4 Common Mistakes Entrepreneurs Make When Choosing Their Market
- Drill down
Uncertainty is inherent to the innovation process. That is why choosing the best markets for an innovation is almost always a high-risk, low-data decision, which calls for informed intuition rather than purely analytical reasoning. That said, it does get more complicated…
Choosing what market a start-up should focus on is so difficult because this decision usually entails some major trade-offs. The pros and cons of various options create real dilemmas for entrepreneurs (one option can have high potential but bear high risk from competitors, another option can offer a lower but safer payout, etc.). Given this quandary, it is not surprising that many entrepreneurs ‘take a wrong turn’, or make decisions that may ultimately cause the venture to never take off.
Based on our research and experience, we have identified four common mistakes that entrepreneurs make as they attempt to find the right market opportunity:
Fail to look before they leap
Often enough, founders jump at the first envisioned market opportunity, without taking the time to uncover other, potentially more valuable options. They tend to fall in love with their idea, and don’t extend their vision to other customers that may need whatever it is that they are developing. Being blind to other alternatives may simply mean that you are aiming for an inferior market. Furthermore, having a set of options at hand should come in handy in the future, if pivoting is required. A research published in Management Science found that the mere identification of alternative markets, in and of itself, increases the start-up’s chance of success.
Base choice on partial information
Although the great impact of a market choice is clear, entrepreneurs often make this choice based on very limited knowledge. They count on their intuition, or they simply follow a specific customer that expresses interest in their offering. While both intuition and an interested customer are important factors, there are other things that must be considered to verify the potential of a market opportunity. Overall, poor research and insufficient evaluation of the market can lead to big disappointments down the road.
Choosing too narrowly
Common mistakes relate not just to choosing the ‘wrong’ market, but also to the scope of your market choice. Following the common advice regarding the importance of laser-sharp focus for start-ups, entrepreneurs often concentrate their resources on pursuing a single narrow path at the expense of flexibility. They develop their product, build their network, and define their branding and identity all to target a very specific set of customers. While sharp focus is clearly important for start-ups, they must simultaneously ensure that they keep other options in mind and retain their flexibility. Eventually, locking the venture into a narrow development path means losing the ability to adapt or pivot over time, as too much ‘undo’ will be required.
Choosing not to choose
Lastly, some founders find it difficult to be decisive about this critical decision, and choose to postpone it until major uncertainties fade. Choosing not to choose means that you keep your coexisting efforts in several markets. Ventures that try to juggle with several balls in the air spread themselves too thin, and because they fail to concentrate their scarce resources, they can’t win in any key market. Deciding what markets we should focus on is definitely difficult, but it is a must if you want progress and get traction in the market. So, make sure you’re clear on the markets that you’re targeting, and on the ones you’re avoiding.
These mistakes may turn out to have fatal consequences for new ventures, or at least may significantly prolong the entrepreneurial start-up phase.
The Market Opportunity Navigator offers a clear, step-by-step guide on how to master the art of choosing a market. It guides business leaders on how to uncover and assess different markets to pick the most attractive one, and how they can hedge their bets by keeping some related options open, while avoiding the risk of over commitment to any particular option.
Click here to download the Market Opportunity Navigator worksheets for free and start looking for the most lucrative markets for your startups.