(Dr. Sharon Tal is co-author of Where To Play, and creator of the Market Opportunity Navigator, a simple and solid framework that is helping thousands of entrepreneurs and business managers identify, evaluate and prioritize market opportunities for their business. She is a co- founder and former executive director of the Entrepreneurship Center at the Technion, Israel Institute of Technology. Today she gives workshops and courses in top universities and accelerators around the world. You can find her on Twitter and LinkedIn.)
What do a company that produces collision-tolerant drones, a startup that intends to change the way international shipping works, and two entrepreneurs culturing green meat have in common?
They all needed to map out their different target markets, and find a systematic way to narrow them down and set their strategic focus.
Whether your business idea was sparked by an unmet need or by a technological inno-vention, chances are you can target more than one type of customer (beyond the first you had in mind), and in most cases offer them a range of products or services.
So before you begin experimenting with and validating a specific target group – or directly start burning cash and valuable resources on fulfilling your dreams – you should take a step back and deliberately attempt to uncover different types of buyers/users that may value your innovation, and map out your landscape of opportunities.
Even if time and resources are limited, here are the three steps you should take to make sure you will be running in the right direction:
Is there anybody out there? (Identify)
Choosing which markets to pursue can be one of the trickiest questions for entrepreneurs and managers, and needless to say: a critical one. This choice not only influences your chance of success, but also imprints the DNA of your venture – having long-term effects that can be difficult to un-do.
Sander Gansen had a vision: he wanted to facilitate easy and transparent international shipping for businesses and individuals. Yet, far away from marrying the initial market from his first lean canvas, he decided to explore what other types of customers may value his services. In a previous blog post, Sander described how his company Shipitwise did just that in a simple and lean way. An informative landing page and input form revealed who may be their potential users. They decided to further experiment with and validate three types of customers: businesses involved in art, manufacturing and travel. These customers created their first market opportunity set.
Photo above: Flyability’s Market Opportunity Set, using Worksheet #1 of the Market Opportunity Navigator
Adrien Briod from Flyability is a the co-founder of the Swiss startup that develops caged drones for operating indoors, in complex and confined spaces, and in contact with people. These unique drones can perform many different jobs, including the inspection of complex industry machineries or difficult-to-maintain infrastructures, and even for security or search and rescue purposes. In fact, each of these applications can serve many types of customers. So where to begin building this business? Industrial inspection in itself can be valuable for power plants, for the oil and gas industry or for the maritime industry- and so goes on their list of possible market opportunities.
Arturo Geifman from BioFood Systems, a startup at the #EITFood accelerator, is working on culturing meat using bovine embryonic stem cells in a disruptive and cost-effective process. Even though this is a very specific product, they still need to figure out where to play: should they address meat producers or large meat consumers like global fast food chains. On top of that, their geographical markets vary dramatically, so they need to figure out if their early adopters would be in the US, Europe or Asia.
Still wondering why revealing different market segments is important? Take a look at this Management Science study which shows how generating a set of market opportunities at the outset increases your chances of success. It can be summarized in one short phrase: look before you leap.
Is ‘attractive’ really attractive? (Evaluate)
Figuring out what type of customers we can address is only the first step. Yet, understanding which one offers the highest potential for value creation, and the least challenge in capturing this value is another ball game. Market opportunities are not born equal- some are more attractive than others and can provide a more fertile ground for your venture.
To find out where to play, you therefore need to assess the attractiveness of each opportunity in your set, so you can compare and prioritize options. Clear criteria for assessing the potential and the challenge of each market are extremely valuable, as they allow you to be systematic in your evaluation, and to make sure you have not missed out on any important consideration.
For Flyability, this process took several months. Using the lean startup principles, they validated and invalidated some of their markets, resulting in an attractiveness map that looked like this:
Photo above: Flyability’s Attractiveness Map, using Worksheet #2 of the Market Opportunity Navigator
Inspection of large thermal boilers in power plans seemed to be the most attractive market for them. It was a ‘Gold Mine’ opportunity – offering high potential and manageable challenge. They decided to make it their primary focus. Few months later, this decision turned to be a winning strategy: sales grew quickly from 0 to 2 million Euros and 90% of the sales came from inbound requests.
