In our last Thursday Theory Tips piece, we explored disruption as a theory of competition. In this piece, we’ll explore one of the two types of disruption: new market disruptions and, consequently, market-creating innovations (MCIs)— the specific spark that births a new market structure.
Market-creating innovations—innovations that transform complicated and expensive products into products that are simple and affordable so many more people can access them—are a significant focus of our work in Global Prosperity. This is because market-creating innovations have the potential to spur sustainable development, progress the global economy, and even address the largest energy deficit in the world.
When fully harnessed, new markets fueled by MCIs can lift an entire nation out of poverty.
How?
Nations are built from markets. But building these markets first requires targeting nonconsumption. Nonconsumption is the inability of a person or an organization to consume a product or service that will help them make progress.
New market disruptors must convert nonconsumers to consumers. A new value network, which allows for the creation of cheaper, simpler products meant to attract the nonconsumers, is critical for that conversion. In other words, it’s impossible to change product prices without first changing the existing value network. But once the new value network is designed, then the stage is set for market-creating innovations to build an entirely new market from nonconsumers.
What about competition?
New market disruptions aren’t necessarily competing against incumbents. They’re competing against nonconsumption. Furthermore, because new market disruptions are targeting people or entities that aren’t existing customers of the incumbents, then incumbents don’t feel threatened until they’ve been overtaken by the entrant.
This isn’t to say that new market disruptors don’t have to worry about competition. Nonconsumption is a fierce competitor, and this competition can be seen in the form of barriers to consumption. These barriers are time, access, skill, or money.
Therefore, new market disruptors must create a way to address nonconsumers’ struggles, address these barriers, and convince nonconsumers to leave their workarounds for the MCI. That is how they beat the competition.
Is there proof?
Some successful market-creating innovators that we often refer to are Celtel, Indomie Noodles, Grupo Bimbo, Clinicas del Azucar, and Ford. But everyday there are more and more new market disruptors targeting nonconsumption. Our most recent paper, Accelerating the adoption of solar energy in Nigeria: A market-creation strategy, highlights solar energy providers who can and are creating new markets by targeting the nonconsumption of electricity in Nigeria—the country with the largest population of people that don’t have access to electricity. If enough providers can successfully address this mass nonconsumption then not only will they provide electricity for over 90 million people, but help Nigerians make progress in their lives and propel sustainable development for the entire nation.
These examples demonstrate how new market disruptions are not limited to one particular sector or one particular country. Nonconsumption exists at a global level, but so does the opportunity for new market disruptors to create prosperity, to increase access, and to improve lives.
For more of our Thursday Theory Tips, read:
Thursday Theory Tips – Who are your best customers?
Thursday Theory Tips – Is my business model working for me?
Thursday Theory Tips – Culture, management’s secret weapon
Thursday Theory Tips – How do I plan my new venture?
Thursday Theory Tips – Disruption, a theory of competition
