4 Types of Market Opportunities and Why Should You Care
Any venture can apply its abilities or core technologies to create different types of applications and address different types of customers. This creates a set of strategic possibilities, or market opportunities, which need to be prioritized so that you can focus on the most attractive option.
Clearly, market opportunities are not ‘born equal’: some are more valuable than others – offering different levels of value creation potential (link to post: is this opportunity worth pursuing), and some are easier to pursue than others – offering levels of value capture challenges (link to post: is this opportunity reachable for us).
A visual and intuitive way to distinct between market opportunities and grasp their differences is to map them on a simple 2*2 matrix which we call The Attractiveness Map. The Y axis represents the overall potential of each market opportunity (ranging from low to super-high), and the X axis represents the overall challenge in capturing it (ranging as well from low to super-high).
This creates 4 quarters, or zones, that represent 4 types of market opportunities: Quick Win, Gold Mine, Moon Shot and Questionable.
I. Quick Win
Opportunities that are located in this quarter of the map offer relatively low potential but also entail low challenge for capturing it. You can choose to focus on such options to increase your sales volume in a relatively safe manner, or simply as a stepping stone towards a larger and more challenging opportunity in the future.
Tesla chose such a strategy when focusing first on the high-end electric sports car, as a stepping stone towards an affordable electric car for the mass market.
II. Gold Mine
Gold Mines are rare opportunities that promise high potential with a relatively low challenge for you. Uncovering a Gold Mine is usually a result of identifying a significant need in the market that no one has been aware of before (think about Facebook for example), or of developing an extremely powerful capability that no other company has. If you have a Gold Mine opportunity in your map, you should definitely focus on pursuing it.
III. Moon Shot
Just like their name, Moon Shot opportunities promise you tremendous potential, but are extremely challenging. In the risk-return analogy, these are high risk – high return options. Breakthrough ideas often fall in this quarter of the map (innovative drug development is one clear example). Choosing to focus on a Moon Shot means that you accept the entailed risk and that you are prepared for the long-term ride, with a hopefully rewarding end.
Questionable opportunities offer a challenging climb towards a relatively low reward. Logically, companies should avoid pursuing questionable opportunities, but yet the #1 reason for startup failure is putting much sweat in developing an offer that no one really needs. So, if you invest time and effort in researching and validating your business ideas before pursuing them, you just might save yourself from focusing on such questionable options. Alternatively, you can think how to re-shape your idea so that it becomes more attractive to you.
Overall, while estimating the potential and the challenge of your opportunities require a great deal of attention, it will help you to distinguish between your options, and to be fully aware of their upsides and downsides before choosing where to play.