2. What Are Market Dynamics?
Working hard is analogous to throwing a ball hard. The velocity is an important part of
reaching the target, but you cannot ignore other interactive forces like gravity and drag.
3. Identifying & Locating Opportunity
You cannot work simply work hard
and expect to have a desirable
outcome. There are many dynamics
at play that all determine whether
we’re likely to succeed. Some may
get lucky but they are the exception
not the rule.
4. The 6 Market Dynamics
CAPTURING THE WHOLE STORY
THE 3 APPLIED TOOLS
We’ve identified 6 market dynamics
That are interactively defining the
Market opportunity at any time. The
conceptual framework is the basis of
the Startup Scorecard.
5. Customer Criteria
WHAT’S A GOOD CUSTOMER?
The ideal customer has an unmet need or
desire. The size of this market should
match your ability to compete and ability
to deliver justify solving the problem.
Validate you can control means of customer
acquisition along the way.
UNMET NEED OR DESIRE
Unsatisfied Customer Desire
RIGHT-SIZE MARKET OR SEGMENT
Need to Segment? Too Niche?
RELIABLE ACCESS TO CUSTOMERS
Diversified Channels? Gatekeepers?
6. Unmet Need or Desire
FOCUS ON HELPING OTHERS
FOCUS ON CREATING VALUE
Mom was right! Focus on helping others and
everything else will fall into place. Find a need
or desire that is not yet sufficiently addressed,
where the customer is so passionate they’d
happily pay for a solution. This approach is
much more likely to create real value than
copying an existing solution.
7. Right-Size Market (or segment)
Select a market to service that meets your needs and abilities. You must have enough opportunity to warrant
the effort. Be weary of large markets however, if you do not have significant funds and plan to be aggressive.
BIG MARKET STRATEGY
PURSUE LARGE MARKETS
BIG FISH STRATEGY
PURSUE QUIET NICHES
8. Reliable Access to Customers
A sustainable business requires control over customer supply. Don’t rely on a single marketing channel (Google
SEO). Government or monopolistic manipulation of markets can also be challenging (Online Gambling).
SINGLE POINT OF FAILURE
March April May June July
9. Product Criteria
WHAT’S A GOOD PRODUCT?
A good product will be a direct response to
a customer need or desire. If the value is
well articulated and the customer is
passionate about your new solution, the
reason to buy will be compelling. Consider
deterrents also – are their high switch costs
and is the solution easy to use and
CUSTOMER FOCUSED SOLUTION
Solves Unmet Need or Desire?
LOW BARRIERS TO ADOPTION
Low Switch Cost, Usability
CLEAR VALUE PROPOSITION
Compelling Reason to Buy
10. Customer Focused Solution (benefit)
The purpose of your product is to create value by addressing a specific need or desire. Stay Zen focused.
Don’t ambiguate the value created with distracting features that aren’t aligned with the goal.
ADDRESS NEED OR DESIRE
FOCUS ON CLEAR GOAL
KEEP IT SIMPLE!
DON’T AMBIGUATE THE VALUE
11. Customer Focused Solution (benefit)
Any intelligent fool can make things bigger and more complex... It takes a
touch of genius - and a lot of courage to move in the opposite direction.
12. Low Barriers to Adoption (cost)
Even if you create new value, customers may hesitate to adopt your product if they’ve already invested
too much in an existing solution that is good enough, or if adopting your solution is too disruptive.
PRIOR INVESTMENT & NEW COSTS
INVESTED TIME & NEW COSTS
DOES IT EASILY INTEGRATE?
13. Clear Value Proposition (value)
IS THE VALUE CLEAR?
VALUE = BENEFIT - COST
People don’t want quarter-inch
drills. They want
quarter-inch holes. cost
14. WHAT IS GOOD TIMING?
Every market has a natural lifecycle
driven by innovation and circumstance.
Look for new demand or interest in
something that wasn’t possible just a
couple years ago. Be a “fast follower”
into a validated emerging market rather
than speculating on new opportunity.
RECENT INNOVATION ENABLER
Was it Possible 2-5 Years Ago?
DEMAND ALREADY ESTABLISHED
Build It & They Might Not Come!
NO SIGNS OF COMMODITZATION
Shrinking Margins. More Products.
15. Innovation Life Cycle
Every market has a natural lifecycle driven by innovation and circumstance. Look for something that
wasn’t possible just a couple years ago & ramp up before the market capitulates (supply > demand).
The Golden Era The
Early Movers Consolidation
Innovation Adoption Curve
16. Innovation Life Cycle
Opportunity to enter diminishes as the market matures. Geoff Moore suggests entering at “the
chasm” after demand is validated but still early enough to ramp before the market capitulates.
New Entrant Opportunity
Innovation Adoption Curve
Ideal point to
enter a market
- Geoff Moore
17. Commoditization of Technology
It is difficult to imagine a more perfect commodity than a byte of data.
