Just because there is no one selling ice to Eskimos doesn’t mean you should enter that market. Conversely, a competitively crowded industry just means there is demand for it. The key to succeeding in a crowded industry lay within your company’s ability to do something different or present yourself differently.
There are so many ways you can differentiate yourself in a crowded marketplace. To name a simple few, you can choose to sell to different people, such as small businesses; you can find new distribution channels; you can stratify the industry’s price points by introducing a luxury class; or, you can redefine your selling proposition – for example, Starbucks sells "experience" rather than "coffee." However you choose to be different, you need be great at the basics and be exceptional at your defining factor. The key here is to know who you are and who you are not. Don’t conform if you know you’re right; a true customer mind-shift will take time and education; be patient (and listen).
To know how to be appropriately different, you have to know your customer and their expectations. Discover their baseline needs or expectations to be considered and make sure you cover those as well or better than other options they can find, but then go beyond that and understand their environment, their job, their experience and their pain. Shake up their expectations by providing them something they didn’t know they needed or wanted. Ideally, you reset your customers’ expectations to match your offering where ultimately they want YOU, rather than a widget that any of your competitors can offer.
On the flip side, there are many reasons not to enter a competitive market, but entrepreneurs must not break the cardinal rule when doing so – playing by a rival’s rules. New entrants must change the ground rules by openly challenge operational, customer and service assumptions through calculated risk-taking measures. The old adage is true; build a better mousetrap, and the world will beat a path to your door.
Many examples of unsuccessful "Me Too" companies exist – the early days of the dot-com era were littered with such firms. It’s a common tale, particularly in the infantile stages of a new market opportunity. Entrepreneurs will, at times, feel like it’s anybody’s to win, so long as they can sign up customers faster than the next guy. While that may be true for some low-hanging prospects, it will soon come down to what firm has the better offering. Make no mistake – over time, people will pay only if they see a value they perceive is better than someone else.
There is often no better business opportunity than entering a crowded market. It has demand, therefore revenue and it has available market-share (you just have to take it). I would say that there are very few category leaders out there who hadn’t entered the market until others had already done so. To be successful, you just have to know more than the next guy and then differentiate yourself. Aim for nothing less than excellence.