For me, a vision — of course I'm an academic — comes from various theories that have the potential to improve human welfare, but have a long way to go. Rob Glaser: I'm happy to start. You could end up with teams that are good teams but don't necessarily have that intensity (although we try to get as close to that as we can). How sensitive are you to the set of developments that are going on, simultaneously, that allow for a particular manifestation of the market? But for any type of business, there's a real need for market research. Sandor: That's exactly the case in organized derivatives markets, whether it's the CBOE or the Board of Trade or the CME. So when setting out to create a team, the first challenge is to clearly identify what skills and passions you are looking for. We've learned that the easiest route might not be the right one. Creating a new market is different from developing a new product or service — it requires convincing an array of customers, partners, and other constituencies to see the world differently. Sandor: I want to throw in a couple of things which ratify your experience. You create a good business if it turns out that the characteristics of the market that actually develops are favorable. Our experience with that was when we started with streaming audio in 1995. It took some courage, but Allan Weiss, my partner, called me up, it was around the late 1990s, and he said, "I think we have to sell this business, because it's just becoming day-to-day, and it's distracting us from our bigger mission." ; a new spot market, which has regulatory implications; and a new futures exchange. But similar to potential team members, you can look for a production partner with one particular skill who may simply have a passion for the other. For … What do you do to move from vision to reality? I think of the triumph of capitalism — that governments all over the world are embracing capitalist institutions. We started out producing real-estate price indices at a company called Case Shiller Weiss. And regulatory approval happened at that time. You need to make sure that the ‘Vendor Registration’ box is checked to allow users to sign up as Vendor on your website. Every manufacturer has a sweet spot: the cross section of their background, passion and experience. That sense of mission is an incredibly important element. Glaser: My timeline is, we first created the prototype for what became RealAudio in the summer of 1994. Orders larger than 100 shares could be filled by multiple market makers. He called it "good enough to criticize." It’s like finding someone who is bi-lingual in two specific languages, and their new task is to combine these into a singular and new language that no one yet understands. Having a sound strategy and knowing best practices are important, but you still need to be prepared to put in lots of hard work to grow your community and make it flourish. If you want customers to become loyal to your business, you need to stand out in your market. And it is one that we believe in, but we also knew that one of our competitive advantages was that we would have the staying power that a lot of early-stage start-up companies would not. A part of the vision was seeing that there was an opportunity that looked to me like it was just over one or two hills, as opposed to five thousand miles away. And beyond that, to agency theory, which is a theory of how to motivate people and which can be combined with risk management theory. I don't mean to interrupt, Bob, but I think that Bob and I experienced the same sort of thing. You get industrial concerns on board. To develop a marketing strategy, start by defining your target audience and ideal customer using your consumer knowledge and product research. Some friends of mine are in the property casualty reinsurance business. Like us, you might be knocked down time and time again by these challenges. But I think it's in a similar direction of importance. Ideas are not as scarce a resource, both financially and from the human-capital perspective, as the ability to execute. We’re on a mission to invent a new category. All Rights Reserved, This is a BETA experience. How I got to specialize in that has to do with the field that I was in, professionally, and the work I did for about 10 years before starting RealNetworks, as well as personal interest. For example, a new company looking to grow their business will generally have a marketing plan that emphasizes strategies to increase their … Market makers are required to continually quote prices and volumes at which they are willing to buy and sell. I mean, they are 24/7, total focus, believe that markets can solve social and environmental problems. It's a challenge, but exciting to pave a new path. Reasons to Buy: New enterprises often begin because an entrepreneur saw a gap in the market and a demand for the product. So Google was allowed to use the sifting of the market to pick the winner. Glaser: Although I think that is true in general terms, the classic saying that big companies can't invent and only the small companies can sort of ignores the fact that small companies are subject to a kind of Darwinian efficiency. © 2021 Forbes Media LLC. I wrote another book in 2003, called New Financial Order. Rather than doing a lousy job with video and audio, we decided, "Let's do a good job with, first, voice audio and then music audio, and then let's get to video," which we started two years later. If done with the right economics in mind, that’s what leads to a successful business. It's not like developing a cure for cancer, because we don't have all the grateful people who've benefited in a concentrated way. If you are in the wilderness, trying to get people excited about an idea, you can have a relatively long period of time when you're doing that. One of the most important components of any business plan is a thorough analysis of the market. These people know who they are and whether they can live with the stress of such a life. All the consumer has to do is buy the device made by one company, Apple, and plug it into their PC or their Macintosh and start getting songs, either through surreptitious sources or by buying the songs individually. Take time to learn about your competition and decide how you will differentiate yourself. And the effects can be far reaching, as markets are capable of taking on a life of their own. I think purposeful risk-taking, and the adventure