Established firms tend to struggle when having to identify and execute new opportunities for value creation. While established organisations are usually good at execution, they aren’t normally designed to engage in the art of entrepreneurship. Larger and more complex firms can stifle their own growth by the same forces which help its established lines of business run so well. This gives smaller businesses an advantage as they are able to create a different mind-set than most managers and employees currently have in order to find the best market opportunity and successfully capture it.
Choosing the best market opportunity puts a great deal of pressure on making the right decision, and on controlling the cost of failure if and when it occurs. While potential losses need to be taken into account, first and most importantly the success of new endeavours depends on the firms ability to unearth new profitable market opportunities.
How can your company spot new market opportunities?
There are three main steps that you should follow when trying to find new market opportunities for your company.
Firstly: Gather your options.
Don’t get your heart set on an initial idea straight away, make sure you develop a broad range of business concepts to choose from. Outstanding opportunities are rare, and the chances of discovering one are directly proportionate to the number of business concepts which you can identify in these early stages. Despite this the number of opportunities isn’t the only factor at play, it is variance between them that counts.
Often when we are looking for new market opportunities we make the mistake of choosing opportunities that are already tightly related to exciting lines of our business. This generally stems from an on-going desire to better serve your current customers – something which shouldn’t be knocked! By looking beyond to more varied ideas you open yourself up to completely new windows of opportunities, accessing previously unserved markets.
Secondly: Be systematic to discover more opportunities.
There is a tried and tested tool which will help you discover new market opportunities: the Market Opportunity Navigator. This tool guides how to characterise the chore abilities of your company – while keeping them detached from any specific product that you are currently producing, or specific customer group that you currently serve. The process of de-linking these abilities from their current uses allows you to re-link them to new applications and to reapply them to new customers. A great example of this process is Apple in 2001 when it took its existing skill set and applied it to a completely new market- the music player industry.
Importantly, this process will not only support you in discovering adjacent market opportunities, but will also facilitate your distant search for new opportunities. As an example, consider the Japanese company Fujifilm. Originally, Fujifilm brought photographic film production to Japan and grew based on this business. By researching and developing for many decades everything related to photographic film, from raw materials to processes to systems, Fujifilm became an expert in many different advanced materials technologies, including coatings, membranes, and organic compounds. When the photographic film market started to decline, Fujifilm was able to leverage these core technologies to create different products in multiple domains. In fact, by re-combining these abilities, the company today creates unique materials that can be used in an extremely wide variety of applications, including desalination, gas membranes and astropore filters, far beyond its original market.
Thirdly: Manage your priorities to filter the best opportunities.
Expanding your business is an exciting step into the unknown, but the uncertainty of the journey can be managed by screening and evaluating the attractiveness of each opportunity which you have identified. This process is a crucial task – though can be extremely challenging. It is worth investing a great deal to develop criteria in which to filter the best opportunities and process to make the best decision on which market opportunity to pursue.
By developing a set of criteria or use existing checklists to filter the market opportunities you can remove any unconscious bias from the decision making process in order to make an informed decision. For each option you need to consider two things: How big is its value creation potential, and how challenging is it for you to capture this value. A systematic measure will enable you to actually compare your options and reveal the most valuable growth opportunity.
Dr Sharon Tal and Prof Marc Gruber are the co-authors of Where to Play, 3 steps for discovering your most valuable market opportunities, published by FT publishing. They also offer a free EdX course. For more information go to www.wheretoplay.com