The promise of "El Dorado" makes young entrepreneurs embark on the conquest of the New Economy.
A little history, the conquerors arrive. The appetite for conquest and wealth fueled by Hernán Cortés' conquest of the Aztec empire in 1521, similar to that of Francisco Pizarro with the Incas of Peru 12 years later, attracted many others to undertake the journey to the New World.
"El Dorado" the land that promised incredible riches that was always hidden behind the next mountain or when crossing the next river, entered the annals of the conquest of the New World and over time became the legend of a strange ritual of a cacique to the objective of a multitude of conquerors.
As if it were the conquest of the New Economy, numerous young entrepreneurs set out to conquer new market niches.
Armed with enthusiasm, knowledge and new technologies, they still see territory on the Internet to explore.
What comes first, Innovation or Demand?
The creation of new markets is accompanied by the same four events:
- The Chance (accidental or luckily) of the development of a new technology.
- The flow of companies that enter an uncertain market (take risks) opened by the development of this new technology.
- The slow initial takeoff of products and services associated with this new technology, followed by a great explosion of consumers interested in the established dominant design.
- The death of most early entrants and their products once the dominant design has emerged.
The development of the Internet is an example of this. No one involved in technology in the early days had any idea of the scope of the final product.
This apparent unplanned, unsystematic development of technology appears to have been the consequence of how and by whom the work was done, most scientists and engineers at research institutes and universities.
When the Internet emerged (dominant design: "killer application"), a host of business opportunities arose. Blurred at first, but hooky enough to attract new pioneers with a variety of business models.
The fact is that it took some time for these technologies to take off and their existence and evolution do not respond to clear customer needs.
Furthermore, engineers "playing" with new technologies pushed the new market to an unsuspected population. This type of behavior radically introduces new markets. These markets are seldom created by demand or by customer needs.
"Demand-driven innovation" can develop and expand with increases in existing markets.
These innovations usually come in the form of either product extensions or process innovations; Without taking away value, these types of innovations do not create new markets.
Evidence shows that new markets are created by chance when new technologies manage to enter the market.
This process of innovation drives demand, inventors have a very vague goal. In fact, most of the new products are goods of experiences; customers can form clear preferences for them just by using them.
New World, New Economy
All this suggests that the new markets are volatile and unpredictable places, characterized by high technology and customer uncertainty.
These markets are identified by: the number and frequency with which companies enter and leave the new market and the number of products and their variants.
To survive in this type of environment - as inhospitable as it is exciting - pioneers must be enthusiastic.
Have an extensive knowledge of science and technology. And show a special interest in taking it as far as they can.
This means that the pioneers have the ability to take risks, they are committed to projects that result in new products beyond established borders. The Pioneers are "Born Entrepreneurs".
Many appear and very few succeed
Given the possibility of discovering a new market, hundreds of players want to enter to conquer it.
But at some point in the evolution of that market, a "dominant design" emerges, which standardizes the product or service and defines the identity of the market it serves.
Thus most of the early movers who chose the wrong design are out of business; and the few who bet on the winning design, survive with the possibility of growing to dominate the new market.
Market leaders are those companies that strategically invest in market growth and attract customers to it.
Conquerors and Colonizers
Companies that create new products and services are seldom the ones that lead them to mass market in the new market.
This is for a simple reason, the skills, mentality and competencies necessary to discover and invent are not only different from those necessary for their commercialization, but are often incompatible.
That is: those good for invention are unfortunately not good for marketing and vice versa.
Some companies are "Natural Pioneers", capable of exploring new technologies quickly and efficiently and converting them to products or services that meet the needs of customers. What these companies are good at is creating new market niches.
Others are "Natural Settlers." They are capable of organizing a market, serving regularly, attracting consumers, and efficiently manufacturing and distributing to the mass market.
Very few companies are good at both.
Conquerors or pioneers are enthusiastic, take risks, and share with customers their interest in science and technology.