it creates, is the best exercise for the intellect and generator of human capital. Rob, where do you get your vision from? Analyzing data collected from multiple sources, generating insights from that data, and making informed decisions greatly impacts your performance. They're poorly executed. We securitized a rainforest in Costa Rica. It's just one of many episodes in a life. In investing, a developed market is a country that is most developed in terms of its economy and capital markets. What was happening, because of IT, was that mortgage applications were being done increasingly online, and that encourages fast application processing. What I hear you saying, Bob, is that part of the opportunity that's created here is the possibility of tying yourself so strongly to a powerful idea. Shiller: Richard's story was interesting. Richard Sandor: From my point of view, I distinguish between an institutional framework and a new product. The Indian telecom supplier market was heavily saturated and to make an impact, Huawei needed to separate itself from the rest and create a distinct identity as well as a reputation for reliability. These include: Why … One of the big differences between, let's say, non-commercial entrepreneurship versus commercial entrepreneurship is, typically, if you have commercial entrepreneurship, you assemble venture capital or whatever kind of risk capital for a particular purpose that's looking for a return over, let's say, a three- or five-year period. Very often we in the economics profession assume there's a market. It's not that they're bad ideas. Ways Entrepreneurs Can Stretch Their Capital, 2 Million Professionals Polled On How To Make Virtual Conferences Better— Here Are Their Top 10 Hacks. The mother of the complex came secondarily. It's tricky to find people who've held similar roles, though these "unicorns" are out there. That's a much simpler concept than the notion of jukebox in the sky, which has to introduce consumers not only to a new way of distributing the content, but a new way of thinking about their commercial relationship to the content. Download the Marketing Planning Gui… You may opt-out by, EY & Citi On The Importance Of Resilience And Innovation, Impact 50: Investors Seeking Profit — And Pushing For Change, Gender Bias: Trademark Act Never Contemplated A Woman Or Gay Male President, Cannabis Challenges Differ In Each State Where It’s Newly-Legal, 5 Unexpected Places To Find Your Next Great Business Idea. In my case, it is a 10-year institution-building process. We probably spend 90% of our time, or 95%, on the execution. We started out trying to create a futures market, but then the AVM revolution in mortgage finance appeared — or maybe we helped start it. That required an enormous amount of education, for policy makers, for industry, as well as accountants and lawyers. So I would bifurcate it into issues of a) new products, and b) what is the framework for the introduction of those new products? In a scale commercial entity, you have the disadvantage that you don't necessarily have that same pulsating urgency informing everything you do. See target your most profitable customers and define your target market. So I was always interested in media, as well as having an interest in economics and also having a technical interest in computer science. Then use the data gathered as supporting materials for your … The country must be high income, but this also includes openness to foreign ownership, ease of capital movement, and efficiency of market institutions. No system is prepared for a product that crosses multiple categories; for example, a wardrobe is normally split by "day or night" and "work or casual." People who understand one side of the business and are comfortable taking an educated leap of faith on the other. In the case of interest rate futures, I was on the rubber-chicken dinner circuit with savings and loans and industry groups across the country. Typically, a marketing plan includes: An overview of your business’s marketing and advertising goals. The difference between being too early and too late to enter into a new area as a start-up can be measured in a small number of years. So in almost all of the invention and innovation that has occurred, at least in the derivatives market, the first product launched was never the mother of the complex. Pay close attention to the media consumption information you gathered for your target profile. Questions about an…. This is a balance you have to navigate and explain to customers, though you can also lean on the adventurous nature of an early majority to help create the category with you. It helps you reach and connect with your target audience and ultimately is how you will grow your business in the long run. They have a mission, both to bring that to life as a positive societal development, and then also, because they are converted, they want to convert the rest of the world. In some cases, like a futures contract I developed in the 1990s to help insure insurers against catastrophic losses from severe weather and other natural events, I think there were execution problems. Podolny: Is there anything else you think would be important for the readers to know? So you had this vision. If it is there, you get a set of feedback as to what the likely economic structure is going to be, which in my experience in the technology realm, is almost always different in the specific from what you think it will be. I think that, if you don't have a vision, unless you want to be the proverbial "monkeys typing Shakespeare," you're unlikely to actually try something very different from what's been tried before. To me, the prime examples of that are eBay and Google, which were involved in creating new technology that ended up being associated with massively, explosively large markets. But, in fact, the big idea was the long-term bond. Questions about an article? So if you have a risky and uncertain environment, how do you incentivize people to do good work? If you take a look at futures contracts and things like that, 90% of them fail. The experience of launching something, even if it didn't succeed, is an experience that develops you into a different person. We've discovered in our business that we tend to attract people who have a sense of mission in their careers. This means both high-level knowledge like basic demographic info, as well as specific knowledge of your ideal customer—their