Market Vision

“There is no market there,” I said to the entrepreneur, who left in a huff.

Sure, I might have been wrong, but that is unlikely.  The entrepreneur may be one of those storied Silicon Valley visionaries whose acute sense of the needs of certain buyers is so profound that he soon will buy a small third world country with his spare change, but that is just as unlikely.

The first need every company has is a market.  The first question is always “does a market exist?”  After all, without willing buyers no amount of product design, cost reduction, hard work or plain dumb luck will make a company successful.  This then brings to the fore the nature of identifying viable markets, a task Silicon Strategies Marketing routinely performs for our clients though we have to deliver bad news more often than we like.

There are two primordial paths to market conceptualization:

Intuitive: An organic process whereby an individual or small team acquires via passive absorption insights into buyer needs, market gaps or pervasive trends that create a “Eureka!” moment.

Quantitative: Process where measurements of market dynamics, buyer expected outcomes and competitive pressures show available product opportunities and positions.

The two are not mutually exclusive.  Visionaries should (though rarely do) commit to quantitative analysis to confirm a viable and profitable market exists for their vision.  Jobs and Wozniak likely did little market dynamics research before presenting their bosses at Hewlett-Packard a notion about personal computers.  They had a vision about desktops and found ways to make that happen.  Steve Jobs is still in that line of work — visualizing things that ought to be (except Adobe Flash).  Other founders have a vision, but gather market research to keep from burning through grandma’s retirement money on a wild scheme.

Quantitative market identification lacks the visionary aspect.  It is a top-down, numbers focused examination of what is occurring in market places to identify what is missing.  I recently conducted research for a company specifically to identify what they and all their competitors had missed — where the market wanted something that had not yet been conceived (and it looks like we found it).  Quantitative market identification is science while intuitive market identification lies between the brain and the soul.

For start-ups seeking funding, one is an easier pitch than the other.  Put yourself in a VC’s richly appointed leather chair and imagine a young Jobs-like visionary pitching a previously inconceivable notion about a computer in every home in an era when a lot of home didn’t have a television (back before satellite dishes became the official West Virginia state flower).  Tough sale?  Yes, unless you had market surveys that showed the number of potential customers, their price sensitivity, and a marketing ROI plan, in which case a VC might break a finger trying to write a check fast enough.  Conversely, if you identified your market via quantitative means then you might not need or want to dilute your shares just for VC cash infusion.

Let’s take two examples.  Apple was a visionary approach.  Jobs and Woz saw a market though there was likely very little in the way of structured market research that did (or could) substantiate the future of desktop computing.  It took working at HP and Atari and hanging out at a computer club for them to triangulate a future nobody else could.

Though I have no inside information, I suspect SeaMicro — who came out of stealth mode this week — had a quantitative epiphany.  They basically reinvented servers by challenging all the assumptions about those boxes.  Examining how servers are used and how they are inherently inefficient, the SeaMicro founders likely justified revising corporate backbones by looking at market realities, quantifying demand and ROI, then designing a machine based on merging trends in technology (low cost, low wattage CPUs) with trends in demand (virtualized server farms) and customer-side cost/benefit analysis.

The best path may be the validated visionary approach, and hence the one most often practiced.  Vision is an odd creature — not everyone has it.  Yet people who are subjected to a specific market day in and out, who see data or hear what buyers have to say have their vision because they have non-quantified analysis.  Visionary risk is reduced by quantification.  Quantification can also eliminate the need for visionaries.

The marketing lesson is pretty simple:  Vision is great but has huge risk.  But don’t let risk detour you.  Be smart enough to reduce the probability of failure early on in your start-up by quantifying what you are making, for who you make it, why it matters and what it is worth to the buyer.

Now that’s visionary!


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