Strategy
A General Theory of Commercial Innovation
Technologies do not create markets automatically. Every technology change contains multiple possible markets. Someone has to discover which one is economically viable — and that discovery is a distinct strategic discipline.
The technology industry has become extraordinarily good at creating capabilities. It has become much less capable at creating the markets that allow those capabilities to matter.
This is not primarily a startup problem. It is a systemic one. According to CB Insights, 35% of technology startups cite "no market need" as the primary reason for failure — the single most common cause, ahead of funding, team, and competition combined.[1] But the same dynamic appears inside large, well-funded organizations with proven technologies and experienced leadership. The capability is real. The commercial translation is missing.
The defining constraint of the AI era is not whether something can be built. Increasingly, the question is whether an organization can recognize why it should exist — and whether the market can be made to recognize it too. That recognition is not a marketing problem. It is a strategic one. And it has a name: market formation.
Definition
Market Formation is the strategic discipline of transforming emerging technological capability into a recognized market category by identifying economic value, adoption pathways, ecosystem requirements, and mechanisms of scale.
Why This Problem Is Becoming More Acute
For most of the industrial era, technology innovation produced product innovation. A new capability became a new product, which entered an existing or adjacent market. The commercialization model was largely inherited.
That model is breaking down. The current wave of innovation increasingly produces platform capabilities — general-purpose technologies that can support dozens of markets but belong to none by default. AI does not ship as a product. Digital identity does not ship as a product. Trajectory intelligence does not ship as a product. They are capabilities waiting for markets.
The strategic challenge is no longer deciding whether the technology works. It is deciding which market should emerge around it — and doing the work to make that emergence happen.
The Missing Step
Most technology companies operate with an implicit commercial model:
For discontinuous technologies, this model consistently fails.
The reason is a missing step:
Interpretation is the process of discovering what a technology actually means economically. It asks not what the technology does, but what decision becomes possible because it exists.
| Technology | Obvious reading | Economic interpretation |
|---|---|---|
| GPS | Location | Asset coordination |
| Generative AI | Text generation | Knowledge work automation |
| Digital keys | Vehicle access | Programmable identity |
| Trajectory intelligence | Route data | Risk-adjusted mobility |
In each case, the obvious reading produces a feature. The economic interpretation produces a market. A technology can be technically correct and commercially invisible. This is the normal condition for discontinuous innovation.
GTM is downstream of market formation. GTM exploits an existing market. Market formation defines what market exists. Companies that attempt GTM before completing market formation are writing a sales playbook for a category that does not yet exist in the buyer's mind.
The Discipline and the Organizational Gap
Market formation comprises five distinct strategic activities:
| Discipline | Strategic Question |
|---|---|
| Market definition | What category does this belong to? |
| Economic discovery | Who has the unresolved economic pain? |
| Adoption wedge | What use case creates initial inevitability? |
| Market architecture | What ecosystem must exist? |
| Value capture | Where does economic value accumulate? |
Technology companies typically staff three functions clearly. Together, they leave a critical gap:
Engineering → Can we build it?
↓
Product → What should we build?
↓
[ Market Formation ]
What market does this technology belong to — and what must exist before customers can buy it?
↓
GTM → How do we sell it?
Engineering, Product, and GTM are budgeted and measured. The middle layer is owned by almost no one. It is filled by accident, distributed across roles that each hold only a fragment, or skipped entirely in the rush from product to revenue. That gap is where technology value disappears.
Five Market Formation Cases, One Pattern
Each case follows the same structure: a technology change contains a latent market. The old interpretation made it invisible. A new interpretation made it legible.
SAP — Enterprise Software
The buyer was not purchasing software. The buyer was purchasing operational standardization: the ability to run a global enterprise on a shared data model. SAP did not find the ERP market. It formed it.
inDplay (2006) — Digital Media
Backed by top-tier Silicon Valley angel investors, inDplay faced what BusinessWeek described directly: “the challenge of pioneering a new type of online marketplace.” Rights holders were optimized around the $500,000 studio deal. The internet made the $1,000 long-tail transaction possible at scale. Market formation often begins by identifying an economic transaction that incumbents cannot see because they are organized around the old market structure.
HERE Technologies and TomTom — Location
The consumer navigation market was being commoditized by smartphone platforms. The strategic challenge was recognizing that maps were transitioning from a consumer product into an intelligence layer embedded across industries. The technology was present. The category had to be built deliberately. The market formation work is still underway — the insight was recognizing the transition was structural, not cyclical.
Digital Fleet Management — Vehicle Identity
The technology did not change. The market boundary changed. That reframing determines what gets funded, who champions it, and what competitive frame the company enters.
AI and Geospatial — Trajectory Intelligence
Routing answers where to go. Trajectory intelligence answers whether you should go there. That is a category creation statement. It belongs at the beginning of a commercial strategy, not the end.
The Structural Explanation
The Gartner Hype Cycle has tracked this pattern since 1995.[5] What it does not measure is the organizational work required to cross from the trough of disillusionment to the plateau of productivity. That work is market formation — and in most technology companies it has no owner, no budget, and no name. In the AI era, new capabilities arrive faster than the organizational structures and mental models that would absorb them. The gap between invention and adoption is widening.
Naming as a Strategic Act
"Product-market fit" became foundational because it named something real that previously had no name.[6] Before the term existed, companies either found fit by accident or missed it without understanding why. After it was established, investors asked about it, founders optimized for it, and boards monitored it. Naming created accountability.
The distinction that market formation introduces operates one step earlier:
Product-market fit asks whether a product satisfies an existing market. Market formation asks whether a market exists for a new capability.
Every major technology change contains more possibility than the market can initially recognize. The companies that shape an era are rarely those with the most advanced technology. They are the ones that recognize the market hidden inside it first.
Market formation is the discipline of finding that market.
References
- CB Insights, "The Top 12 Reasons Startups Fail," 2021 and 2023 editions — no market need as the leading cause across cohorts.
- SAP AG, Walldorf, Germany, founded 1972 by Hasso Plattner, Dietmar Hopp, et al. — ERP as a created category; enterprise software investment redefined from IT cost to board-level imperative.
- Elizabeth Woyke, "The eBay Model Goes to the Movies," BusinessWeek, December 11, 2006.
- TomTom Newsroom, "Getting More Out of Maps: Goetz Weber's Unusual Journey in Software Application Strategy," tomtom.com.
- Gartner Hype Cycle for Emerging Technologies — five-phase maturity framework, published annually since 1995.
- Andy Rachleff / Marc Andreessen — "product-market fit" as coined and popularized concept, 2007.
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Goetz Weber
Contributor @ Maei.ai
Pioneer in motion intelligence, trajectory AI, and semantic routing. Theoretical physicist turned AI innovator.
Follow me on LinkedIn for insights on motion intelligence and AI
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