Niches

What Fascinates Me About Niches

  • Building long-term knowledge that can be applied anywhere build a solid foundation. However, to get it's true value, it must be applied to a specific niche, context, industry etc where the advantages are often temporary. I've personally resisted the specific and temporary nature of opportunities, but as I've gotten older, I've realized that they are critical components.
  • Finding a niche is really hard. It involves a lot of inner work and self-understanding along with a lot of outer work (understanding others deeply) and then finding the overlap point.

Niche In My Own Words

  • The idea of a niche is derived from the field of evolutionary biology.
  • Organisms have certain traits that fit an ecological niche that help them survive.
  • Organism have similar preferences and there are a scarce number of resources.
  • So there ends up being competition for those resources.
  • The idea of niches is a big topic in business now. In this context, the organisms are companies and the resource is money given by consumers.
  • Both the companies evolve and consumer's prerences on what to buy evolve.

Why Choose A Niche

1. Consumers want to work the the best in every niche if they can

2. Easier to build a brand

  • People will hear about product multiple times within a niche

3. Competition is increasing

  • In order for a business to survive, you need customers to pay you money for your product or service.
  • In order for customers to pay you money, you need them to choose you over their other options.
  • As markets become more global, there are more option
  • As markets become larger, specialization is a way to outcompete others.
  • A great niche can especially be helpful when you're starting a new company and don't have resources or brand recognition to compete on a lot of other dimensions. It helps you customize your product and your marketing just to thie niche.

Key Points

Niches are temporary

We may find them, but then they evolve and change. In business, customer preferences evolve and the substitutes and competition evolve.

Being Different vs Being Better

No matter where your company is located or how big it is, when you position your business or yourself as “better” than some other option, you are invading someone else’s queendom. You are fighting for attention, messaging your mission according to someone else’s rules — a person or business that your customers already know. You’re playing a comparison game. And when two people say, “I’m the best,” by definition one is lying. Making it worse, the game you’re playing is a game invented by someone other than you. They set the agenda in the minds of the category. Not you. They frame the problem. They educate the world on how to solve the problem and what the product or service is worth. So, you will always be compared to “them.” [...] It comes down to leveraging the exponential value of what makes you or your venture “different” rather than leaning on the incremental value of what makes you “better.” — Niche Down

Consumers Think Category First And Brand Second

In any buying decision, humans need to know the category first, then they’ll consider the brand second. It’s how we make sense of the world.
Your No. 1 goal on the path to legendary is to achieve a unique position, one with which your brand can become synonymous. Imagine being so respected in your field that other people who do similar things are compared to you, because you are the category queen — the leader in mindshare.

Related Concepts

Self Genius

  • Strengths

Market Need

Definitions

  • "A niche market is a focused set of people or businesses who are in the market to purchase a product or service you sell. This group of individuals has a specific set of needs that can be met by a targeted product or service that addresses those needs." —Hubspot
  • "Most organisms find a niche: a method of competing and behaving for survival. Usually, a species will select a niche for which it is best adapted. The danger arises when multiple species begin competing for the same niche, which can cause an extinction – there can be only so many species doing the same thing before limited resources give out." —Shane Parrish’s Farnam Street Mental Model Guide

Key Words

Cognitive Niche

As opposed to body evolution, which happens on a biological evolution time scale, mind evolution happens rapidly. This is why when humans enter a habitat, other species drop like a fly.

Niche Construction

"As organisms evolve, they have impacts on their environment, which in turn influences their evolution.46 For example, plants process carbon dioxide and emit oxygen, while aerobic organisms (e.g., worms, fish, mammals) process oxygen and emit carbon dioxide. The two groups of organisms have coevolved over time, changing the composition of the atmosphere from 1 percent oxygen in the Proterozoic era to 21 percent today, which in turn provides a fitness constraint on future evolution." —Eric Beinhocker in The Origin of Wealth

Modern Evolutionary Synthesis (MES)

Quotes

Modern science provides just such a theory. This book will argue that wealth creation is the product of a simple, but profoundly powerful, three-step formula— 1. Differentiate 2. Select 3. Amplify—the formula of evolution. The same process that has driven the growing order and complexity of the biosphere has driven the growing order and complexity of the “econosphere.”And the same process that led to an explosion of species diversity in the Cambrian period led to an explosion in SKU diversity during the Industrial Revolution." —Eric Beinhocker, Origin Of Wealth

Business Niche Qualities

Map

Customer

  • Problem (actively trying to solve it)
  • Solution

Each of the qualities above as sub-qualiti

Qualities

  • Market is growing

Benefits Of Finding A Niche

Types Of Niches

How To

Peter Thiel

Start small

image
The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors. This is why it’s always a red flag when entrepreneurs talk about getting 1% of a $100 billion market. In practice, a large market will either lack a good starting point or it will be open to competition, so it’s hard to ever reach that 1%. And even if you do succeed in gaining a small foothold, you’ll have to be satisfied with keeping the lights on: cutthroat competition means your profits will be zero.

Dominate and then scale

Once you create and dominate a niche market, then you should gradually expand into related and slightly broader markets. Amazon shows how it can be done. Jeff Bezos’s founding vision was to dominate all of online retail, but he very deliberately started with books. There were millions of books to catalog, but they all had roughly the same shape, they were easy to ship, and some of the most rarely sold books—those least profitable for any retail store to keep in stock—also drew the most enthusiastic customers. Amazon became the dominant solution for anyone located far from a bookstore or seeking something unusual. Amazon then had two options: expand the number of people who read books, or expand to adjacent markets. They chose the latter, starting with the most similar markets: CDs, videos, and software. Amazon continued to add categories gradually until it had become the world’s general store. The name itself brilliantly encapsulated the company’s scaling strategy. The biodiversity of the Amazon rain forest reflected Amazon’s first goal of cataloging every book in the world, and now it stands for every kind of thing in the world, period. eBay also started by dominating small niche markets. When it launched its auction marketplace in 1995, it didn’t need the whole world to adopt it at once; the product worked well for intense interest groups, like Beanie Baby obsessives. Once it monopolized the Beanie Baby trade, eBay didn’t jump straight to listing sports cars or industrial surplus: it continued to cater to small-time hobbyists until it became the most reliable marketplace for people trading online no matter what the item. Sometimes there are hidden obstacles to scaling—a lesson that eBay has learned in recent years. Like all marketplaces, the auction marketplace lent itself to natural monopoly because buyers go where the sellers are and vice versa. But eBay found that the auction model works best for individually distinctive products like coins and stamps. It works less well for commodity products: people don’t want to bid on pencils or Kleenex, so it’s more convenient just to buy them from Amazon. eBay is still a valuable monopoly; it’s just smaller than people in 2004 expected it to be. Sequencing markets correctly is underrated, and it takes discipline to expand gradually. The most successful companies make the core progression—to first dominate a specific niche and then scale to adjacent markets—a part of their founding narrative.

Ikigai

Match skills, passion, and market

Justin Welsh (runs LinkedIn Audience & Community)

  • What's a broad topic you know really well?
  • What's a sub niche you know really well?
  • Who do you want to help in that niche?
    1. Price
    2. Level of quality
    3. Psychographics
    4. Demographics
    5. Vertical or industry

Principles

  1. Be specific
  2. Focus on an underserved niche

Resources