This month, Nike launched a new shoe, the Nike Air Zoom Pulse. Launching a new shoe is not rare for Nike--but launching an athletic shoe for non-athletes is. The new shoe was not created for athletes but for a different community: medical workers. In a press release, the company called the Air Zoom Pulse "a shoe for everyday heroes: nurses, doctors, home health providers and others who work tirelessly to support patients."
This is a smart move by Nike into an adjacent market--a market outside its main customer base. Targeting a new customer segment is not unheard of for companies with dominant market share. When you already have the biggest share of the pie, it makes sense to find a bigger pie.
The objective behind expanding into an adjacent market is to leverage your business's existing capabilities and apply them to a distinctly new customer group. Your current market is at the intersection of the Venn diagram formed by your product, customer, and application. To find an adjacent market, you need to look at who lies just outside that diagram. Here's how Nike did it, and how you can, too:
1. Identify a new customer segment.
Find a new group of customers whose unmet market need plays to your firm's strengths. In the case of Nike, this was product development and branding. The shoe market for medical professionals is inundated by clogs and Crocs, with a smaller niche--say, nurses--wearing running shoes. To apply this at your company, look at who else your direct competition sells to. Finding adjacent customer segments to serve is one of the pillars of entrepreneurial growth.
2. Engage directly with market research.
Nike went to OHSU Doernbecher Children's Hospital in Portland, Oregon, to study medical professionals at work. The company used that face-to-face customer development time to understand the rigors of health-care work. It allowed the shoe's designers to understand that they needed to make a shoe that was both comfortable for long stretches of standing and versatile enough to support the hurried movements required in emergency situations on unsure surfaces.
To bring this approach to your venture, try taking a customer out for lunch. Ask them how their needs have changed over the last five years and listen for opportunities. Ask them how their competitors are disrupting the space. Confirm their unmet market needs. If Nike hadn't seen the need to serve both comfort and function, it might not have foreseen the unmet market need for a hybrid athletic clog.
3. Iterate on what's working.
Nike took the dynamics of a clog and made it exponentially more athletic to increase both performance and comfort. In doing so, the designers acknowledged why medical professionals wear clogs (they can be put on with one hand, or even with no hands). Then they upgraded the design to offer the exponential benefits needed to get people to overcome sunk costs (money already invested) and inherent status-quo bias (people resist change).
In business school, we teach future leaders to select a new adjacent market using two key dimensions: value creation potential and market accessibility. The former represents the market's potential to create value either by growing revenue, lowering costs, or increasing customer base. The latter represents how costly will it be for your venture to enter a new market.
While I can't speak to how Nike saves money by adding this product line, it does seem that the company is able to bring large value creation potential with the Air Zoom Pulse by growing its revenue and potential customer base. Plus, Nike likely faces only modest friction when entering this new market (I assume that most health care workers recognize Nike's brand; some may even already own Nike products). So for Nike, selling shoes to health-care professionals seems like a slam dunk. The question for you is: what adjacent markets can you take advantage of next?