Fast second

Transforming a radically new market into a mass market is a complex process that involves several key developments. Initially, the focus in such markets is often on creating the best new product, with pioneers and colonizers leading the way by emphasizing the technical attributes of their innovations. However, for a market to transition into a mass market, this focus must shift towards producing a product that is economically priced and "good enough" for the majority of consumers. This is where consolidators come into play. Unlike pioneers, consolidators are not primarily driven by technology for its own sake. Instead, they aim to deliver a product that not only outperforms other options but is also acceptable to the average consumer. By shifting the focus from technical attributes to price and quality, consolidators work to reduce the product's price to a point where it becomes highly attractive to mainstream users. They then focus on steadily improving quality over time. This strategy allows consolidators to quickly build market share, benefiting from economies of scale and learning benefits.

For a company to succeed in this transition, it must win the race for dominant design status. Achieving this often requires creating a groundswell of support for the firm's specific design. Strategies may include acquiring firms with competing designs, generating buzz to create the impression that the choice has already been made, or forming alliances with rivals to promote a single common platform. Additionally, it's crucial that suppliers of complementary products agree with the choice made and support it. This consensus helps solidify the product's position in the market and encourages widespread adoption.

To fully leverage the innovation opportunities of the 21st century, it's not advisable for established companies to try to innovate themselves. This is not where their true strengths lie. Rather, these established entities should delegate the task of creating new technology to start-ups. They could even cultivate a network of feeder firms to do the groundbreaking work. When the timing is right, the established companies can then step in to take over the niche markets created by the start-ups and expand them into mass markets.

By dividing the pioneering and consolidation tasks in this way, superior outcomes can be achieved. Conceptually, the ideal commercial structure for the development and commercialization of groundbreaking new technologies looks something like this: The key characteristics of this structure are that the start-ups are free to develop any new technologies that make sense to them, particularly technologies that will make existing products obsolete. The start-ups can be funded independently or by the established company. Regardless of the funding source, the established companies have no managerial influence over what the start-ups do. The established company can concentrate on serving its existing customers. The start-ups can focus on a supply-push approach – develop advanced new technologies and then use those state-of-the-art technologies to enable customers to do things that were previously impossible.

The established company can assist with funding, providing R&D expertise, or other business development services to the start-ups under contract. The start-ups can concentrate on building niche markets for their technologies. When a product design comes together and begins to gain momentum as the dominant design for an industry, the established company can then step in and provide the resources, distribution channels, manufacturing capacity, and marketing required to build a mass market for the new technology. Both the start-up and the established company divide the revenues generated fairly according to a formula agreed upon beforehand. In the long term, the start-up and the established corporation may end up merging if the new technology proves to be applicable to a substantial mass consumer market. Or alternatively, if the new market ends up being inconsequential, the contractual relationship between both companies might end up being dissolved. This commercial structure allows for both scenarios to be played out.

The suggestion that big companies should not even attempt to develop radical new technologies in-house may seem undesirable to the managers of those companies, but in fact, this is the business model that has been used successfully in numerous creative industries for many years. For example, in the publishing industry, a major book publisher does not have thousands of employees sitting in offices attempting to write great books. Instead, the publisher goes out into the marketplace and finds those authors who are writing good material. The company then signs an author to a contract, perhaps with an advance on royalties being paid. The author then writes the book free from bureaucracy or other impediments. Once the book is finished, the publisher prepares the book, gets it printed, promotes the book, markets it, and distributes it through the publisher’s established relationships.