How to Find New Market Opportunities
Most of the time, when we talk about ideation, we’re talking about brand new companies. But, what if you’re an established company looking to innovate? How do you find valuable new market opportunities?
A new year often feels like a rebirth, giving us a chance to wipe the slate clean and talk about new ideas.
The problem with the topic of ideation is that most of the focus is on startups and from-scratch products, and leaves out the important role of ideation in established businesses. Studies show that innovation is key to the long-term survival of any organization (as evidenced by the incessant thinning of the Fortune 50).
In that spirit, my first article of 2022 is about one kind of ideation that helps established companies grow and diversify their businesses through the discovery of new market opportunities.
Let’s work backward. We want to end up with a compelling statement of our most valuable new market opportunity — the one that is easiest for us to pursue and has the greatest revenue potential. While that’s a great outcome in itself, it’s insufficient.
In the spirit of de-risking our innovation efforts, wouldn’t it also be great if we had backup options? These backups would also be attractive (though perhaps not the most attractive), and would overlap with our primary opportunity in a time-saving way, but they would not share any of the same major risks as our primary opportunity. That way, if one of those risks manifests itself in an insurmountable way, we have attractive, ready-to-go backup options to which to pivot.
While we’re at it, let’s also assume our primary opportunity, or one of the backup options, succeeded. What’s next for us? Since we’re already exploring market opportunities, let’s snag some closely-related growth options to which we could turn our attention to create additional value over time.
So we want a primary opportunity on which to put our focus, as well as backup and growth options for later. With that goal in mind, let’s work backward from there.
Step 1: Create a set of opportunities
First, we need a bunch of market opportunities with which to work. Because we’re working within an existing organization, we have existing unique capabilities: technologies, processes, IP, people, etc. A market opportunity is some combination of those abilities that can serve a particular customer segment. While it seems fairly straightforward in theory, it can be a little challenging to come up with them in practice.
Developing a list of our core capabilities requires us to think outside the context of how we’re currently applying those capabilities to find the generalized version of that capability. As an easy-to-understand example, a software-as-a-service company may use an algorithm to find patterns in audio using artificial intelligence. In terms of documenting the capability, it doesn’t matter what patterns they are currently detecting nor what audio they’re currently processing. The important capability is identifying patterns in audio using AI.
Across the organization, line of business, or product, we can identify many such unique capabilities. A market opportunity is finding different ways to mix one or more capabilities into some kind of offering that serves a particular customer. The key is to think broadly. You can find patterns used in other industries that may work in yours, or you may think about how you could combine your capabilities with technologies you don’t currently have, but could feasibly acquire. To continue the example above, even if the SaaS company does not currently offer a mobile app, it is reasonable that they could develop a mobile app that uses the onboard microphone to record the audio that’s used for pattern recognition. Perhaps it is useful to HVAC technicians in the diagnosis of problems with commercial furnaces. That is a market opportunity (albeit, a contrived one).
The key is to create as many opportunities as we can, in the spirit of quantity over quality. This is the basis for the rest of our work.
Step 2: Evaluate them, and pick the most promising
Armed with a bunch of opportunities, the next step is to evaluate them by the only two metrics we really care about: how valuable is that opportunity, and how challenging is it to capture? While it is often valuable to do a “gut check” on these measures as a directional exercise, it is also an opportunity to make validated decisions by bringing in as much data as we can. What is the size of the market? How much do they spend on competitors? How strong is their pain? How much effort is it to repurpose that capability? How much is it going to cost?
Perhaps most importantly: what experiments can we perform to gather more evidence for the above hypotheses, before we make a big bet?
Once we’ve completed our evaluation of those opportunities, we pick the one that we want to focus on right now: the one that has the highest potential value and the lowest challenge. Sometimes, we are fortunate enough to have an obvious choice. Other times, we need to examine the relative attractiveness of our opportunities, and find the one that best balances our own risk tolerance, interests, and other factors that aren’t purely mathematical.
Because this is the real world, sometimes, there are no attractive options and we need to take a step back altogether. It happens, and it’s not a bad outcome if you get it early.
Step 3: Develop backup & growth strategies
Once we have a primary opportunity, we can decide whether the rest of the options are suitable as growth or backup options — or neither. For this, we need to assess to what degree each option overlaps with our primary market opportunity, both from a product perspective (do they share how much technology, process, resources, etc.?), and from a market perspective (do they share customers, channels, value propositions, etc.?). Additionally, what are the major risks associated with each opportunity, and to what extent are these the same risks as the primary opportunity?
The options that share the most product and market factors in common with the primary opportunity, but share the least in terms of risks, make fantastic backup options. After all, if one of our major risks is realized, we can pivot to one of these options, secure in knowing that they probably weren’t blown out of the water along with our primary opportunity. It’s not a very good backup if it’s killed by the same risk! Due to their relatedness with our primary opportunity, we can leverage a lot of what we’ve already done.
The highly attractive opportunities that do share some of the same risks make great growth options, because we only pursue growth options once we’ve already seized the primary opportunity.
At any time, you want to have one market opportunity on which you’re focused, as well as one backup and growth option that you’re keeping open for later — they don’t take much ongoing effort, but they are always in mind as we make strategic decisions. The rest of the options we save in a proverbial filing cabinet to revisit when the time is right.
Step 4: Profit.
And that’s it! You’re armed with a compelling market opportunity on which to focus, a set of valuable backup and growth strategies, and a proverbial grab bag of opportunities to revisit later. You’ve got a direction to head. All that’s left, I suppose, is to start running.
If you’re curious about this subject and want to read more, check out the fantastic book Where to Play by Marc Gruber and Sharon Tal.
And if you’d like to chat with one of our innovation experts about discovering your most valuable market opportunities together, let’s talk. Our design sprints can help you discover and define them in under a week.
Published 9 months ago
Josh David Miller
Managing Director // The Right Box
JDM is the founder of The Right Box, where he facilitates the process of innovation with startups and Fortune 100s alike. He and his team help get new ventures to market, innovate on business models, and establish a culture of intrapreneurship. JDM spends his free time as a startup ecosystem builder, connecting founders and funders in the Sacramento area — where is known as that guy wearing unusually colourful shoes.