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I think the best answer can be found in the book 'Blue Ocean Strategy' published by Harvard Business Press. That book is one of a kind.
It explains that markets are divided into2 oceans. The red ocean and blue ocean. Red ocean is one in which many companies are fighting to death to capture a small market. A blue ocean is one in which no competition exists... because one smart company starts offering something no one else has thought of. No substitutes = no competition.
This is exactly what Air Deccan did in India. Capt Gopinath realized that the airline industry was bleeding to death. He went to design a business model for an airline, that would enable him to charge a very low price. All the unnecessary leisure of air travel was subtracted from his airline's offering, and he started competing with the railways. This is how you find space. By coming up with innovative solutions that change the industry.
