Prime the pump
August 28, 2020

The difference between market-sharing and market-creating

“Prior to the Singer sewing machine, if you needed to have a new piece of clothing, our mothers had to do it by hand.

It took them about a day to make a piece of clothing and only the rich could have more than one pair of clothing.

When Isaac Singer developed his foot-operated sewing machine, millions of people became owners of these sewing machines, first in America, and then around the world, because Singer made these machines affordable and accessible.”

Today we examine the difference between market-sharing and market-creating. “Market-share strategies emphasise advertising promotion, pricing, and distribution. Customers are interested primarily in price and availability. The supplier with the best financial resources is likely to win.

“Marketing-creating strategies are much different. In these strategies, managers think like entrepreneurs. They are challenged to create new ideas.”

In his book “The Prosperity Paradox”, Clayton Christensen explored whether there was a process by which prosperity emerges and whether it can be replicated. Mention was made of Korea transforming itself from being impoverished to being very prosperous and China being able to reduce extreme poverty from more than 66 percent in 1990 to less than 2 percent, today. At the same time, other countries like The Philippines and Russia were unable to do the same.

Christensen concluded that the key to success was innovation and that the idea could be replicated in countries and corporations. According to Christensen, there are three types of innovations, but only one type can drive growth.

He described the first type of innovation as efficiency innovation. This helps companies make good products cheaper. It helps to maximize free cash flow, but minimizes growth and job creation.

Christensen referred to the second type as sustaining innovation. This focuses on product improvement, but it does not create net growth for a corporation or for the economy.

An example of the third type of innovation is what happened with the Singer sewing machine. Christensen called this market-creating innovation.

The creator was able to transform a product that was complicated and expensive and that only the rich could access to being affordable and accessible so that many more people can own and use them.

“Market-creating innovations create growth, because they have to create the infrastructure.”

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Other source “Thriving on Chaos” – Tom Peters