Analyzing Your Research
Market Research
December 2011 / January 2012
Volume 9 Number 6
Before you can even get to a SWOT analysis, you must take a look at the research you’ve collected on your industry, technology and product to make enough sense of it. Remember, market research is done to help identify conditions in the marketplace that will either help or hinder your entry. If you discover these issues or risks early on, you will be able to develop strategies to overcome them or make the most of them.
I recently led a workshop on assessing markets, and used selected information and graphs in an industry report from one of the big research firms as an example of how to start looking critically at the information you may find. In that study, there were several items that could significantly impact a technology startup in that particular industry.
The overall market is in excess of $3.5 billion and there are three major categories. You fall into Category A, which totals $1.5 billion in revenues. That’s pretty healthy, but you need to look to see where you fit into that category. Within Category A, there are six market segments, and you fall into Segment B. You’ve determined that the revenues for Segment B are $100 million and your part is the smallest of the six segments. The issue with a $100 million market size is that it is probably too small to interest venture capitalists, yet you need the funding. How can you overcome this?
Perhaps you make Segment B your first target market and you look at the other market segments or even other industries where you might be able to deploy your technology as a second target market. That’s realistic and doable.
Segment B is showing a 3 percent annual growth rate over the next five years, the smallest of all the segments, but at least it’s growing. However, the report indicates that the number of issued patents in that segment over the past five years is the largest percentage (well over half) of those filed in all six segments. You must try to figure out the reason behind this.
Perhaps the technologies in the patents are not really good, and that gives you an advantage. Perhaps the technologies are good, but haven’t been commercialized yet. This could mean additional growth in the industry, which is good for you. It could also mean that there will be additional competitors soon, which is not good for you. Perhaps there are unmet needs in the marketplace that those technologies can fill. That may put you at a disadvantage unless your technology also addresses those unmet needs.
This information requires more digging, researching and talking with people to find out the real reason behind this patent/market percentage imbalance. Once you find out, you can deal with the situation, perhaps by enhancing the features of your product to meet more needs or by using messaging to position your product and its benefits against those technologies.
Also in the report is the fact that four companies control the 85 percent of the market, yet “other” companies file 70 percent of patents in your segment. Why is that? Perhaps the “others” license their technology to the big guys and never enter the market themselves. In those instances, the big guys could utilize their technology, or they may shelve it if it interferes with their current product plans. The latter situation is probably advantageous to you.
Perhaps companies simply buy on the name recognition of the big guys, which is an obvious disadvantage to a startup. More disturbing, maybe it means that it really is difficult for new companies to gain a foothold. Note that this isn’t a death knell; it simply means that you must find a workaround in to get into the marketplace. This could mean partnering with someone, even a competitor, to gain entry. It could mean changing your first target market segment to one less dominated by big names, or moving to another industry first.
The point of all this is that if you do your research, you have information indicating opportunities and risks. It’s relatively easy to exploit opportunities, but risks need to be mitigated in some fashion if you are to succeed. It’s better to address those risks now, before you try to enter the market, rather than later, when you’ve spent a ton of resources in unsuccessfully entering the market. You may not get a second chance!
Betsy Gillette is market research director at Technology Ventures Corporation.
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