Idea: many of the pioneers will fail, they will have to assume their conqueror profile and prepare the ground for colonizing companies. You will have a better chance if you are able to find a niche in which your product design is more accepted by the market.
The conquerors, The pioneers.
The characteristics of the conquerors in the new world. Who and how were the conquerors?
Most of the conquerors of America were people of humble origin endowed with an undeniable desire for adventure, fame and wealth. Many of them had already fought in the wars that the Spanish kings maintained in Europe and were very skilled in handling weapons.
The Captain had to take care of both the financing of the company (ships, weapons, horses, food…) and its military and political management.
At the end of the conquest, if it ended well, a settlement was made: from the loot obtained, the expenses and the part that corresponded to the king were discounted. The rest were distributed among all the members of the expedition.
The conquerors after the conquest:
The conquerors, in addition to gaining fame and wealth in the conquests, aspired to become "lords" (that is, in something similar to the nobles in Spain).
They wanted land and they wanted "vassals"; the most ambitious also aspired to become governors of the conquered lands, although acknowledging the authority of the king of Spain.
What they achieved was much less. The pioneers.
Pioneers need to be flexible and adapt to respond to developments in new technologies and new markets.
They need to be relatively open to external influences and have internal processes that facilitate continuous learning. On the other hand, they don't require marketing skills (they tend to take care of few key customers), nor do they need production skills.
Their organizations do not need to be very large or complex, so pioneers do not have to have deep organizational knowledge, and the ability to manage complicated accounts, personnel, or complex distribution systems.
Pioneers typically get in fast, their competitive advantage lies in the ability to be agile and flexible and accurately hit a constantly moving target.
The colonizers
Settlers for their part must increase the market niche to mass markets. They need to win the battle of the dominant design and unify the potential market.
Typically this means making large investments in exploiting economies of scale, following learning curves, strong “brand” development, and controlling distribution channels and the mass market.
For these reasons, colonizers are slow. Investing in consolidating a market involves significant costs and should not be taken lightly. They are risk averse.
One can imagine the complexity of trying to unite, structures, cultures and processes to facilitate the coexistence of pioneers and colonizers in the same organization.
The incentives and investment horizons of each activity are radically different and very rarely coexist. The attitude towards risks is different. I include the mentality and the behaviors are different and makes their coexistence impossible.
We are heading towards Open Innovation or outsourcing of Innovation («outsource innovation»)
Missionaries and Evangelizers, Brand Creation.
Along with colonization there was an attempt at Christianization. The ones in charge of making this change were the missionary friars, trying to change the customs and religion of the indigenous people.
The difference between missionary and evangelizer, is that the missionary is a person sent by an order (salesman, they pay him for his work) teaches and preaches. While the evangelizer is dedicated to preaching without an explicit commission.
Taken to the market, it is usually a user or consumer satisfied with a product, who has tried it and communicates its benefits to their neighbors, friends and field of influence. It works by word of mouth.
These terms are widely used in technology, we do not find Free Software evangelists, such as Linus Torvald.
The Colonizers have the ability to "Create Brands", they can access the communication channels to get the benefits of the new product to the users / consumers.
Open Innovation, Outsourcing of Innovation.
In these types of changing environments and where innovation drives demand, large companies have the need to create, sustain and establish alliances with the most innovative companies.
Large companies can outsource their exploration needs and focus on growing ideas to the mass market.
These strategies of outsourcing Innovation is a commonly accepted practice in a large number of industries such as pharmaceuticals, biotechnology, financial services, computing and energy.
Perhaps it will be a practice that we will see more and more accepted: large companies can serve as venture capitalists for young entrepreneurial companies engaged in conquering new market niches.
Marketing constantly teaches and repeats one of the golden rules, the need to focus and position. Again we will have to analyze our strengths and weaknesses, opportunities and threats. This approach will allow us to create more realistic expectations of what our entrepreneurial horizon may be.
