The conventional and perhaps easier option is to develop products for an existing market, but there are plenty of lucrative benefits to creating a brand-new market instead. What do I need to create a campaign? At Yale, I was editor of a newspaper. That alone was enough to kill it. And in our own example, the company that Allan Weiss, Chip Case, and I created was lucky. Bob Shiller: I'll launch off on the same question. Really, the big challenge is the execution and building of that market, which involves a whole range of players and disciplines including trade associations, accounting, and legal, as well as educating the press and academics, and building human capital — all of those things. We started out producing real-estate price indices at a company called Case Shiller Weiss. I'd be curious to hear everybody's viewpoint on a timeline on invention. I don't mean to interrupt, Bob, but I think that Bob and I experienced the same sort of thing. I think that, if you don't have a vision, unless you want to be the proverbial "monkeys typing Shakespeare," you're unlikely to actually try something very different from what's been tried before. And beyond that, to agency theory, which is a theory of how to motivate people and which can be combined with risk management theory. Analyzing data collected from multiple sources, generating insights from that data, and making informed decisions greatly impacts your performance. Glaser: I think both of those points connect up with my commercial experiences. It helps you reach and connect with your target audience and ultimately is how you will grow your business in the long run. Sandor: Sure. One of the main purposes of developing a marketing plan is to set the company on a specific path in marketing. Then the notion that the first product isn't always the one that is the full embodiment. Definition: Market development is a strategic step taken by a company to develop the existing market rather than looking for a new market. So when setting out to create a team, the first challenge is to clearly identify what skills and passions you are looking for. What was happening, because of IT, was that mortgage applications were being done increasingly online, and that encourages fast application processing. So it was something that combined a set of things that I was interested in, and that I was trained for. Take time to learn about your competition and decide how you will differentiate yourself. How I got to specialize in that has to do with the field that I was in, professionally, and the work I did for about 10 years before starting RealNetworks, as well as personal interest. In my case, it is a 10-year institution-building process. The freedom to act is fundamental to the development of a market. Going beyond that, risk management theory tells us that markets for risk are fundamentally important. I take a Schumpeterian view of this, in that we can divide the process into three components: invention, that is coming up with the novel idea; innovation, the commercialization of it; and then the diffusion or replication process. To develop a marketing strategy, start by defining your target audience and ideal customer using your consumer knowledge and product research. See target your most profitable customers and define your target market. We had to educate the investors. So there's definitely this powerful sense of urgency associated with that model. When assessing the size of the market, your approach will depend on the type of business you are selling to investors. Shiller: I think that a common human error is to underappreciate the importance of timing. All those theories, to me, represent the real vision that I have, and that many of us have, for improving the world. A media and technological innovator, a leader in the use of finance to address social problems, and a creator of housing futures discuss the risks and rewards of attempting the trick. Create New Channels to Find Your Customer. This assessment determines whether a business and its … The replication or the diffusion or the imitative aspect of it takes the balance. So I think one of the essential elements in creating new markets is to create that first product that is at least good enough to criticize. You have to be timed right for what's happening now. Podolny: Is there anything else you think would be important for the readers to know? In this case, it was the Board of Trade. In the case of interest rate futures, I was on the rubber-chicken dinner circuit with savings and loans and industry groups across the country. But as Whole Foods and Sundance demonstrated, the secret is that you have to do more than just create a high-quality, innovative product -- you have to invent a market, too. Our initial thought was to create futures markets, but what happened is we did a kind of switching, which I think is actually common in entrepreneurship. Ideas are not as scarce a resource, both financially and from the human-capital perspective, as the ability to execute. Description: Market Development is a 2-step process to tap the untapped market.It begins with market … What these give us is a powerful technology for improving human welfare. It was inferior to a reinsurance product, although it served the exact same purpose. And they may end up being more favorable than you expected. It goes back in time just about as far as mine does. So I would bifurcate it into issues of a) new products, and b) what is the framework for the introduction of those new products? I think of the triumph of capitalism — that governments all over the world are embracing capitalist institutions. The problem for us was that the Ministry of Supply Case study -- titled “Will Professionals Demand its Performance?” -- was the only one that ended in a question mark. And then, beyond that, there's behavioral economics, which talks about the real human condition and why some of these theories are difficult to bring to fruition. ; a new spot market, which has regulatory implications; and a new futures exchange. Then there is the separate question of a new product. That sense of mission is an incredibly important element. This is a long process. Podolny: I think it ends where it begins, which is that all of you have clearly been visionary and missionary in the markets that you've been helping to give birth to. Our experience with that was when we started with streaming audio in 1995. Sandor: Bob, how long did it take you? So it started with the notion — which we accept as academics, but it really was not widely