A startup faces trials and tribulations of varying magnitudes on its 0-1 journey. Along the way, it is easy to lose focus of their core value proposition or for a founder to simply be overwhelmed by all the different hats they need to wear. Often, while brainstorming with our founders in navigating the 0-1 journey, we lean on a framework that ensures market centricity while planning various efforts. This has proved to be a useful anchor while thinking about strategies on go-to-market, risk mitigation, marketing messaging and even hiring.
We wanted to share the same with everyone to learn and build on this. Do provide your feedback. Without much adieu, let us dive deeper…
Market Centricity Framework:
i) Existing Market is defined as an old market being served by an old product. For example, antivirus softwares and firewalls continue to serve traditional cybersecurity requirements. A key characteristic of this segment is that competition is fierce, with margins and market share consistently under pressure.
ii) The Re-segmented Market segment refers to an old market being served by a new product. For example, Electric vehicles fall in the Old Market/New Product quadrant, with them slowly replacing traditional automobiles. A key characteristic of this segment is that existing market leaders can catch up fast, and staying ahead of their offerings is key.
iii) The Invented Market segment is all about creating a new market by a new product. One of our portfolio companies, Wysa, has done a tremendous job in creating a new market by automating the whole process of talking to a human therapist for mental health. You can chat with an “AI Therapist” - right from your phone - anytime you want, about anything you want - that too for free! This has opened a whole market of consumers who were otherwise not able to access mental health support either due to cost, availability or self inhibition. Characterized by requiring a change in customer behavior, offerings targeting this segment often require evangelization for consumers and customers to adopt something new and benefit from it.
iv) The Re-invented Market segment here is defined as a new market being served by an old product. A defining characteristic of this segment is most often a business model innovation where an old product opens up a new set of customers. An interesting case in point here was when low cost airlines began - suddenly they started attracting consumers who were traveling by First AC / Second AC in trains.
As one can see, the risk profile for these four segments are different. For the left half (Existing Market and Re-invented Product), the key risk comes from competition or alternatives whereas in the right half (Re-invented Market and New Market), the key risk is adoption as consumer/ customer behavior change comes in the way.
For us as a deeptech fund, most of our founders end up launching a new product either in an old market or creating a new market itself (top half).
Quite often, the product overlaps segments - for example a new product could be replacing some alternatives as well as bringing new customers who have never used that product. However, for startups in the 0-1 journey, resources are limited and you need a sharp wedge to enter the market, it is often advisable to pick one of the quadrants to focus the messaging and GTM efforts before expanding to other segments.
The upcoming sections will focus on the New Product half of our mapping.
Keeping in mind which quadrant your startup’s core offering lies in can provide a useful anchor while thinking about GTM, risks, etc. To illustrate this, let’s think about the market centricity framework in the context of a startup’s GTM motion.
Startups whose core product lies in the Invented Market segment, for example, have to primarily solve for customer adoption. They usually stand to benefit from evangelization and building new use case scenarios with a focus on how it can benefit the consumer or enterprise. Let’s look at how things are playing out in the alternate proteins market, for instance, where a go-to-market strategy for cell-based meat products requires evangelization efforts such as tying up with local restaurants to whip up cell-based meat entrees.
Similarly, a product launched in the Resegmented Market domain might be best positioned as a better alternative to existing solutions, with a focus on their gaps. One of our companies, Niramai, is doing some great work here - their radiation free, no pain solution of thermal scanning with AI for breast cancer has enabled many women to come forward to get a scan which otherwise is very painful for them (mammogram).
In essence, recognizing the quadrant in which a startup's core offering resides serves as a pivotal guide in shaping its go-to-market (GTM) strategy and mitigating associated risks. The market centricity framework proves invaluable in this regard
Temporal nature of Market Centricity:
Markets are in constant motion. New products are launched, customer needs change and technological advancements occur. All these factors typically mean that products mapped on this framework at a point in time consistently shift left i.e: new markets convert into old markets (in the context of new products addressing them).
And so, for founders building, making decisions based on a static point in time is akin to attempting to hit a moving target - leading to an offset in perceived v/s realized outcomes.
It is imperative that you take timing and how you expect things to shift over time into consideration.
Take chatbots, for instance, which had several vertical and horizontal adaptations targeted at enterprise come up in 2020. Many of these saw great adoption as well, with their solution outperforming rule-based chatbots at the time. However, in the wake of changing customer needs in the form of demand for hyper-realistic chat experiences and the launch of one of the greatest technological leaps in the form of large language models, the winds have shifted. In 2023, standalone chatbot companies have a more challenging question to answer - “Can’t ChatGPT do this?”. Prescient founders heeded the signs of forewarning earlier this year and focused on differentiating on the basis of richer enterprise-aware workflows, along with experimenting with ChatGPT and open-source models alike.
In the physical innovation domain, we call upon the alternate protein markets example again. Just 5 years ago, plant-based meat was all the rage (new-product) and startups in the space focused heavily on evangelization, whereas more recently, one might describe it as an older market with solutions in the space looking to differentiate from Beyond Meat, Impossible Foods, etc with the promise of better taste and texture.
In an era of changing consumer and customer needs and technological breakthroughs around every corner, it is imperative that founders don’t lose sight of what makes them special, while being able to consistently convey that message. Maintaining market centricity during various startup building efforts can go a long way in differentiating from the competition, while staying true to your core strengths.