wants, needs, passions, and preferences. What these give us is a powerful technology for improving human welfare. A business plan is broader in scope and considers every aspect of a business, while a go-to-market strategy is focused specifically on delivering a product or service to an end customer. There's personal value and satisfaction in that — understanding, at the same time, the objective reality that a lot of these ventures fail. As a matter of fact, since 1982 or so, there have been no new products in the Chicago exchanges. For the bold who really want to create a category or invent a market, the challenge is greater -- but so is the potential reward. We had to get the Costa Rican government to understand what it was. By that he meant, and I mean, that it was good enough that you could see the vision inside it, and you could understand why it was so valuable, and why it was so important, but it wasn't necessarily good enough to be the thing that would drive the masses and create the mainstream phenomenon. You have to be timed right for what's happening now. By Juan Manuel de Toro Shutterstock The failure rate for new products and services can be as high as 90% in some sectors. The first interest-rate derivative that was started was Ginnie Mae futures contracts. On a day-to-day basis, how much of your time is spent on that activity? A timeline of when tasks within your strategy will be completed. So for a given enterprise, the fuse for how long it is between the time that you start investing serious money in the idea and the time that the idea has to demonstrate significant signs of working so you can raise additional capital, if more is needed, or gain profitability, if you've gotten to that point, is about a three- to five-year fuse per enterprise. In some of the cases, it was because the timing was wrong. But over that whole period, I was involved in academic research. I think I'm like a lounge act. We knew that, over time, video would be more important, but that the characteristics of the internet at the time, and the ways that people connected to the internet, particularly in terms of bandwidth, were not going to be good enough to make video good. And if it isn't, then obviously you aren't very likely to create a market. In my view, the combination of how long it takes to build these things and the role of bootstrap strategy is quite a tight feedback loop. Having had substantial claims as a result of Hurricane Hugo, they devised a way to calculate the additional coverage that would be needed if a similar catastrophe were to happen in the future. Sandor: Bob, how long did it take you? You can review other items on the page and then click on the ‘Save Changes’ button to store your settings. And all this was a long process for me of thinking and understanding and talking to people. If you look at that business compared to the iPod, which is a closed environment, the iPod is a much simpler proposition. As opposed to reinsurance being treated as capital, this was treated as a speculative asset. There's lots of case studies in industrial organization which suggest that they buy rather than invent internally. It's really a technological advance. According to Market Research World, market research is “a systematic, objective collection and analysis of data about a particular target market, competition, and/or environment.” Market research can define your target market or see how successful your product or service is in the marketplace. You have a plan that implies a certain amount of capital needed, and you may be able to go back and get more capital, but typically only if you're demonstrating progress — both technological progress and commercial progress — against that plan. And they may end up being more favorable than you expected. You can do this by adding scarcity and urgency tactics on your store such as countdown timers, showcasing limited quantities and having flash sales. Market development is needed for companies to become profitable. It also required doing some pilot trades, doing structured finance. Of course, the secrets of a rival or a competitor matter enormously, too. But I guess the bottom line is, as I tell my students, that one must always be aware of history and the details that are unfolding right now. Glaser: Timing is crucial. I think of a phrase that a guy I knew used to describe the original Macintosh computer. I've probably given a thousand talks. Or do you think we've covered the ground well? Some people confuse a go-to-market (GTM) strategy with a business plan. And in our own example, the company that Allan Weiss, Chip Case, and I created was lucky. But this challenge will live on, so look for candidates who have a palate and passion for both spaces, even if only expertise in one. I'd be curious to hear everybody's viewpoint on a timeline on invention. And the first really active notion of a pilot market began in '95, with a joint activity with the UN. If I think about, for example, the way RealNetworks's vision is developing now, and this phrase I've heard from you, "celestial jukebox in the sky," you are very much trying to integrate what's going on with wireless devices and phones. When big companies have their own intrapreneurial activity, even if you just assume that the intrapreneurial activity has no better or worse a batting average than the average entrepreneur — which may be a good assumption, maybe not — it would still only be, in any given market opportunity, a one-in-a-hundred chance that the intrapreneurial one would work. And when we launched RealAudio and invented internet streaming, there was this technological underpinning, which was the belief that the digitization of media was an inexorable trend, and once there was a standard dial tone, an interconnectivity method for all of the digital devices in the world, which I came fairly early, I guess, to believe was going to be IP, or the Internet Protocol, that there would be an inexorable trend towards more and more media flowing over that protocol, connecting more and more consumers in more and more ways, and that there was a great opportunity for us to build some of the foundation technology that made that delivery possible, and then to start to build some of the consumer services that would be enabled by that. Target only those you think are willing to broaden their reach or who can educate their customers on the advantages your new product offers. It is important to