For Shipitwise, the case was a bit different. After four months of validating the three target segments, they decided to focus on manufacturing companies. As Sander described, this turned out to be a questionable opportunity, as serving them was time-consuming with low margins. While their lean experiments showed that these customers were placing large dollar orders, some other key factors that influence the potential and the challenge had slipped away. Luckily, they figured it out in due time and successfully pivoted their focus to the travel sector.
Do you have a promising strategic focus? (Prioritize)
Setting a smart strategic focus is more than just choosing the most promising markets to pursue. It is also about managing the delicate balance between focus and flexibility – making sure your sharp focus does not lock you into one narrow direction. This is extremely important in today’s fast moving business environment. Companies- large and small- must stay agile and open to adaptation and change if they want to win the game.
To do so, you will need to set your agile focus strategy, that is – clearly define the market that you will pursue now, but also the opportunities that you will keep open for backup or future growth. Keeping an option open means that you currently invest in it very little resources and management attention, only to make sure that you don’t lock yourself out of it. This will help you to maintain your flexibility while staying focused.
At first, agile focus seems like an oxymoron, but after observing hundreds of startups we found not only that this is possible, but also that it can be extremely beneficial if done right. Carefully select at least one backup and one growth option from your set of possible markets, and make sure they are tightly related to your primary focus, so you can leverage your existing competencies to succeed in both. Keep these options in mind when you develop your technology, write your patents, choose your marketing messages etc, to ensure future adaptability.
For Flyability, inspecting oil & gas storage tanks and large vessels seemed like interesting growth options to keep open, and offering intelligence surveillance for police forces seemed to be a suitable backup option, since it was not relying on the same major show-stoppers. Once set, it is important to clearly depict this strategic choice, not only to align your team around a clear vision, but also for a constant reminder of your top priorities. Here is how it looked like for Flyability:
Photo above: Flyability’s Agile Focus Dartboard, using Worksheet #3 of the Market Opportunity Navigator
Simple is not easy. But that is changing.
Identifying, evaluating and prioritizing your set of market opportunities increase your chances of success. It allows you to focus on the most promising market, and also helps you to avoid a fatal lock-in. Yet, this is such a difficult task: while uncovering different types of buyers and users can be challenging in itself, comparing and prioritizing them can be even more devastating, requiring us to generate decisions with insufficient information, in a chaotic manner.
Over the past 15 years, we’ve rigorously studied and worked with hundreds of startups to create the Market Opportunity Navigator. This simple and solid framework will help your team choose a promising strategic focus while ensuring future adaptability. The Navigator is helping thousands of companies around the globe find the right markets at every stage of their growth.
In short, it helps you to approach three difficult questions in a systematic and simple way:
- Which market opportunities exist for us? What type of customers can we address with our range of offerings?
- Which market opportunities are most attractive for us? Which one offers the highest potential for value creation, and the least challenge in capturing this value?
- Which market opportunities should we focus on? Where should we be playing, and how can we ensure our future adaptability while focusing?
Photo above: The 3 steps of the Market Opportunity Navigator. Downloadable here.
When in doubt, zoom out. When sanguine zoom in.
While the Market Opportunity Navigator provides an excellent framework for overviewing your landscape of opportunities, the Business Model and Value Proposition Canvases provide great frameworks for zooming into the details of a specific market opportunity and looking how the different pieces of the puzzle work well together. Both tools perfectly complement and reinforce each other, as they provide different levels of analysis that are all essential for setting a dynamic and promising strategy.
Want to learn more?
You can download the Navigator’s worksheets and start identifying, evaluating and prioritizing your market opportunities today. The Navigator is protected under the Creative Commons license, meaning that you are free to use, copy, share and create your own versions, as long as you give attribution to the creators. To learn more how to apply this framework, you can also read the book “Where To Play” or sign up to the free online course on edX: Find the right markets for your innovation.