This first period of our MOOC "Develop your venture" was devoted to the challenge of characterizing the market for a venture project. This can be summarized into the following principles:
Market assessment is a challenge that has to be overcome with enough humility, recognizing that assessing the market for a new venture is a slippery question because it is very easy to be wrong about whether or not you have a market and where is that market.
It is, in essence, a learning process that starts, before the venture exists, and that never stops. Throughout that process, the understanding of who is your customer, why would they buy, will change and get refined. Being wrong at the beginning doesn’t matter, as long as you are asking yourself the right questions.
The core questions that need to be addressed are:
Who is your customer?
Why would he buy?
How many of them ? How big is the opportunity?
Which beachhead to focus initial efforts and resources ?
This being stated, we developed a framework for approaching this issue.
Realizing that markets carry several levels of definition. The entrepreneur is usually appealed by the potential market, as it draws the big picture and leads to big number. But it doesn’t bring any valuable insight on the reality of the venture. The relevant level is the “addressable market” that capture the sub segment of the potential market that has a need, high enough to consider buying from you, and that you can physically reach.
The process for characterizing the addressable market is the following:
Build the matrix representing the potential market on 2 axes:
Various hypothesis of customers segments
Various hypothesis of usage scenario / value proposition
Conduct secondary research to assess the most promising one
Confirm or not, by conducting customer interviews, eventually complemented by short surveys on the best use cases
Among the cases under consideration, analyze the decision process to eliminate the use cases where it’s unlikely the venture may close sales
And position competition (in its largest meaning: direct competitors, potential entrants, substitutes), in order to eliminate too crowded places, where closing sales will be more difficult
The outcome of the process is a small list of use case profiles of customers where there is a need that is critical enough so you may expect get some sales.
The last part of this week lecture is about where you can find relevant information.
We shared with you a number of additional content, mostly video conferences. We strongly encourage you to watch these videos, as a key complement to the ideas developed in the course of these lectures.