accepted — that you could get around problems of externalities through trading a new secondary good, and that is the right to emit. ‘Booking.com’ Is A Trademark – Does This Matter To Your Business? This is a personal, lifetime mission. It just is not, "Boom! Rob was talking about how most companies make it or don't in three to five years. Of course, the secrets of a rival or a competitor matter enormously, too. Download the Marketing Planning Gui… And when we launched RealAudio and invented internet streaming, there was this technological underpinning, which was the belief that the digitization of media was an inexorable trend, and once there was a standard dial tone, an interconnectivity method for all of the digital devices in the world, which I came fairly early, I guess, to believe was going to be IP, or the Internet Protocol, that there would be an inexorable trend towards more and more media flowing over that protocol, connecting more and more consumers in more and more ways, and that there was a great opportunity for us to build some of the foundation technology that made that delivery possible, and then to start to build some of the consumer services that would be enabled by that. Historically, Indians have viewed Chinese companies as hard to form relationships with and Chinese made products as … The goal is to demonstrate that the product being developed has a substantial market in a particular industry and can achieve sales in the face of competition. Here's an example of a critical institutional framework: The exchange didn't have the resources to go around to the state insurance commissioners and convince them to treat risk-transfer mechanisms on the exchange in a similar way to reinsurance. Ways Entrepreneurs Can Stretch Their Capital, 2 Million Professionals Polled On How To Make Virtual Conferences Better— Here Are Their Top 10 Hacks. And it is one that we believe in, but we also knew that one of our competitive advantages was that we would have the staying power that a lot of early-stage start-up companies would not. I think of globalization. For … The Indian telecom supplier market was heavily saturated and to make an impact, Huawei needed to separate itself from the rest and create a distinct identity as well as a reputation for reliability. Here are some quick considerations to make before executing a market development strategy: Is the market attractive? Shiller: Well, we started in 1990. You should create a marketing strategy that makes the most of your strengths and matches them to the needs of the customers you want to target. But, in fact, the big idea was the long-term bond. Can … Game theory is one that I've found myself applying frequently. The first interest-rate derivative that was started was Ginnie Mae futures contracts. Tip: New to email … Another thing that people under-estimate is how your human capital matters. One of the big differences between, let's say, non-commercial entrepreneurship versus commercial entrepreneurship is, typically, if you have commercial entrepreneurship, you assemble venture capital or whatever kind of risk capital for a particular purpose that's looking for a return over, let's say, a three- or five-year period. I wrote a book in 1993 called Macro Markets. It's tricky to find people who've held similar roles, though these "unicorns" are out there. Other times, savvy business executives have to create a need for a product they feel passionately about, thus the need for a market development strategy. For example, a new company looking to grow their business will generally have a marketing plan that emphasizes strategies to increase their … Are you willing to commit the required time and resources to reach this new market? That's the automated valuation model. So these are my own personal examples, but things can be timed right and they can be timed not so well. And Bob, when I think about where the housing market is now, versus where it was 15 or 20 years ago, what does that imply for what you're trying to create? Whenever a new business launches a product or a service, it can either enter an existing market or create a new one. If you do need banks to lend you money or investors to jump on board, a market analysis section is required, as savvy lenders or investors will need to know that the business you’re pitching has viable market … We also encountered another pair of challenges once ready to start production and go to market: Investors -- angels, banks, institutions -- all have expertise and hypotheses. But that's the challenge of business life. To me, the prime examples of that are eBay and Google, which were involved in creating new technology that ended up being associated with massively, explosively large markets. Glaser: Timing is crucial. I mean, how much is timing a central issue that you have to be sensitive to in how you move from the vision to the details? There is a role for inventors outside of the system for either their products to be licensed or, ultimately, to be bought up by larger institutions. That's a good thing, overall, but it creates anxiety. Research the competition. History is being made all the time, and it's changing the situation and the world. One of the reasons that the markets are interesting is because of the interaction between the role of vision and the role of pragmatic reality. They're people who either after 9/11 became disenchanted with the world that they were living in and sought to do something differently, or coming out of a PhD program, they're interested in problems of water and endangered species, and things like that. The experience of launching something, even if it didn't succeed, is an experience that develops you into a different person. The others had proven their ability to invent new markets. Sandor: I want to throw in a couple of things which ratify your experience. No system is prepared for a product that crosses multiple categories; for example, a wardrobe is normally split by "day or night" and "work or casual." That limited its use. You need to also get academics on board, so that they understand what it means to have the right to emit. These people know who they are and whether they can live with the stress of such a life. This guide will examine 1) the benefits of creating a new market. So you had this vision. They're poorly executed. We knew that, over time, video would be more important, but that the characteristics of the internet at the time, and the ways that people connected to the internet, particularly in terms of bandwidth, were not