Huge market imbalances can be created by a new factor. It is the perspicacious observation of an intelligent, successful entrepreneur who is able to identify the imbalance, the solution, and execution of the final plan. Yet it is the imbalance that needs to come to the forefront.
This week I attended a couple of meetings where I noted the imbalance in a specific marketplace – the aging demographics. In one meeting, doctors presented an interesting dilemma in the field of organ transplants. For decades, there has been successful transplants. But the patient’s longevity after such transplants have been curtailed by rejections. Now such transplants are having a longer impact because today’s drugs have been capable of controlling the natural body’s defenses in such a fashion to accept such organs.
The fact that such transplants have increased the longevity coupled with other advances in healthcare has created another dilemma: the ratio of available organs vs. the potential recipients are lopsided with a ratio of 1 organ to 10 potential recipients. This imbalance created an underground economy dealing with the commercialization of organ donations. Various Asian countries have developed a marketplace for organs to sell to the developed world. So the fact that people are living longer has developed an ugly economy where people in desperate economic conditions sell their kidneys for a few months of cash.
Technology is attempting is fill in this gap. However, it is not a simple solution – from culturing cells from the donor and harvesting them to implant in a shell of the organ — whose defective cells had been removed. This solution seems years off in deploying the marketplace. And, yet, it seems to be most likely candidate to forestall the commercialization of organs. It is a new technological solution to fill the huge gap in organ demand.
At another pitching session, a CEO discussed a mail order distribution of hearing aids. By circumventing the medical clinics and creating an economy scale through a nationwide solution, the company believes it can greatly reduce the costs for hearing aids – again to fulfil the growing numbers of senior adults living longer. Savings would come through the nationwide network and inexpensive sourcing for batteries and the hearing aids. I thought to myself, why batteries. And the answer was that the average lifespan for batteries for a hearing aid is four days. Then, I thought to myself, here is the true imbalance – batteries have to be replaced one hundred times a year. Assuming batteries cost about one dollar — that mean the expenditure, from a population with fixed income, 400 hundred dollars annually just for hearing aids.
Here we have a common macro-economic factual trend – an aging society. Here we have two costly imbalances for that market: organs and batteries. Between organ donations and commercial sources, the market still has a huge imbalance. Technology is battling to find a solution. For the hearing aids, we can attempt to resolve the problem by inventing hearing aids requiring less power, longer lasting batteries, or finding a way to manufacture batteries more cheaply when the price range is between $0.60 to $1.00 a battery. These imbalances have created challenges that technology needs to answer.
I have used these two examples to show that opportunities originate from macro-economic or demographic trends. Once someone spots that trend, you need to ask yourself two questions: is it a growing market and whether the specific solution will be profitable.