How A Market Evolves

Many technology businesses were created in the last two decades (2000s and 2010s). I had been reflecting on why these businesses were created , and realized it did evolve in a certain way like the following -

This phenomenon may not be novel or universally applicable to all markets, however this can help identify trends and gaps.

Innovation Breakthrough

A consumer market often starts from a brilliant innovation, with preconditions of need and technology capability, i.e. product market fit. For example, selling goods existed during the early human civilization. The creation of internet enabled Amazon to sell books online, which made online marketplace a reality. Ride hailing was not new either, so the need had been there. Because GPS became possible on personal mobile devices, Uber was created, so was the ride sharing market. The new market is usually carved out from an existing market by replacing the old way. In the earlier example, the taxi was the existing market, and the ride sharing market has caused the taxi demand to shrink.

The innovation breakthrough is called a “wave” in the startup world.

Competition

When a new consumer market is created, many entrepreneurs want to ride the wave, so competition comes in. In a market with low barriers to enter…