Changing customer needs

Market entropy is good for new entrants.

It’s not impossible to break into a market by brute force, but it’s hard. Very hard. Most successful companies, especially startups, have found tailwinds to harness that help pull them forward.

Changing customer needs are the largest source of entropy in markets. When customer needs rapidly change, there is less advantage in being an incumbent. Instead, legacy companies are left with all the overhead and a product that no longer is what customers want.

There are many causes of changing customer needs. Often there are new and growing segments of customers with different use cases. Existing products may work for them, but they aren’t ideal. The features they care about and how they value them are very different from the customers the legacy company is used to. Companies resist changing core parts of their product for every new use case since it’s costly in work, money, and attention. But every once in a while, what was once a small use case grows into one large enough to support its own company.