If the innovator succeeds, it will have a nearly impenetrable position.
The fourth major entrepreneurial strategy, occupying an ecological niche, allows an innovator to establish a virtual monopoly in a small niche market. The first niche strategy is the tollbooth strategy. Under the tollbooth strategy, the innovator creates a product or service that is an indispensable part of a larger process. Then the cost of using the product becomes eventually irrelevant. Here the market must be so limited that whoever occupies the niche first is able to effectively bar anyone else from entering it.
Here is an example: Alcon, a company started in the late 1950s by a salesman for a major pharmaceutical company. He had known all along that there was a major incongruity in the operation for senile cataracts in the eyes. There was one dangerous procedure in the surgery where the surgeon had to sever a piece of muscle tissue with a slight risk of bleeding that would destroy the eye. The innovator read up on what was known about this muscle and found almost immediately that an enzyme dissolved it without bleeding or cutting. But there had been no way to prevent this enzyme from disintegrating and to give it shelf life. Then the innovator found that since 1890 a number of substances had been developed to give enzymes stability and shelf life. He patented the application of one of these substances to the enzyme, and within eighteen months he had the world market for the stuff.
ACTION POINT: Exploit an incongruity in an internal process using the tollbooth strategy.
Innovation and Entrepreneurship
Entrepreneurial Strategies (Corpedia Online Program)
* Source: The Daily Drucker by Peter F. Drucker