Create Your Own ‘Big Bang’ – How does one create a market other than by building a great company?

Given all the excitement they’ve generated, you might have concluded that the new, multibillion-dollar markets based on RFID, Wi-Fi, VOIP and so many other "new technologies" have emerged in a big-bang fashion, analogous to the creation of the universe — a rapid, exponential inflation from a state of nothingness to a vibrant, eternally expanding ecosystem.

By STEPHEN H. GOLDSTEIN Wall St. Journal

http://www.wsj.com

Actually, we should hope that this kind of analogy doesn’t hold up. Because while scientists can describe what happened during the big bang, they are still trying to figure out how it started, leaving the current debate at the intersection of physics and faith. In the business world, we like to have a little more to go on than that.

Despite the success of companies like eBay, EMC, Apple and a few others, most entrepreneurs will never be able to independently create a new market simply by building their companies. But few try other ways to grow and steer the new markets that they want to dominate. Thus, they suffer the same quandary as cosmologists, not knowing how to spark and build a business ecosystem, and missing out on many of the value-creating benefits that this knowledge can bring.

How, then, does one create a market other than by building a great company? Consider the following three approaches, recently proven to be good starting points:

• Court a king. To create a market, you need a dominant market leader or "king" in your court. Your king will need to be so convinced of the business benefits he will gain from what you and your competitors are offering that he will gladly drive market adoption. And if your company is the one outlining the benefits, you can gain an advantaged position as the king’s adviser and supplier in an accelerated, big-bang market adoption.

Just a few months ago, Wal-Mart mandated that RFID (radio frequency identification) tags be on all pallets passing through its supply chain by 2005. Almost instantly the market turned from engineering trials to 500 million piece orders. Those companies spun out of the MIT lab that spearheaded the technology development, testing and standardization, and that worked closely to win Wal-Mart over are standing at the head of the line now.

• Advocate an ecosystem. To grow, a new market requires a working ecosystem. Too many emerging businesses are struggling inside markets made up of ill-defined ecosystems, let alone well functioning ones. Those that are loosely defined are often dysfunctional — fragmented, directionless and leaderless.

Companies usually need to collaborate to shape an emerging market into a working ecosystem. Wi-Fi — the market for the wireless local area network (WLAN) equipment used to provide broadband access for multiple computers in homes, offices and public spaces — is a recent example of companies successfully organizing and advocating an ecosystem to greatly speed adoption.

The companies across this embryonic ecosystem recognized the disharmony in their market. They banded together in business associations to encourage members to adopt common standards and market the offerings of various parts of an ecosystem that now make up the Wi-Fi market. Their advocacy effort also helped them court King Intel, which put $300 million behind its Centrino chip marketing and advertising campaign last year, which helped create the Wi-Fi big bang.

• Create a standard. If your company is part of an industry where more than one fundamental technological approach is being pursued, you will clearly need standards, one of the most critical, time-sensitive drivers of market adoption for emerging industries.

Some say that the only standards that matter are the ones that are set by the market leaders. Clearly, if dominant leadership already exists in a market, the standard is usually whatever the leader wants it to be. But in embryonic or fragmented markets, the way standards get set can be critical to the pace of market adoption and individual companies can usually play a role in steering and setting standards. Look at the effort and time companies put into getting represented on the right committees at the IEEE and other standards bodies to see how much is at stake. Agreeing on the standards for RFID and Wi-Fi marked fundamental turning points in the ability to move these markets forward.

As passionately as you believe in your own company’s plan and the huge market need that your company can address, you must be part of catalyzing these ecosystem-wide reactions that create new markets and accelerate their adoption. If you don’t, you risk running out of capital waiting for the big bang to happen or getting blown away when it moves too fast in a direction you are not prepared to take.

Mr. Goldstein is a managing partner with Growth Advisors.

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