When launching a startup, you need to understand what is the stage of your market in order to choose the right product and go-to-market strategy.

Every market goes through 3 development stages – here they are:

1) Market creation

1st product to solve a problem in a completely different way (think cars vs. horses).

Most of the time, the 1st products are not the best ones, but they provide great data points to understand the constraints of the market/consumer habits/use cases/unit economics, etc. It’s rare for the 1st movers to be the long-term winners of a market, but there are notable exceptions.

Think about:
Smartphones – Blackberry, HTC
Social networks – SixDegrees, Friendster, Myspace
CRM – Siebel
RPA – Blue Prism

If you think your product is here – maybe think again.

2) Market development

The market leader is just starting / weak and many competitors rush in to challenge it. Most of the time, the long-term market leader is one of the entrants during the market development phase.

Smartphones – iPhone, Samsung
Social networks – Facebook, Linkedin, Twitter
CRM – Salesforce
RPA – UiPath, Automation Anywhere

Key success factor – the market leaders are the 1st to scale, not 1st to market.

3) Market specialization

The market is clearly defined and with strong leaders – but specific use cases can be solved 10x better by specialized products. The new entrants focus on becoming “kings of niches” and enlarging them because the added value can attract new customers.

Smartphones – Bittium (security), Sirin (luxury)
Social networks – Insta (pictures), Snap (disappearing pictures), TikTok (short movies)
CRM – Pipedrive (CRM for salespeople), Monday (CRM for SMBs), etc.

Correspondingly, the next wave of RPA innovation will most probably bring specialized RPA tools for (maybe) lawyers, accountants, smartphone-first users, etc. but not direct competitors to the market leaders.

Network effects, unit economics, and data can provide effective moats for market leaders.

For a new entrant, strong product differentiation added value for a specific market segment is a mandatory prerequisite for potential success. Ideally, this can also enable an innovative go-to-market strategy.

Think about the stage of your market, and the place of your product in it, and set your strategy and priorities accordingly.