The Mirage of “Promising” Markets
Seeking a market that will automatically propel you to the top is like trying to launch into space with the engine turned off.
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At one point, a company where I served on the board was looking for new markets and business opportunities. One summer morning, I was chairing a strategy committee meeting to discuss this matter.
The CEO suggested a few criteria for promising markets for us to enter:
1. The market must be large.
2. Competition should be relatively low.
3. There should be no local manufacturers in that market – we must be the first.
4. Local manufacturers should receive some form of government support.
5. The market should be growing.
“I’m into sailing,” the CEO added. “Out there, you really need to pay attention to the wind and use it to your advantage.”
I pointed out that business isn’t sailing, and using these criteria is too dangerous.
Roads, investors, and business ideas
Imagine you somehow found out that a highway is going to be built soon in an area that is now just desert. Would it be a good business idea to start buying land there to build gas stations, restaurants, and parking lots in the future?
Yes, if you’re an investor.
Not quite, if you’re an entrepreneur.
– An investor is someone who invests money to make a profit for themselves.
– An entrepreneur is someone who invests their own money, time, energy, and creativity to create value for six stakeholder groups, including themselves.
– An investor’s goal is finite—even when it’s long-term.
– An entrepreneur’s goal is usually infinite. They build a business to last a long time.
When you buy a piece of land just to sell it when the price goes up, or you enter a market simply because it’s big and growing, you make the future of your venture too dependent on external factors.
That’s good for short-term investments, but bad for business.
A market you’re about to enter might look big, growing, and almost free of competition. But sooner or later, those tailwinds fade, and competition picks up.
An attractive market is one where you’ve found a significant, unmet customer need and know how to meet it. The key is delivering that solution in a way no one else has managed yet.
And the level of competition doesn’t really matter. Revolut, Zoom, Slack, and Dollar Shave Club entered markets that seemed overcrowded – and won.
Amazon and Airbnb
“But what about Amazon or Airbnb?” asked the CEO. “Didn’t they just ride the wave? Back in ’94, Bezos saw a report saying internet usage was exploding, so he jumped in.”
That’s an excellent question.
Amazon and Airbnb aren’t “online businesses.” Amazon is a retail company, and Airbnb is in the hospitality industry.
Sure, these companies leveraged the internet boom to build their models. But at their core, they are about customer needs, not technology.
Business isn’t hitchhiking—you can’t just try to catch a ride that happens to be going your way.
It’s a relentless hunt for unmet needs and new ways to meet them.