going to be good enough to make video good. If you are writing a business plan for a restaurant chain then you need to asses… And then it turned out that the timing in which that digital dial tone became a technical and then a commercial reality happened to be consistent with when I was setting out to start what became RealNetworks. Your target market is the group of people most likely to want or need your products or services, and that's where you'll spend the bulk of your advertising dollars. Developing market information. Then use the data gathered as supporting materials for your … Creating a new market is different from developing a new product or service — it requires convincing an array of customers, partners, and other constituencies to see the world differently. One of the most important components of any business plan is a thorough analysis of the market. As opposed to reinsurance being treated as capital, this was treated as a speculative asset. What do you do to move from vision to reality? I have a partial academic background in economics. Glaser: My timeline is, we first created the prototype for what became RealAudio in the summer of 1994. Conduct Thorough Market Research: Put in the necessary time during the initial exploration phase to research the market and gather as much information as you can. A timeline of when tasks within your strategy will be completed. So if you have a risky and uncertain environment, how do you incentivize people to do good work? If it is there, you get a set of feedback as to what the likely economic structure is going to be, which in my experience in the technology realm, is almost always different in the specific from what you think it will be. You have a plan that implies a certain amount of capital needed, and you may be able to go back and get more capital, but typically only if you're demonstrating progress — both technological progress and commercial progress — against that plan. In our case, it required both setting up a new exchange, and that has all kinds of execution risks, etc. We were traveling around to the futures exchanges, trying to get a home-price futures market started. So in almost all of the invention and innovation that has occurred, at least in the derivatives market, the first product launched was never the mother of the complex. As Professor Mutki noted, “clear categorical identities are essential to valuation because they allow actors to determine valid comparables, which are central to determining criteria of evaluation.” Essentially, without a proxy already on the market, it's your role to educate customers on the value and placement of your product. While some aspects of developing market information are more technical, such as using Python, most are less sophisticated. But if it turns out that the market is a lousy market, you can end up having launched a revolution but being a catalytic element sitting at the bottom of the glass, rather than a participant in that market. Sandor: If we take a look at industrial R&D, it follows the pattern of Google. Next, you need to click on the ‘Commission’ tab to set a commission rate for vendors across … Creating a new market is different from developing a new product or service — it requires convincing an array of customers, partners, and other constituencies to see the world differently. Podolny: Bob, as you think about your experience with the Case-Shiller Home Price Indices, do Richard's comments on institution building resonate with you? And the effects can be far reaching, as markets are capable of taking on a life of their own. You can do this by adding scarcity and urgency tactics on your store such as countdown timers, showcasing limited quantities and having flash sales. Sandor: That's exactly the case in organized derivatives markets, whether it's the CBOE or the Board of Trade or the CME. Shiller: When you put products out there that are not perfect, of course, you invite competition. Marketing is essential to any good business. But, as respected VC Bijan Sabet notes on his blog, just creating a beefed-up product and fighting for market share is not always enough. Like us, you might be knocked down time and time again by these challenges. That required an enormous amount of education, for policy makers, for industry, as well as accountants and lawyers. Professor Mukti Khaire of Harvard Business School recently completed a series of lectures titled “Value Construction and Market Creation,” where three of the examples were Whole Foods, Sundance Film Festival and our own company, Ministry of Supply. The innovation, the commercialization of the idea, which requires a lot of details, is probably 70%. We have more ideas than we have the capability to implement. Rely on partners who are willing to invest in your cross-channel team and traction. If I look at what we've done in creating the jukebox in the sky, we have a business that's about a $150 million business. No basic inventions, only improvement inventions. Rob, the phrase you used was "time in the wilderness," and you pointed out that once you're out of the wilderness, there's a relatively short time-horizon that one has to make something happen. For these products or creations that are bringing about markets, and aren't just products that fit incrementally into another set of offerings, within a market — if one issue is time, another issue seems to me to be timing. But that was pure luck for us, that we just happened to launch at a time when the AVM industry was getting started. If you're interested in selling through other retailers -- which for us were stockists, boutiques and larger retailers -- you need to figure out which channels make the most sense. Shiller: One thing that emerged is that people who do this kind of thing are people with a sort of mission and a purpose in life and they derive some excitement from it. A final challenge arises when you're ready to go to market: Where should you sell? But the market system that we have, certainly in entrepreneurial cultures, actually subjects you fairly early on to a feedback loop that causes you to understand, first, whether the unsated need or the opportunity to create a new compelling experience that you thought was there is actually there. The country must be high income, but this also includes openness to foreign ownership, ease of capital movement, and efficiency of market institutions. Pay close attention to the media consumption information you gathered for your target profile. 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