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Column: Market creating innovations -- the founder’s holy grail

Column: Market creating innovations -- the founder’s holy grail
Sateesh Andra

Embarking on an entrepreneurial journey needs much more than a great idea. 

Many a time, startup creation and growth is driven by passion, purpose, and personal biases. For founders in the early stages of their startup journey, often, there is a lack of clarity about positioning and go-to-market strategies.

It is very important for founding teams to have a structured approach on how to position their products or services based on what problem they are trying to solve and which customer segments they are trying to pursue. The frameworks here would help founders think deeper and calibrate their journeys better, enabling them to create successful businesses.

Professor Clayton Christensen is credited with the classifying types of innovation.

  • Sustaining (performance-improving) innovations that replace old products with new and better models
  • Efficiency innovations that help companies make and sell mature, established products or services or improve productivity
  • Market-creating innovations that transform complicated or costly products so radically that they create a new class of consumers or a new market that didn't exist before.

While innovation might be the common driver, the focus, application of resources and the quantum of impact differs within each of the following categories.

The innovation bucket decides how big a startup can get and what kind of value does it create in the ecosystem (new industries, new jobs, and new economic growth). Market-creating innovations tend to have higher valuations both in private and public markets.

Growth strategies (borrowed from Strategyn) framework help founders to examine drivers for new product and service offerings to win or fail in the marketplace, and how to proactively finetune focus and prioritization to formulate a winning strategy in the long run.

Dominant — Product or service performance is much better than alternatives in the market (Zoom.us or Netflix). The company charges significantly less and pursues a large share of the market.

Differentiated — Product or service Performance is better while price is higher (Tesla or Whole Foods or Earlier Versions of iPhone). Allows companies to target underserved customers

Disruptive — The Product or service may be simpler or inferior to existing options, but charges much less (Google Docs, Vivo). Targets overserved or non-consumers with product or service offerings.

Startups often pursuing ‘Dominant’ or ‘Differentiated’ strategy achieve escape velocity faster than others.

The purpose of the frameworks is to stimulate founders to think beyond the regular questions and develop an understanding of the innovation landscape and preferable go-to-market strategies for their products. The frameworks are meant to help founders understand what they are building and what is their ideal market.

Entrepreneurs can leverage these approaches to calibrate their own journey and do course corrections. However, one shouldn't try to artificially induce changes to their business models and force-fit these methodologies to look better. 

Sateesh Andra is founder and managing director of Hyderabad headquartered venture capital firm Endiya Partners. This views expressed in this article are his own.

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