Can entrepreneurs create demand?

I was reading about entrepreneurs last weekend and was struck by a simple yet powerful notion. Some entrepreneurs set out to fill demand while others aim to create demand. But what exactly is the difference?

It wasn’t the first time I had this thought, but this time I decided to ponder it. (It helped that I was sitting on the patio of a little cafe enjoying perfect weather with no schedule to speak of.)

So, I wondered, can you really create demand?

Let’s start with an easier question: who is filling demand? Well, most entrepreneurs. They see a market, usually a big and growing one, and throw their hat in the ring with the other players in the hopes of getting a piece of the pie. If they can turn a profit it’s usually because their offering is cheaper or differentiated or both. And if they build a sustainable business then they’ve figured out a way to protect their earnings with a difficult to replicate competitive advantage. There’s nothing easy about any of that, but at least the path is clear.

But what if there is no existing market for your product? Are you creating demand then?

When Cisco co-founder Len Bosack was asked how he priced his invention, the world’s first fully functional network routers, he replied simply: “we guessed.” That’s because they didn’t have any direct competitors. Cisco was the first. Things turned out well – very well in fact – for Cisco. But did they truly create demand, or was the demand already there? Didn’t companies want their networks to talk to each other? Of course they did, but they didn’t have a good way to do it before Cisco came along.

Thus, Cisco wasn’t creating demand, they were simply revealing it.

Then it hit me.

In order to create demand, you’ve got to offer something that is not only new, but also solves a problem people never knew they had. Even if you were the first to articulate the solution (as was Cisco), you can only claim to have gone so far as to reveal the latent demand.

It is only when you articulate the problem as well as the solution that you can be said to be creating demand. In the language of this blog’s central theme: you’ve got to transform people’s thoughts before you can transform their actions.

Al Gore, for example, is certainly on a mission to create demand. His slideshow is attemping to awaken people to the problem of climate change. If he succeeds, he will have helped to create demand for green products (and green policy).

But it’s certainly not just social entrepreneurs who play this game. Steve Wozniak invented the PC, but it was Steve Jobs who created the demand for it. You could argue Jobs was only revealing latent demand for productivity, but that’s splitting hairs; no one knew they needed their own personal computer before Jobs came along.

Demand creators take a risk that demand fillers (or even revealers) never do. They have to have the conviction to believe that demand will emerge once people “wake up.” They have to be thought leaders as well as innovators. Motivators as well as inventors. Mentors as well as managers. And if it is about ego (i.e., “I know what’s best”) instead of a genuine attempt to guide people to a new beneficial perspective, then they’re likely to fail.

That’s why I believe creating demand is the pinnacle of entrepreneurship. John Schaar sums it up eloquently:

The future is not the result of choices among alternative paths offered by the present, but a place that is created – created first in the mind and will, created next in activity. The future is not some place we are going to, but one we are creating. The paths are not to be found, but made, and the activity of making them changes both the maker and the destination.