Finding new market / business opportunities through organized innovation
Companies around the globe today are struggling to survive or going through a major turnaround. They are still struggling to figure out which way is right to take their business up, which new markets, products, services they can possibly address. Companies wish to find some or the other way, not just to survive but flourish, however designing future road map seems covered with lots of uncertainties. Where to turn for growth is the question mark for the many business owners.
C. level executives of the companies are asking about ways to improve the health and effectiveness of their innovation programs. This is a direct consequence of global market trends. These companies understand that growth will not come from doing more of the same business activities but is possible only by changing it through innovation.
One common question come from the most is; “How to efficiently find new markets for the existing products / services?” There are a few basic approaches to driving revenue growth:
® Finding new markets for existing products / services
® Extending the client (revenue) life of services in their current markets
® Finding new applications for technologies or methods
® Entering adjacent markets
Innovation is the tonic to drive the health and success of the company. Let me address the 1st and the most important starting point “Finding new markets for existing products / services”.
Fragment markets: The total of buyers in the segments for which we have a whole product.
Defining each of these markets is important in guiding our company’s operations and strategy, and for communicating to interested parties, including investors, analysts and the media. How we determine these market definitions is very complex.
Total market (the potential market)
You need to estimate your total market size since it helps both in narrowing down the “other market” definitions, and also in permitting perspective on our addressable market. Defining the total market size is the easiest of exercises. If you can estimate what percentage of the population wants our products / services at the price you intend to charge, and if your services are new and lacks competition, then the calculation is quite easy:
(Target buyers population * percent buyers) * Price. It sounds easy but it is not as simple as that.
Some analyst firms like Gartner might already have estimated the annual spend for our services category, and can provide top-line numbers. However, if a market is mature enough that analyst groups have an accurate reading on total annual spend, chances are it is not a market you want to enter! Mature markets will always have some sharks and whales that eat start-up small fishes.
Addressable markets are those that you can address, meaning the ones that you have an actual chance of selling our products or services. This includes all buyers for whom you have a reasonably packaged products or services solution, attached with certain constraints. If your services can adequately serve multiple segments, then your addressable market might be as large as the sum of the segments. But it rarely happens.
You cannot start selling your products / services to our addressable market; you actually need to look at the smaller realistic market. You can even call it “Convincing market“. These are the markets you can realistically recruit considering your internal constraints.
Having an addressable market of a million buyers is meaningless if you have a budget that can reach 1k. Calculating your realistic market is easier than your addressable market because the number of variables is smaller and the numbers are very clearly defined. If you have been selling our services for long time, you also know our win/loss ratios.
If your calculations on your realistic market are sound, and if you can explain how invested money will scale your market outreach, then your company management will mostly believe your projections. If you present the other way around, by saying you need money to sell to your addressable market, they will send you home since there is no proof of results.
As you know segments are essential to marketing. You have to create a whole services portfolio to attract buyers, but creating new services for a whole new market is impossible. Thus, a segment is a ‘market’, and a collection of closely related segments may be a larger scale market.
The Steps in Measuring
There are two approaches:
Decline: Take each market and put restrictions and a lot of caps on it to divert marketing efforts towards smaller markets. For example, start with the total market and add restrictions to discover new addressable markets, and then do the same to the addressable market to find the convincing market. This is the least advised approach since it may trigger dissatisfaction for your sales and marketing personals
Build-up: Start with your business plan, track record and current budgets and project your short- and mid-term realistic markets. This is the right approach for start-ups. Smart companies do it from the bottom-up, supported by real numbers picked from reliable sources to build the definition. Quality numbers can come from surveys, studies, analyst re-ports, sales records and other sources.