Deep-tech founders, R&D leaders and tech portfolio managers usually know very well what makes their technology platform outstanding. They also have a clear vision of how the technology will evolve and what applications it could enable.
What they find less obvious is where to first commercialize their technology. This uncertainty is not due to a lack of strategic options. Quite the opposite. A technology platform can often generate value across multiple applications, customer segments and even industries. Take, for example, a company developing a breakthrough non-invasive diagnostic technology. Should it target hospitals, private clinics, veterinarians or food safety? The underlying technology may be the same, but almost everything else changes: product design, certifications, sales channels, partnerships, pricing, customer success criteria and the capabilities the company needs to develop.
As discussed in a previous post, there are different reasons why commercializing an innovation is complex. Market positioning is one of these reasons.
The good news is that market positioning is not an irreversible decision. Startups regularly expand into adjacent markets, and established companies often reposition products over time as part of their diversification strategy. However, the first market to enter has long-lasting consequences because it shapes which capabilities to build and what to learn from the market.
Four strategic ways to position an innovation
If you are bringing a technology to market, thinking strategically about positioning comes down to two imperatives.
- Choose the right beachhead market. Your initial market should be small enough to allow your resources to stay focused, but accessible enough to give you the cash flow, credibility and knowledge to expand later. Identifying a beachhead market is one of the pillars of what Bill Aulet calls disciplined entrepreneurship.
- Prepare yourself for iteration. As you learn more about customer needs and strengthen the product, your market positioning will naturally evolve. The important part is to expand in sequence rather than dilute focus by serving every possible opportunity in parallel.
Once you have identified the applications where your technology creates meaningful value, you need to decide what type of market strategy best fits your innovation. In practice, there are four common market strategies, resembling Steve Blank’s market types.
1. Compete within an existing market
Incremental innovations typically enter established markets by outperforming existing alternatives on a limited number of attributes.
In existing markets, customers already understand the problem and compare new products against familiar competitors. This means that a new product succeeds by being clearly better at what matters most.
The advantage of competing within an existing market is that there is little or no need to educate customers. This is because customers already have product expectations and selection criteria. The challenge for existing markets, on the other hand, is that competition is often fierce.
In existing markets, product metrics should focus on product quality, customer acquisition, and retention
2. Create a new segment within an existing market
There are many established markets where some customers are unsatisfied with existing offerings. This creates an opportunity.
Positioning to serve an unsatisfied segment within an existing market allows to forget about every competitor and focus on serving only those customers whose needs are only partially addressed by existing offerings. In this case, the product strategy consists of deliberately optimizing the offering for that specific segment and excelling on the attributes that matter most to that group.
For example, an industrial dishwasher with a compact footprint and lower energy consumption can target small restaurant owners who care about efficiency and space savings.
This approach reduces direct competition and allows you to establish a strong position within a specific customer segment. If successful, that segment becomes your launching pad before expanding into adjacent segments.
Success metrics in this case should focus on penetration within the target segment, customer satisfaction and repeat adoption.
3. Enter a market with unmet needs
Some markets contain customers who already recognize a problem but rely on inefficient workarounds because existing solutions are just inadequate. They are what Chan Kim and Renée Mauborgne define as second-tier non-customers. They have a problem but they intentionally avoid choosing any solution within the traditional market boundaries.
Here the challenge is to provide such customers with a significantly better way to solve their pain than using a workaround that is inefficient or inconvenient. A pickup-and-delivery laundry service for single urban professionals renting apartments, for example, does not compete with washing machines. It competes with the set of imperfect workarounds customers already rely on: delaying laundry until it becomes urgent, spending hours doing it over the weekend, or coordinating shared laundry rooms in apartment buildings where machines are often unavailable.
The advantage for entering a new market is that there is no competition. Customers cannot compare your product with existing alternatives because no meaningful comparison exists.
The other advantage is that customers already have the problem and are actively trying to solve it, so you do not need to spend resources to raise awareness.
In these markets, growth depends on driving adoption quickly before competitors emerge. Product metrics therefore initially focus on customer acquisition and referral rather than customer loyalty and product quality, as there is no competition.
4. Create a market around latent needs
The most challenging scenario is when you target people who would but do not yet recognize the problem your product solves. According to Chan Kim and Renée Mauborgne, they are third-tier non-customers.
Radical innovations often belong to this category. Customers cannot compare your product with existing alternatives because no meaningful comparison exists. Before selling the solution, you first need to make the problem visible and the value clear
Netflix, during its transition from DVD rentals to streaming, is a classic example on how to make the problem visible. In the late Nineties, consumers did not see “instant video availability” as a problem because renting DVDs from Blockbuster felt efficient enough. Netflix used its DVD-by-mail service to target tech-savvy early adopters. This strategy built awareness around the convenience of on-demand access. A decade later, streaming technology took the industry by storm and made content truly ubiquitous.
Think beyond the first market
Choosing your initial market is not about finding the largest opportunity. In fact, the largest markets are often the hardest to penetrate because they demand greater investment and stronger competitive capabilities.
Instead, identify a beachhead market where your technology creates distinctive value that customers can adopt quickly.
In this way, market positioning becomes a sequence of strategic decisions. The first market gives you credibility, customer insight and field experience. Those assets make the second market easier to enter.
Different positioning strategies require different product metrics. Companies competing in established markets optimize for competitive differentiation. Companies serving underserved markets optimize for customer adoption. Companies creating new markets target behavioral change before they can measure any growth.
