Basic Research Opens Up Windows
Market Research
October / November 2011
Volume 9 Number 5
Many entrepreneurs have experience in their chosen industries and because they understand the issues of their industries, they are able to turn their technology into products that solve those issues. Other entrepreneurs without experience in a particular industry can use market research, in a staged approach, to help hone product ideas.
Let’s say that an entrepreneur has a technology that can be used for detecting explosives, but he doesn’t have any experience in the CBRNE (chemical, biological, radiological, nuclear and explosives) industry. He is therefore unsure of what kind of product to make. At this stage, the best option is to do some basic research. Some examples of what he might find include:
The market comprises mostly government agencies, from federal to local. This includes applications such as screening cargo in ports of entry and in airports; monitoring for explosives by Customs, Border Patrol and the Coast Guard; and monitoring and detecting explosives by first responders.
Down the road, commercial entities—sports arenas, shopping malls, skyscrapers, etc.—will take an interest in such products to keep customers safe and liabilities low.
There are many sizes and types of detectors, from large portals for shipping containers to small handheld devices for containers and other applications.
The market for all explosives detection is estimated to reach $4 billion in 2012, and is comprised of government agencies (and a few commercial users) and functions, such as countermeasures, monitoring and detection.
Armed with this information and knowing that the overall market is fairly large, the entrepreneur should do some analysis of his technology within the context of what he has learned about the market. Some of the thinking might include what application is best suited for the technology. Perhaps it’s a larger-scale size that might be appropriate for screening portals or for use in aerial surveillance. Perhaps it’s a smaller scale size that is best suited for handheld devices. Or maybe it’s size-agnostic technology that can best be used in unmanned vehicles, both ground and aerial, used for countermeasures. Another round of thinking might cover the different technologies and how the entrepreneur’s compares with what is currently on the market. What should the entrepreneur do with this new information and analysis?
Serious thought needs to be put into the market and the technological side of things at this point. Assuming the entrepreneur needs venture capital funding to complete the technology/product and get it into the market, he should look at the market segments, their sizes, and a high-level view of competitors and regulations.
The markets for handheld devices ($100 million) and countermeasures ($150 million) are likely too small to garner any outside funding. Moreover, several large companies command at least 85 percent of those markets; this may indicate that small startups have difficulty in gaining a foothold.
That doesn’t necessarily mean the entrepreneur should not pursue these segments, but it does mean that the technology would likely have to be a “platform” technology that could be used for at least two or three segments in the government market, or something that could potentially spur sales in the commercial sector. This would ensure that the combined markets are of sufficient size to gain venture capital interest.
If the entrepreneur believes that his technology is best suited for larger scale applications, the larger $750 million portal market looks better for venture capitalists. Market studies show that smaller companies have most of the market share in this segment, which also is in the entrepreneur’s favor. At this stage, the entrepreneur should be assessing his technology to see if it is differentiated and can provide benefits that solve current problems in this market segment.
Once the entrepreneur has a good target market direction, he must start developing a detailed product idea that is weighed against the high-level look at the competitors already in the market. Having a rough prototype or bench testing at this point (money permitting!) is helpful, because this is the time to really dig into product market research to gain enough intelligence to turn the product into a winner and to also begin to figure out how it will best be sold in the marketplace.
With a detailed product idea and some alpha (technical) testing, a competitive matrix can be drawn to compare features and benefits, costs, ease of use, efficacy and efficiency, and so forth. Some primary market research can be done with potential customers to test the validity of thinking that went into the matrix.
If the detailed idea or prototype falls short in any area, now is a good time for the entrepreneur to make revisions. Once there are deemed to be significant product advantages, the entrepreneur may be ready for beta (customer) testing and a round of primary market research. In this phase, testers are asked well thought out questions to cover operational and ease of use issues, perceived benefits (there may be some the entrepreneur never thought of), cost analysis and performance. The primary research should provide the entrepreneur enough feedback to revise and finalize the product—as well as the competitive matrix—and to begin marketing.
Clearly, different entrepreneurs will have different sets of information to use in product planning; therefore, some of the stages and information gathered at each one may vary with the situation.
However, the point is that market research can and should be used throughout the innovation cycle to help form direction, product development and strategy, and marketing. The more targeted the information, the better the results will be. Just remember in these efforts that you are aiming not for perfection, but for something good enough to get you started successfully in the marketplace.
Betsy Gillette is market research director at Technology Ventures Corporation.
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