HBS Working Knowledge has an article on Clay Christensen’s ideas on creating sustainable new-growth businesses.
The third model Christensen termed new-market disruption, whereby you create a product for a customer who hasn’t been able to participate because of low skill level or low wealth. The initial product for this new market usually isn’t very good; in fact, it’s usually “crummy,” Christensen said.
But it’s good enough. When Sony developed the first transistor radio in the 1950s, the sound was awful. But Sony sold them to teenagers, a group that couldn’t afford the nice-sounding, floor-standing radios their parents enjoyed. For them, a transistor would do just fine.
Once the initial crummy product has kick-started a market, follow-on products become better and better, eventually drawing in customers from above. As transistor radios evolved into the Walkman, parents bought them, too.
Another key in identifying potential markets is to never compete against the customer’s manifest priorities. Instead, he said, facilitate them.