand, but either insufficient supply or poor quality.

The Theory Behind It All

Let's get a bit nerdy for a moment. There's a concept called the "Technology Adoption Lifecycle" or the "Diffusion of Innovations" theory. It suggests that new ideas or products are adopted in this order:

1. Innovators (2.5%)

2. Early Adopters (13.5%)

3. Early Majority (34%)

4. Late Majority (34%)

5. Laggards (16%)

When you're creating a new market, you're starting at zero. You need to convince those Innovators and Early Adopters before you can even think about the majority. That's a long, expensive road.

Supply vs. Demand Constrained Businesses

Here's another angle to consider. I already shared a bit about it in the previous issue, but let’s look more closely:

Supply Constrained: These are businesses where the demand exists, but there's not enough supply. Think of your plumbers or painters with earliest bookings for next year.

Demand Constrained: These are businesses where you can easily produce more, but you're struggling to find customers. Think of a new app that no one's downloading.

Based on this I boiled it down to a few criteria, which I think are great for people trying something for the first time. Even I decided to score ideas higher if they are positive on these criteria.

The First-Timer's Sweet Spot:

1. Entering an existing market

2. With a unique twist or improvement

3. In a supply-constrained area

This approach gives:

• Proven demand (people already want the thing)

• Room for innovation (your unique twist)

• Easier growth (because supply isn't meeting demand)

Real-world example from Greg Isenberg. I’m not saying that you have to build a service business, could be a Micro SaaS following this approach:

That’s all for today. In the next weeks I want to look into more evaluation criteria as I am developing them for myself. See you in a week!

- Slavo