A SUMMARY OF THOUGHTS: INNOVATION & ENTREPRENEURSHIP V

[continued from the Last Post.]

(3) The Ecological Niche Strategy aims at controlling a market and comes in three flavors:

· The Toll-Gate Strategy

· The Specialty Skill Strategy, and

· The Specialty Market Strategy.

The Toll-Gate Strategy aims at market control through providing an indispensable product or service, based on patented or otherwise protected intellectual property; this enables the existence of some essential product or service.

The problem with the toll-gate strategy is that market conditions may render the product superfluous through substitution of either the product itself or the products or processes the toll-gate product complements or enables.

The growth toll-gate product is also dependent on the products or services the toll-gate product enables.

The example that Drucker provides is an enzyme developed by a company called Alcon, which is used during cataract surgery to dissolve a ligament. Sales of the enzyme depend on the number of cataract operations performed.

The Specialty Skill Strategy within the Ecological Niche depends on developing a high degree of competence in a formidable field so that entry barriers into the market are high enough to keep out competitors.

The difference between the toll-gate strategy and the specialty skill strategy is that the specialty skill is not necessarily based on protected intellectual property. It just isn’t economically feasible for a competitor to enter the market.

The specialty skill strategy usually requires the innovator to be first into the market, so that it can establish sufficient market penetration and branding before any competitor can step in, thereby dominating the market.

Like the toll-gate strategy, the specialty skill will live or die on the products or services it enables.

The Specialty Market Strategy of the Ecological Niche depends on the innovator spotting a market that is being ignored by other businesses.

The death of the specialty market is when it becomes a mass market. An example is the modern perfume market, first created by the French perfumery Coty after World War I, and originally targeted at the upper middle class sector; today, it has become a mass market with perfumes being sold at grocery stores.

[To be continued in the Next Post. Excerpted from the 'Lifescaping' seminar participant's manual. The 'Lifescaping' seminar is conducted by Dilip Mukerjea about four times a year under the auspices of the Singapore Institute of Management.]