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Kindle Notes & Highlights
by
Bill Aulet
Read between
March 13 - March 13, 2018
The amount of time you spend will depend largely on how effective your team is at getting primary market research. You should spend enough time so that you can fill out the matrix for all your top segments with some accuracy. Don’t just search the Internet and debate this in your office.
It is likely you will not find a perfect market opportunity, but there rarely is one that is “perfect.” Do not let yourself fall into “analysis paralysis.”
then-MIT undergraduate Thomas Massie created, working with his Professor Ken Salisbury, a new device that would give its user the sense of touching virtual objects using a stylus-like interface.
Massie received queries from all over the world about potential uses for the technology. He started to sell versions of the lab product.
his “early adopters” consisted mainly of universities and research labs—“technological enthusiasts” who will buy almost any innovative product.
(Geoffrey Moore’s book Crossing the Chasm goes into greater detail about technological enthusiasts, and says that these customers can be a first bridge to the ultimately most desir...
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We worked hard to find a scalable market opportunity that would allow our business to reach the goals we had set out to achieve: being a company worth tens of millions of dollars in the relatively short time horizon of five years or less.
I worked with our business development manager, John Ranta, who had experience in previous startups identifying such market opportunities and doing the hard work of primary market research with customers to discover their real needs. We spent weeks building out a list of potential markets, using our current customers, trade show feedback, incoming product inquiries, and our own imaginations as sources of ideas.
We never did this amount of researh.
We discussed ideas weekly, sometimes nightly, and we discussed our core values and personal passions, which made certain markets unattractive (e.g., pornography). Another outcome of our brainstorming was that we saw where our product’s real value was—applications that used 3D data, not those using two-dimensional (2D) data.
Once we had a comprehensive list of possibilities, we then systematically narrowed the field down to eight industries, made the outline for a market segmentation chart (see Table 1.1), and then spent weeks doing the primary market research to fill out the matrix. Somewhere around 90 percent of the data in the chart came from direct interaction and talking with real potential customers in these industries about their situations, pain points, opportunities, and market characteristics. Very little data came from research reports by well-known research firms or by finding data on the Internet.
The SensAble Market Segmentation Chart
We had the luxury of already selling to technological enthusiasts, which gave us enough of a revenue stream that we could spend over three months on the market segmentation analysis. You will want to spend at least a few weeks,
we needed to understand what data was upstream of our solution, how we would receive it, what was downstream from our solution, and how we had to output files.
SUMMARY The market segmentation process identifies multiple potential market opportunities. Once you have a list of potential markets, direct market research-based analysis on a finite number of market segments will help you determine which markets are best for your idea or technology. The goal of the research is not to provide a perfect solution, but to present a wide spectrum of market opportunities as you start to think about where you will focus your business. Primary market research, which involves talking directly with customers and observing them, is by far the best way to identify good
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IN THIS STEP, YOU WILL: Analyze your top 6–12 market opportunities and choose one to pursue. Further segment that market to determine your beachhead market.
In the previous step on market segmentation, you built a matrix based on your primary market research on your top 6–12 markets. Now, select just one market opportunity from the matrix to pursue as your beachhead market; ignore the other markets.
Almost all first-time entrepreneurs find that ignoring market opportunities is difficult and even painful. They doggedly hold on to the idea that more markets increases their odds of success and that they are best off hedging their bets until one market takes off.
Imertual. Is it us?
such thinking will decrease your odds of success, because you and your new enterprise will lack the necessary focus required to succeed.
People keep options open even when it is not in their best interest, according to former MIT professor Dan Ariely, who discusses the topic in his 2008 book, Predictably Irrational.
By choosing a single market to excel in, your startup can more easily establish a strong market position, and hopefully a state of positive cash flow, before it runs out of resources.
By focusing in this way, you will position yourself to most quickly achieve the all-important positive word of mouth (WOM)
Need this or info products
HOW TO CHOOSE YOUR BEACHHEAD MARKET
In military operations, if an army wants to invade enemy territory with water access, the army may employ a beachhead strategy, where the army lands a force on a beach in enemy territory, controlling that area as their base to land more troops and supplies, and to attack other enemy areas. The 1944 invasion of Nazi-controlled Europe by the Allied forces is one of the most famous examples of a beachhead strategy.
Likewise, your beachhead market is where, once you gain a dominant market share, you will have the strength to attack adjacent markets with different offerings, building a larger company with each new following.
In many cases, there are multiple paths to success, so it is not imperative to choose the absolute best market.
(SensAble is a good example of a technology that could have been successful in any number of market segments.) Therefore, get started doing, rather than getting stuck in “analysis paralysis.”
Action will produce real data that will tell you quickly if the market will or will not be viable. If the one you have selected is a viable market, great. If not, you will still hopefully have time and resources because you acted quickly and efficiently...
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The seven criteria I mentioned in Step 1 for narrowing your market opportunities are also useful in choosing your beachhead market: 1. Is the target customer well-funded? 2. Is the target customer readily accessible to your sales force? 3. Does the target customer have a compelling reason to buy? 4. Can you today, with the help of partners, deliver a whole product? 5. Is there entrenched competition that could block you? 6. If you win this segment, can you leverage it to enter additional segments? 7. Is the market consistent with the values, passions, and goals of the founding team?
It is better to avoid selecting the largest or very large markets, even if they seem like the “best” segments.
you are better off learning in a smaller market where you can quickly get high exposure among the base of potential customers.
This principle is similar to learning a sport—you will learn a lot from playing against someo...
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if you live in a small geographic region, start there before trying to launch in a larger region.
As you begin to focus on your beachhead market, you will quickly recognize that it almost surely can be segmented into smaller markets. This is standard good practice.
You should not worry about being focused on too small a market
You want to start in a market where you have great ability to dominate in a relatively short time period;
You want to continue segmenting until your market opportunity matches the three conditions that define a market.
Three Conditions That Define a Market 1. The customers within the market all buy similar products. 2. The customers within the market have a similar sales cycle and expect products to provide value in similar ways. Your salespeople can shift from selling to one customer to selling to a different customer and still be very effective with little or no loss of productivity. 3. There is “word of mouth” between customers in the market, meaning they can serve as compelling and high-value references for each other in making purchases.
If you find a potential market opportunity where the customers do not talk to each other, you will find it difficult for your startup to gain traction.
EXAMPLE SensAble Technologies
we chose the industrial design industry as our beachhead market
after choosing the market, we discovered that industrial designers could and should have for our situation be divided into three distinct groups.
A third group works with highly organic and sculpted forms, often designing with clay.
Our product was most appropriately suited for free-form designing, so the third group was the optimum market for us to focus on. The customers in this group were primarily toy and footwear companies with extensive clay studios and many sculptors among their designers
Figure 2.1 The toy and footwear markets were our primary focus. The next adjacent markets were likely animation and jewelry, but we would need to do more research when we prepared to scale.
Much to our surprise, we were able to group toy and footwear companies as one market, because industrial designers in the toy and footwear industries acted so similarly that they completely met the three conditions of a market presented earlier in this step.
They both used lots of clay to sculpt highly organic, 3D art shapes that were shipped to China on a very tight schedule.
in a very telling sign, the designers frequently moved between toy and shoe companies to advance their careers; they even belonged to the same subgroup in the Industrial Design Society of America.
Smart Skin Care
After deliberating, they found that a consumer market such as sunscreen required less time and money than medical markets, which need a thorough FDA review.
The consumer market would allow the team to work closely with real customers and get a feedback loop going so they could more efficiently develop the technology into a product.
