Lesson: Customer Understanding with Steve Blank

Step #8 Resegmented Market: Existing players can be sideswiped with a new niche in a resegmented market.

Resegmented market. You have a hypothesis about who the customers are. You think you understand what your fit is, either in low cost or their specific niche needs and so you might have a better fit for them. Competitors, there's many if you're wrong and but very few if you're right. Your risk is, that you get the market and product redefinition just wrong, you didn't do enough customer discovery and you say "No, this is how we're going to enter this existing market. We're going to go after these set of users specifically" and you were wrong. A great example of this is what Southwest did. Southwest took on the airline industry by bringing up the traditional hub and spoke model and providing very limited services but for an extremely low price.

Now the other thing is in a resegmented market, and again we use Southwest as a low cost entrant or Whole Foods as a unique niche supplier via positioning, but you really want to start asking what factors can you eliminate that your industry has long competed on. What can you reduce below the industry standard or raised above the industry standard? What can be created that the industry has never offered? What's interesting is if you look at the chasm between your early adopters, your earlyvangelists and the mainstream market in a resegmented market, this is what Moore was talking about called the chasm. There really is a gap between what these people want and a gap between their needs. If you're not careful your sales curve would start looking like this over here, actually might collapse until the mainstream adopts.

Let's take a look at what a sales curve might look like in a resegmented market. It's a complex sales growth chart because in the first couple of years you're just getting the spill-over of people who think you're just a competitor in the existing market. Your sales will tootle along until, if you're correct and you were right about that niche or low-cost segmentation, you will start seeing an exponential increase in sales. If you're wrong, you'll just be one of the many competitors in an existing market.