Month: March 2010

How to assess a market opportunity

/ Robert Pease / Leave a comment

Being stuck inside on a rainy Sunday in Seattle, I thought I would share a post about how to use a framework/structured approach to assess a market opportunity. 

This is primarily for a new venture but most of this can be applied to analyzing an existing business or launching a new product/service from an established company. 

First, some baseline questions to answer:

  1. What market are you talking about? Define it in broad but measurable terms.
  2. Who is the customer? End-user, distribution partner, someone else?  Detail the persona including name, role, etc.  Even better if you know one or many of these people (so you can talk to them)
  3. What challenges do you face as a new entrant lacking a track record? What are the barriers to entry? Can you disrupt existing consumption/distribution models or are you dependent on a few partners to be successful?

Next, dig into the market opportunity:

1. Validate the market

  • Market definition – per above but dig into the specific category and sub-category you are targeting.
  • Target segments including both vertical industries and functional roles.
  • Buyer profile(s) – not only who says 'yes' but who pays…and who can say "no."
  • Needs vs. wants – are you addressing a pain or are you a nice to have?  Elevating a want to a need or surfacing a yet to be realized pain takes considerable effort and resources.
  • Structured '5 Forces' analysis including power of customers, intensity of competitors, power of suppliers/partners, threat of new entrants, and threat of substitutes.

Deliverable:  Summarized data covering market size, segment definitions, and needs analysis.  Also include background/learning conversations with thought leaders/influencers (analysts, bloggers, etc.) as well as results of discussions with assumed customers and friendly observers.

2. State of the market

  • What does the adoption curve look like? Are you selling to early adopters or pragmatists?
  • Will it be a long or short sales cycle?  What are the barriers to yes?
  • Strength/unique selling proposition of incumbents as well as challenges faced by a new entrant.

Deliverable:  Analysis of most attractive markets, competitors, and customer traction/uptake potential.

3. Capabilities

  • What is the offering and how will you deliver (distribute) it?
  • Does the product/service address the market need? In what way? Does it solve a real problem?
  • Do these capabilities already exist or will they have to be developed?

Deliverable:  Gap analysis between what is currently available and what needs to be developed to align with market need and distribution realities.

4. Pricing

  • How will you charge for your product/service? Per seat, per user, per transaction, per month?
  • What are the scenarios and be sure to incorporate margin targets (you do want to make a profit after all).
  • Include volume and contract duration discounts.

Deliverable:  A pricing model that supports uptake scenarios and sensitivity analysis (test your assumptions and be prepared to have them informed/adjusted by reality).  Test pricing and pricing assumptions during early customer validation discussions.

5. Go-to-market model

  • Determine the best path to market including pros and cons of direct vs. indirect selling models.
  • For indirect, understand what channels, available partners and how they distribute including sell through opportunities.
  • What is the optimal go-to-market model to reach your target customer…and what is the forecasted cost of customer acquisition?
  • Remember – you have to be able to sell it yourself before a distribution partner will be able to do it.  Don't fall into the trap of thinking a partner will carry your product to market without you or without your help (a great deal of it at first).

Deliverable:  Select an optimal go-to-market model to reach your target customer and detail how you will enable the model to be successful (what tools, techniques, dependencies, etc.)

6. User experience

  • What does a "day in the life" look like for a target buyer or end-user?
  • Map your product/service use cases against that day and define the gaps, pains, and workarounds currently being used.
  • Write a narrative of this day.  Use your persona and write a story that spans the start of their day to the end of it including all the tasks, systems, and steps they take during the day (this is hard…but very, very valuable).

Deliverable: Build a process flow of current state for your target user(s) and then one that shows how their daily activities would change for them and other key players by using your product or service.

This should get you started and provide a point of reference as you assess a market opportunity.  Yes, there are many additional tasks and details but this (to me) represents the core elements to complete.  What did I miss?  What would you add?

The case for case interviews

/ Robert Pease / Leave a comment

I was asked a question today (via email) about case interviewing somewhat indirectly by someone going through the interview cycles with management consulting firms.  I weighed in along with a couple of others on what they are all about and how to best approach them.

I have been on both the delivering and receiving end of these types of questions during my time with Arthur Andersen Business Consulting (now mostly part of Bearingpoint).  Although we were not a tier 1 strategy firm like Mckinsey, Bain, etc. we did similar (albeit it cheaper) work and had many of the same approaches, methodologies, and operating models. Here are my two cents on how to best approach the case question.  Feel free to weigh in in the comments about your own experiences:

  • The answer is not as important as how you get there.
  • Case
    interview questions are an exercise in the employer understanding how
    you think and you showing off how you can apply a structured framework
    to solving a problem where you have minimal information    .

Take this example (one from my vintage):  How many plumbers are
there in the U.S.?  The actual number is not important but
think about how you would calculate this:

  • What information
    sources would you use, professional associations, unions, publications,
    blogs, etc.
  • How would you segment this population – professionals, handymen,
    weekend warriors, etc.
  • How would you quantify the size and
    growth of the population – demographics, trends like more building
    requires new plumbing/less building requires more maintenance, is this a
    different skill set or one that the same population can use regardless
    of need    ?
  • And so on…

Consulting is all about taking
imperfect data inputs, structuring them in a salient way, and extracting
some meaningful and actionable insight then managing the process of
using that insight to change strategy, process, or systems.

Hands vs. Mind

/ Robert Pease / Leave a comment

I had a nice chat this week with someone I had met in the past and with whom I recently reconnected.  We talked about a wide range of topics related to technology, marketing, and the types of work we do.  I did not explicitly ask if I could reference him so in the spirit of "journalistic integrity" I will not but will definitely update the post when I get the green light.

One of the more interesting parts of our discussion was about doing "hands" work vs. "mind" work.  Although it would be easy to separate this as tactics vs. strategy that is not so much the case.  It is about being in the weeds to get something done like writing copy and delivering pitches to prospects, analysts, or journalists vs. spending cycles on what needs to be said, how to position the company, and who to target as a customer or influential all the while tracking performance and making tweaks.

The challenge, at least in a startup, is to focus on getting things done (hands) no matter what it is while keeping an eye on it through a strategic framework (mind).  Although it is a bit of cliche, I never ask anyone on my team to do something that I haven't already done myself or wouldn't be willing to do.  There is no time or cycles to spend on someone who deems tasks below them – this is radioactive in a startup so if you see it, address it immediately.

Given the speed, resource constraints, and workload in a startup, it is a definite challenge to balance these two types of work so think it about it as hands vs. mind and be sure to make time for both.