On Pantyhose, Taxi Cabs, and Billions
Don't Beat the Competition—Make It Obsolete
In 1993, a young woman in Florida was selling fax machines door-to-door. She had to wear pantyhose—a dress code her employer enforced.
She didn’t like the panty lines or the seam that showed through her open-toed shoes. In the heat and humidity of Florida, she tried to find pantyhose that did not have seamed toes, and that did not roll up the leg after she cut them.
She failed but saw it as an opportunity. She moved to Atlanta and invested her $5000 life savings to create the first prototype of what would later become Spanx. It made the woman, Sara Blakely, a self-made billionaire.
Spanx is a privately owned company, but in 2021, Blackstone bought a majority stake in Spanx, valuing it at $1.2 bln.
Love your problems — they might spark businesses, disruptive strategies, or, at the very least, blues songs.
Sara Blakely created a new market niche, but not a new market. The difference is that a new market is harder to build but easier to protect.
Magic Nine
Nine characteristics define any market:
Target customers
Customer value (value businesses create for customers) vs Customer trade-off (what customers have to accept to receive the value).
Ways to monetize customer value
Sources of captured value
Place
Time
Occasion
Experience
Let’s take the music radio market as an example.
Target customers: Listeners, often everyday people.
Customer needs: Entertainment, news updates, background music for daily routines, etc.
Customer value vs. Customer trade-off: Engaging content vs. ads that interrupt the music.
Ways to monetize customer value: Selling listeners’ attention to advertisers.
Sources of captured value: Advertisers.
Place: mostly at home or in the car.
Time: Primarily during the day.
Occasion: Engaging in activities that can be accompanied by music.
Experience: Enjoyment, good mood.
Your market has these nine characteristics, too.
Change one, and you’ll create a new product.
Modify two, and you’ll carve out a new niche.
Alter three or more, and you’ll shape a new market.
Build a new market, and you’ll have no competition.
Competition is a fight against many for a small share of the market. Igniting new markets is a fight against ourselves for the whole market.
Costco and Uber
Sara Blakely created a specific customer value, footless pantyhose (tights) for specific occasions.
Costco, an American retailer, chose another strategy.
It’s a club, and you have to pay a membership fee. You need to buy in small bulk, and Costco locates its stores in suburban areas. It doesn’t offer as wide a selection of products as some other retailers, but the prices are always attractive.
So, Costco modified five aspects:
Target customers (it focuses on families with cars).
Customer needs (it prioritizes savings).
Customer value vs Customer trade-off (low prices vs. bulk purchases, long trips to the stores, and a limited product selection).
Sources of captured value (Costco added membership fees)
Place (suburban areas)
But Uber went even further.
They added drivers to the equation and changed seven characteristics out of nine:
Target customers – both riders and drivers.
Customer needs – riders need quick and affordable rides; drivers need a side hustle.
Customer value vs Customer trade-off – customers don't have to wait but share a car with an unlicensed stranger.
Ways to monetize customer value – when a rider pays, Uber takes a cut.
Place – a mobile app.
Occasion – Uber made more people take taxis than ever before. Many people became drivers, at least temporarily.
Experience – drivers can have a flexible side hustle.
The more characteristics you modify, the more unstoppable you become.
If you want to achieve what no one else can do what no one else does.
In the future issues of the Strategic Seeing newsletter, we'll discuss igniting new markets in more detail.
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It’s always important to think about the problems you’ll be solving for customers, but what fascinates me is how some of these people were solving their own problems—and how those solutions turned into huge, money-making businesses for them.
All the best with you talk! I can’t join it live but would love to watch it later if a recording is available.