Why You Should Look at Alternative Industries for Your Next Big Idea

Most businesses spend their time watching direct rivals while ignoring the forces that actually steal their customers. The concept of alternative industries involves looking beyond direct competitors to find different businesses that satisfy the same underlying customer need. This perspective allows you to see the market as a series of choices rather than a set of rigid categories. When you understand why people trade across these categories, you can build an offering that makes your competition irrelevant.

Traditional strategy often traps founders in a race to be the best within their specific niche. This focus leads to shrinking margins and copycat products that fail to excite the market. Identifying the right opportunities in alternative industries helps you break away from these crowded waters. You can stop fighting for a bigger slice of a small pie and start creating a new pie entirely.

Rethinking the Boundaries of Your Market

The idea of looking across alternative industries is the first of six paths developed by W. Chan Kim and Renée Mauborgne in their book, Blue Ocean Strategy. They argue that companies don't just compete with firms in their own industry, but with every other business that produces an alternative product or service. Most managers ignore these outside threats because they don't look like direct rivals. This oversight is exactly where new market space is found.

Traditional strategic thinking assumes that industry boundaries are fixed and given. If you run a cinema, you likely benchmark your success against other movie theaters in your city. However, your customers don't just choose between you and another theater. They choose between you and a nice dinner out, a local concert, or even a night at home with a book.

Deciphering the Difference Between Substitutes and Alternatives

To move forward, you must understand the distinction between substitutes vs alternatives. Substitutes are products that have different forms but offer the same functionality. For example, if you want to manage your personal finances, you might choose between a financial software app and a physical ledger. They look different, but they do the same thing.

Alternatives are much broader because they include products with different functions and forms that serve the same purpose. A person looking for a night of entertainment can go to a restaurant to socialize or to a movie to watch a story. These two businesses have almost nothing in common physically, yet they compete for the same evening of a consumer's time. This realization is the core of cross industry innovation.

Analyzing Why Buyers Switch Between Categories

In every purchase decision, buyers implicitly weigh various alternatives, even if they do so unconsciously. They ask themselves which option will give them the most utility for their specific goal. A professional looking for a quick lunch might choose between a fast-food burger and a pre-packaged salad from a grocery store. The forms are different, but the purpose is a fast, convenient meal.

Sellers often lose this intuitive sense when they focus too much on their internal operations. They get obsessed with their own technical specifications and price points relative to their closest neighbors. By shifting your focus to the reasons why customers switch between categories, you find the elements of value that actually matter. You'll often find that the features your industry obsesses over aren't even on the customer's priority list.

Finding New Growth in Alternative Industries

Breaking out of a red ocean requires you to stop benchmarking rivals and start looking at the space between industries. This is where you can find untapped demand that others are ignoring. Most companies are so busy fighting for existing customers that they don't see the millions of people who aren't currently buying from their industry at all. These non-customers are often waiting for a solution that bridges the gap between two existing alternatives.

When you look across alternative industries, you aren't trying to predict the future or invent a technology that doesn't exist. You're looking at familiar data from a new perspective. You're asking which decisive advantages lead people to trade across industries and which disadvantages they're forced to accept in each. This synthesis allows you to create a value curve that is both differentiated and lower in cost.

How NetJets Redefined Private Aviation

A classic example of this concept is the NetJets blue ocean example. In the 1980s, corporate travelers had two main choices: fly first class on a commercial airline or buy a private jet. Each option had massive downsides. First-class travel meant dealing with airport security, fixed schedules, and busy hubs. Buying a jet meant a multi-million dollar investment and high maintenance costs.

NetJets looked at these alternative industries and asked why corporations were choosing one over the other. Corporations chose commercial airlines because they were cheaper and avoided the fixed costs of ownership. They chose private jets because they saved massive amounts of travel time and provided a productive, hassle-free environment. By focusing on these key drivers, NetJets created a new category called fractional jet ownership.

Combining the Best of Both Worlds

NetJets offered customers the ability to buy a share in a jet rather than the whole thing. This meant a corporation could get the convenience of a private plane at a fraction of the cost. A one-sixteenth share started at roughly $400,000, which made it comparable to the cost of a year's worth of first-class tickets. It was a perfect blend of the two existing alternatives.

This move allowed NetJets to tap into a massive market of non-customers who previously couldn't afford their own planes. It also pulled travelers away from commercial airlines who were tired of the lack of flexibility. Statistics show that while 70% of commercial flights go to only 30 major airports, NetJets provided access to more than 2,000 regional airports. This saved executives hours of ground travel and eliminated the need for overnight stays.

Scaling the Blue Ocean Concept

The company didn't just steal customers; it grew the entire aviation market. By 2010, the NetJets fleet had grown to over 700 aircraft, flying to over 170 countries. They avoided the trap of trying to out-compete United or Delta on their own turf. Instead, they built a business model that rivals found impossible to copy without destroying their own existing structures. Even today, NetJets holds a market share nearly five times larger than its closest competitor.

Move Beyond Your Competition This Week

You don't need a massive budget to begin applying this framework to your own business. It requires a disciplined look at the world through your customer's eyes. Follow these three steps to identify your next big opportunity.

1. Identify your core purpose rather than your form. List every industry that solves the same problem as you, regardless of how they look or function. If you sell coffee, your alternatives might include energy drinks, tea, or even a quick nap.

2. Pinpoint the decisive trade-offs. Look at the two or three most popular alternatives and list why customers choose one over the other. Usually, one is chosen for its low cost and the other for its high performance or convenience. Write down exactly what people give up when they pick the cheaper option.

3. Synthesize a new offering. Design a product that takes the best features from both alternatives while eliminating the features that don't contribute to the core purpose. If your goal is to bridge the gap between a high-end service and a budget product, determine which expensive bells and whistles you can cut to reach a strategic price point.

Why Cross Industry Innovation Often Meets Resistance

One of the biggest hurdles to this approach is internal skepticism. Critics often argue that looking at other industries is an oversimplification of the complexities of your own. They might say that what works in the airline industry could never work in retail or software. This pushback usually comes from a place of cognitive comfort; it's easier to follow the established rules of your field.

There's also a risk in trying to combine too many features at once. If you don't stay focused on the decisive trade-offs, you can end up with a product that is "stuck in the middle." This happens when a company tries to be everything to everyone and fails to achieve either differentiation or low cost. Successful cross industry innovation requires the courage to eliminate features that have been industry standards for decades.

Looking across alternative industries isn't about ignoring your rivals, but about realizing they aren't your only threat. By focusing on the purpose your product serves rather than the form it takes, you can identify where people are making trade-offs. Successful firms like NetJets show that the biggest growth comes from bridging the gaps between existing categories. Review your customer exit interviews to see which non-competing categories they chose instead of you this year.