SERIES: Potentially Contrarian Ideas – 1. Create Products and Create Markets

Most business students learn the timeless advice from Theodore Levitt about “Sell the hole, not the drill.” In his article in the Harvard Business Review in the 1960s, he urged businesses to move away from a narrow focus on their products and services and to broaden their understanding of market needs. Customers are not looking for a drill, but rather for the hole they want to create using the drill.

This concept was further elevated into an innovation management philosophy by Clayton Christensen in the famous 'Jobs-to-be-done' framework. The fundamental premise here is that customers hire products or services to help them accomplish a job. In the previous example, we hire a drill to fulfill the job of making a hole in the wall for a nail, where we want to display a picture.

This makes sense and is sound management advice. I would summarize this as "Creating Products for Markets."

But the wonderful world of ideas and technology we live in has also shown that products can create markets, generating a need that did not previously exist. This usually happens when significant technological advancements push us out of the status quo. For example, with advancements in smaller speakers and more efficient battery technology came the Sony Walkman, which created a market for portable music. There is debate over whether it met a latent demand for portable music, but we can all agree that, as recently as 50 years before the Walkman, the technology for recording and replaying audio, let alone for portable use, did not exist. So, it is fair to assume that there was very little latent demand.

Side note: I have a hypothesis, based on anecdotal evidence, that such technology-push market creation usually begins in entertainment fields where the needs are not clearly manifested.

In a recent conversation with Stanford Graduate School, Jensen Huang, the trailblazing CEO of Nvidia, made some fascinating observations that lead me to believe we are truly in an era of products creating markets. Jensen talked about how Nvidia’s early success depended on partnering with Electronic Arts, also a fledgling company at the time, to create a graphics computer that spurred demand for the computer games industry, which was very nascent. The key phrase that caught my attention is that Nvidia and Electronic Arts created a product and a market. That was their clear strategy.

Following that initial success, Nvidia’s strategy, Jensen says, has become one of creating products AND the markets for those products. I strongly believe that this slightly contrarian approach is one of the reasons for their recent wild success. While others have been following the norm of creating products for existing markets, Nvidia is creating markets AND products.

References

1. Timeless Wisdom from Theodore Levitt: Selling Value Over Features
2. What Does It Take to Create a Market?
3. Jensen Huang on Creating Products and Markets
4. Know Your Customers’ “Jobs to Be Done”