As information technology’s power and ubiquity have grown, its
strategic importance has diminished.
Harvard Business Review, 2003
What cost $5 million to accomplish
12 years ago can now be done with
less than $5,000. Mark Suster
observed that commoditization and
availability of more building blocks
has radically reduced cost and risk
of developing a software product.
Cloud Services (SaaS/PaaS)
Open Source Software
As cost has fallen, so has the
competitive barrier to entry.
Competitive positioning is now the
key strategic issue, not
technological capability for most
consumer Internet products. How
do you cut through the noise?
2000 2002 2004 2006 2008 2010 2012 2013
Data From NetCraft 2013 Web Server Survey
20. Competition Criteria
GOOD COMPETITIVE LANDSCAPE?
Avoid being marginalized by excessive
undifferentiated competition. That
drives margin compression, commodi-tization
and market consolidation. Look
for inefficient markets where there’s still
‘play’ and find ways to develop a
sustainable competitive advantage.
CLEAR MARKET INEFFICIENCY
Stagnant or Fragmented Market
LOW BARRIERS TO ENTRY
Easy & Cheap to Compete?
Something Special or Different?
21. Inefficient Market
DEMAND EXCEEDS SUPPLY
NO CLEAR MARKET LEADER
READY FOR DISRUPTION?
When a market is efficient, a single entity captures
all of the value of a market. Look instead for a
market that isn’t efficient either because it is new,
stagnant, or splintered (fragmented).
22. Low Barriers to Entry
The general who makes many calculations before battle is wise. He who
knows when he can fight and when he cannot will be victorious.
War Strategist, Wrote The Art of War
23. Low Barriers to Entry
Avoid a fight you cannot win! A market can be much harder to enter if a
competitor already has a mature offering that you must catch up to.
THINGS TO AVOID
• Existing Economies of Scale
• Existing Mature Product (feature set)
• Well-Established Brand (halo)
• Price Competition
24. Differentiable Position
LOW PRICE LEADERSHIP
FOCUS ON VOLUME & COMMODITY
FOCUS ON SPECIFIC CUSTOMER
DISRUPTIVE OR INNOVATIVE
HOW ARE YOU DIFFERENT?
WHAT MAKES YOU SPECIAL?
In order to be a desirable signal that stands out against a background of noise, you need to have a
compelling value to some customers that others do not. There are 3 viable positioning strategies.
Porter’s Generic Competitive Strategies
25. Financial Criteria
GOOD FINANCIAL PROFILE?
Look for opportunities to maximize
returns without excess capital risk.
Look for opportunities to start cheap
and to realize higher margins through
focused efforts and economies of scale.
Avoid locking up too much capital.
LOW SUNK COSTS
Up Front Capital at Risk?
WORKING CAPITAL FLOAT
Gap Between Payable/Receivables
ECONOMIES OF SCALE
Margins Increase With Volume?
26. Low Sunk Costs
HOW MUCH CAPITAL RISK?
How much up-front capital must you commit to
develop this product or business? Sunk capital
represents risk since you don’t know if you’ll get it
back, as well as opportunity cost since that money
could be committed to other opportunities.
Some businesses require large cash
outlay every month and payment can
take 3-4 months to arrive. As a result
the business may need to have cash
or credit to cover the gap of 3-4
months of operating costs. This is
both a cost (interest) and a risk!
DO YOU NEED A LINE OF CREDIT?
WHAT’S THE COST & RISK?
60 - 120 Day
Look for opportunities where profits
increase with volume (scale). Supply,
development, and distribution costs all
diminish on a per-unit basis when working
in volume. As a result profit margins and
competitive advantage both increase.
29. Team Fit & Fitness Criteria
WHAT’S GOOD TEAM FIT?
Just because an opportunity exists, doesn’t
mean your team is likely to succeed. Are
you fit to compete? Does your team have a
competitive advantage? Do you possess
deep knowledge, technical skills to deliver,
& access to key partners and resources?
SUBJECT MATTER EXPERTISE
Deep Knowledge of Market?
Technical Skills to Deliver
Access to Materials at Good Cost
30. The Hacker & The Hustler
A team needs deep subject matter expertise and technical skills to design a solution, in order to
succeed. It is difficult for a single person to be efficient at “heads up” and “heads down” work.
Subject Matter Expert The Functional Expert
Technical skills to design &
develop a well-crafted and
Knowledge of customer or desire, and
understanding of market dynamics to
effectively position an offering.
31. Supplier Partnerships
Consider the dependencies you may have on external sources of materials, data, and services. Do
you have access to the necessary resources to deliver your product and to price competitively?
Are you able to procure
supplies at competitive prices?
If affiliate mktg, can you get
Available Data APIs
Are you able to access the data
or integration APIs needed to
build your product?
If planning to manufacture
physical products or software, do
you have a quality vendor you
can rely on?
We have posted in-depth articles,
diagrams, and downloadable references
and worksheets on our website.
Everything is free to use, so check it out.