To review, we have covered what market opportunity is, how to identify market opportunity, how to test for viability, defining your customers and total addressable market.
The next step is to define the products and services that you will offer your customers and to determine demand. While defining your products and services, you need to answer the following questions:
What products will you offer your customers?
- What is the demand for those products?
- How much money is your total addressable market spending on those products?
- What are your competitive threats?
- How are your product solutions better than the competition?
- What is the average payback on the products you are offering?
- Are the pricing and/or margins stable for these products?
What services are you offering customers?
- What is the demand for these services?
- How much money is your total addressable market spending on those services?
- What is the current market rate for those services?
- What are your competitive threats?
- How are your services better than the competition?
- What is the average payback period on the services you are offering?
- Are the pricing and/or margins stable for these services?
By answering these questions, you are able to build the base for the positioning and value proposition for your business. As an added benefit, most lending institutions and capital groups will ask these very same questions when examining the viability of your business plan.
You may wonder where you can get the information required to answer some of these questions. This is where some preliminary due diligence and market research come into play. A good place to start would be to discuss these points with other business owners which service the same marketplace. Good venues for those discussions are business events and trade shows.
You can also leverage your public library, local Chamber of Commerce, or other third party market research / economic development groups to learn more about your market. If you prefer a more direct approach, conduct your own outbound market research campaign. Call some prospects and ask them some questions about spending habits, current market rates, and the nature of their challenges.
A quick note on confidence levels in surveys: If you plan to contact prospective clients to conduct some market research, be sure to talk to enough people to build a complete and accurate picture. The more people you poll, the more reliable the results.
When defining your products and services, you should also consider what future opportunities or market trends will provide additional opportunities. Some good questions to consider are:
- What future technologies will create new opportunities for increasing your product and services offering?
- Is it better to have a wide diversity of products and services or is it better to focus?
When entering any market, you should consider and (if possible) identify future market trends that will support your business. You will need to make strategic decisions to either diversify your offerings to take advantage of a wider range of product and service opportunities, or to focus your efforts on a single niche in the market.
In most cases in the technology marketplace, it can be better to diversify your offerings to include complementing technology products and services. However; you will need to balance diversification with focus. The old expression: “Jack of all trades, but master of none…” rings true. The trick is to balance opportunity and diversification with infrastructure and focus.
Another good way to balance future market opportunities is found in developing what Jim Collins of Stanford University calls a “hedgehog concept”.
A “hedgehog concept” combines three factors to create a singular focus for your company. Those three factors are:
- Knowing you can be the best in the world in your market
- Determining an economic driver for your business
- Having a strong passion for what you are doing
If you use these three criteria when evaluating market opportunities on which to capitalize, then you will enjoy a higher degree of success. For more information on developing a “hedgehog concept” or Jim Collins’ five year research project, we highly recommend reading his book, “Good to Great”.
One last consideration; think about what the operational requirements may be for the products and services that you are offering your customers. When planning on diversifying your products and services, consider the increased infrastructure requirements which come with offering a wider breadth of products and services.