Markets & Choices that May Keep You Awake at Night
As an entrepreneur or innovator, you must decide which market opportunities you should focus on. Without a doubt, this is one of the most fundamental decisions you will ever make in your commercialization process. It is crucial, not only because this choice is key for creating value and generating sales, but also because it has a long term impact on the DNA of your venture. The market choice influences the venture’s identity, culture, structure, brand name, and many other aspects which are difficult to change down the road, or might even be irreversible.
So, once you need to set your strategy, you must thoroughly investigate your options, and understand the pros and cons of each market opportunity on your table, so that you can choose a promising path.
Yet… here’s the catch: despite the critical nature of this choice, and your best efforts to find the most fertile ground for your venture, chances are that you will need to change or adapt your market choice over time. This is because innovation is all about uncertainty and the unpredictable future. Conditions of uncertainty require placing flexibility at the top of your list of priorities. In other words, once you have chosen your direction of focus, you also need to make sure that you remain agile while keeping your eye on the target.
This makes your choice of ‘which horse to bet on’ even more complicated. In fact, as you strive to set your strategic focus, you actually need to consider two questions:
What is the most attractive market opportunity that you should focus on?
How can you focus and stay flexible, agile, and open-minded at the same time?
Here are some basic tips that can help you find your answers and make this profound decision.
Whether you foresee only one single market opportunity, or have a set of possible opportunities to choose from, you must take the time to carefully evaluate the attractiveness of your option(s), or you may find yourself running in less than optimal direction. An attractive market opportunity has two main characteristics:
First, it bears high value creation potential. iI other words, it offers a compelling reason to buy for a large set of customers who will be able and willing to pay for it.
Second, it entails a relatively low challenge in capturing this value, meaning that the difficulties in developing and delivering your offer and the risks associated with your business environment are manageable, and overcoming them is achievable in a reasonable time frame.
All in all, you need to assess both aspects to make sure that you are ‘betting on the right horse’.
Balancing focus and flexibility is a critical challenge, especially for startups. In a classic HBR paper, Eric Beinhocker claims that established companies must bet on multiple horses and cultivate a portfolio of strategies to hedge against key uncertainties. This creates a robust and adaptive strategy, that willingly sacrifices focus for the sake of flexibility.
However, startups are so scarce on resources and management attention that they simple cannot afford to follow this advice. Instead, once you choose your primary market opportunity, you must carefully select very few options that you consciously keep open, so that you will be able to mitigate your risk and increase your value with minimum effort.
To do so, pick at least one backup option and one growth option, and make sure not to lock yourself out of these markets as you develop your technology, write your patents, or even set your brand name.
Overall, keeping these considerations in mind will enable you to make a more informed choice, and hopefully… sleep better at night.