CAPTURING NEW MARKETS
Chapter 4:
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CAPTURING NEW MARKETS
Chapter 4:
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I arrived in Lusaka in 2002, sent by Celtel, one of Africa’s largest cellular networks, to create a new business using cell phones to exchange money. We called it Celpay (imaginative branding was not our strength). We knew we wanted to replace cash with electronic commerce, but where should we begin? We had millions of subscribers on the Celtel network; should we reach out to them first? Thousands of market vendors sold our scratch cards for prepaid airtime; should we try to get them on board? What about the other firms supplying those vendors with everything from toothpaste to cement; would they be interested?
We could not target all these parties at once. We could spend a few million dollars launching the business, but our funds were not limitless. No one had tried building this kind of business in Africa before, and our parent company was not about to plunge headlong into the unknown. If we were to establish |
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The dot-com era of the late 1990s was replete with this kind of vision. Who could argue with the vision of a company selling dog food by mail with its advertising led by a sock puppet? Because no one really knew how the Internet would evolve, and because everyone was in a hurry to get big fast, companies spent billions in a vast land grab. The biggest winner out of the Internet era? Google, established at modest cost well after the land grab was underway, in 1998.
More typically, bold efforts launch with a bang, struggle, and then fade away quietly. Management hesitates to kill projects that once appeared promising, so they linger in a zombie-like state before patience ultimately runs out. |
Speed
While getting big fast is a hazardous proposition, new businesses do need to move quickly. The return on investment (ROI) earned by a venture is a direct function of how fast profits are realized. Footholds accelerate action. By focusing money and people on a small, well defined target, footholds enable rapid decision making. Offerings will not accumulate hundreds of features but rather need to be just good enough to appeal to initial target customers. Sales efforts can be concentrated, so first customers may sign up more quickly. If some part of the proposition does not work for a key stakeholder, the negative feedback will be loud and specific. |
Hazards within Footholds
While footholds are critical to success, there are a number of hazards for firms entering new markets. - Choosing the Wrong Foothold - Few strategies in business lack downsides, and this principle extends to footholds. One significant danger is that the trailblazer will choose the wrong foothold. Given that much remains unknown at the time a foothold is picked, a firm might invest its resources in pursuit of an illusory goal. Indeed, we almost encountered this issue with Celpay. |
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