>In general, solving problems for small markets is just as hard as solving problems for big ones.
Surely that can't be right.
The very nature of a small market, implies that the solutions are easier - because of less competition, so less innovation is needed, therefore lower return.
With larger markets, not only do you have to solve a problem - you have to solve a problem better/different than your competitors.
Not all solutions are created equally and not all solutions solve the problem in the way the customer wants.
It's harder to separate the signal from the noise when the customer doesn't know what the solution should look like - and when the competitors don't know either.
Quite often, in a large market, many competitors exist largely because no 'significantly better' alternative exists. Think about all the crappy desktop software (from the 90s or early 2000s) that many small businesses still use.
In a smaller market, you are more likely able to get away with simpler solutions - e.g. a CRUD web app, versus having to come up with a more sophisticated solution because competitors have already squeezed as much out of CRUD apps as they can.
Competition and the size of the market are not always correlated.
The superior strategy is to maximize returns against efforts, not minimize potential for competition.
The essential argument is that a small market provides small returns therefore go after small markets is not the same as proving that the returns are better in proportion to the cost, in time, resources or opportunity.
Most large markets are divided in following a Pareto distribution, which is to say the winners dominate. You don't have a pie divided between competitors, you have most of the pie going to 2-3 players. Be a player.
When you see a large number of 'competitors' in a market, as often as not the market fragmentation is on the buyer side.
Again, I don't buy the small market simplicity argument, and I especially don't buy that small markets offer the best returns for effort. There is an abundance of large markets, many of which are underserved.
If you see an opportunity to squeeze a little market with a CRUD app, by all means, don't let me stop you, but I don't believe that is a superior strategy.
I won't argue that a superior strategy is to maximize returns against efforts - not minimize potential for competition.
I wasn't making the argument that small markets offer the best returns for effort. Clearly that can't be true either - just by its definition.
The notion that there are an abundance of large markets, many of which are underserved is quite a simplistic argument.
There must be a reason that they are both a) large, and b) underserved.....probably because the barriers to entry are exceedingly high. Energy markets come to mind. Hard to get larger markets than that, but it is easy to find large subsets of customers that are disgruntled and would gladly switch to a `better service`.
The trick is that every Tom, Dick and Harry can't start an energy company. It is VERY capital intensive, even more labor intensive and heavily regulated.
So, I think if you were to reword that statement to say:
"There is an abundance of large markets, many of which are underserved...and easy to reach/service for a single web developer anywhere in the world". I would surely argue that to be false.
If the constraints must allow for traction to start with 'a single web developer anywhere in the world', then I agree that significantly reduces the markets available.
Energy, computer hardware, medical, pharmaceutical, telcom, these are big markets with big stakes, and these are difficult to enter, even for well funded endeavors.
That being said, the internet is still relatively young and acts as a force multiplier enabling anyone to have far greater reach than they could have even 20 years ago.
Relative market size has remained largely undefined to this point. I think the obvious definition of market is in terms of dollars.
What do you consider a large market? A million dollars? tens of millions? 100s of millions?
We should also define abundance.
In 2011, the US GNP was 15,097,083 million USD. If we just say 1% of that is potentially addressable with a technical solution involving the web, that is still over 100 billion in play just in the US.
I don't know about anyone else, but that seems like abundance.
And that's just in the US.
In 2013, as a web developer anywhere in the world, you have never been in a better position to leverage the global economy.
That feels like an abundance.
Perhaps it just comes down to axiomatic world view. Do you see abundance or scarcity?
Again, I say people should go after the biggest market they feel they have a fighting chance to penetrate. Go big, because you can. Fortune favors the bold.
Resource intensity in itself is unlikely to deter entry. A key factor determining industry concentration is the potential for economic profits (rents). You seem to be referring to electric utilities - while regulation is a more plausible entry barrier, the proximate cause is more likely the dearth of rents.
Surely that can't be right.
The very nature of a small market, implies that the solutions are easier - because of less competition, so less innovation is needed, therefore lower return.
With larger markets, not only do you have to solve a problem - you have to solve a problem better/different than your competitors.
Not all solutions are created equally and not all solutions solve the problem in the way the customer wants.
It's harder to separate the signal from the noise when the customer doesn't know what the solution should look like - and when the competitors don't know either.
Quite often, in a large market, many competitors exist largely because no 'significantly better' alternative exists. Think about all the crappy desktop software (from the 90s or early 2000s) that many small businesses still use.
In a smaller market, you are more likely able to get away with simpler solutions - e.g. a CRUD web app, versus having to come up with a more sophisticated solution because competitors have already squeezed as much out of CRUD apps as they can.