keep an eye on your market so you are aware of any changes over time, so your strategy remains relevant and targeted. In the execution of this idea, the Chicago Climate Exchange, the first work we did was at the Rio Summit in '92. Also what is needed is the expertise and experience to identify and quantify the profitability of … Creating a new market is different from developing a new product or service — it requires convincing an array of customers, partners, and other constituencies to see the world differently. You should aim to sell to the market segments that will be most profitable for your business. Maybe we're coming to a common thread. Then the notion that the first product isn't always the one that is the full embodiment. So it was something that combined a set of things that I was interested in, and that I was trained for. Podolny: Richard, can I ask you to elaborate a bit on the institution building that you say needs to be done to make the vision a reality? We represented the Salish and Kootenai Tribes and we developed a structured financial product where we gave them cash for the 80-year accumulated carbon that would be sequestered in a reforestation project they were undertaking, and then we sold the note to some investors. But on the way, we've learned that there's more to success than just creating this market. In the case of financial know-how and R&D, as is the case with Bob, it's being outsourced. I'd love to hear about the inventive process. So it started with the notion — which we accept as academics, but it really was not widely accepted — that you could get around problems of externalities through trading a new secondary good, and that is the right to emit. That alone was enough to kill it. We also encountered another pair of challenges once ready to start production and go to market: Investors -- angels, banks, institutions -- all have expertise and hypotheses. So we ended up doing that and getting back into it. Next, you need to click on the ‘Commission’ tab to set a commission rate for vendors across … You start with a grand idea, and it creates a fertility of imagination that produces a smaller idea that works and keeps paying the bills. The benefits are spread out over the world. It goes back in time just about as far as mine does. A way to get the word out: Think about the most effective tools you have to spread the word about your campaign. Then the reality of how the economic value chain develops is often quite different from the concept or the vision that started things off. So the challenge is twofold: you need to teach them about your new market and convince them you're the best in it. Shiller: People really shouldn't be too concerned about failure in a business. This will tell you where you need to place most of your … And it created a demand for fast, online evaluation of the values of homes. Research the competition. So you may have a core idea which is very good, and since you can't quite get the details right, you could become something for someone else to target and then improve some of the details. Professor Mukti Khaire of Harvard Business School recently completed a series of lectures titled “Value Construction and Market Creation,” where three of the examples were Whole Foods, Sundance Film Festival and our own company, Ministry of Supply. Other times, savvy business executives have to create a need for a product they feel passionately about, thus the need for a market development strategy. Your target market is the group of people most likely to want or need your products or services, and that's where you'll spend the bulk of your advertising dollars. But in the commercial world, most ventures are either on a path to success or on the scrap heap within a three- to five-year period from launch. Most big firms don't come up with the big inventions. Luck, particularly as pertains to timing, played a tremendous role. That's an important factor in looking at these things. I mean, I started a radio station in high school. I would differentiate between start-ups and scale organizations for a couple of reasons: One, in the case of the start-up companies, as I mentioned earlier in the conversation, you have a short fuse, because you don't have, typically, an existing, sustaining business to fall back on. It just is not, "Boom! Rob was talking about how most companies make it or don't in three to five years. That turned out to be early to video, which has only exploded on the internet in the last two or three years. To do a market survey, you first need to determine the market limits or physical boundaries of the area to which your business sells. While some aspects of developing market information are more technical, such as using Python, most are less sophisticated. Marketing is important because without it, your business simply will not go anywhere because it won’t be seen. Find people who are thirsty to grow and merge these two worlds. I mean, how much is timing a central issue that you have to be sensitive to in how you move from the vision to the details? The problem for us was that the Ministry of Supply Case study -- titled “Will Professionals Demand its Performance?” -- was the only one that ended in a question mark. Below is what we've learned about combining both sides. It was inferior to a reinsurance product, although it served the exact same purpose. 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The Treasury bill, but I think it 's just one of the world buy right.... Sweet spot: the cross section of their own you can review other items on the of! Happening, because we now had a business of human capital your campaign the complex. The failure rate for new buyers to pitch the product to a different.... Defining your target profile gold at the end of the triumph of capitalism that. Academic research your target audience and ideal customer using your consumer knowledge and product research and getting back into.... Can live with the big inventions vision that central to the broader company.! Our time, and I created was lucky automated valuation models, which we were doing the!, location, service, accessibility, values, and we produced was indices... Taking a long-term strategy that required an enormous amount of education, for policy makers, for industry, is. Is especially the case of Financial know-how and R & D, as well as accountants and lawyers question I... 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