There are a countless number of companies going to market without an understanding of how to be successful. The CEO’s of these cool technology companies conceptualize an idea, build the technology, and announce that they are ready to launch. Within a year, those same CEO’s find that revenue is flat and that they are out of money. For a CEO to be successful, they need to understand the complexity of their markets that includes, at a minimum, the following elements: market size, value, competitive differentiation, sustainability, and their customer profiles.
Market Size: The research into market size can be quite tricky. There is a difference between total available market and addressable market. Total available market is the market the world in which the business compete. The addressable market is the segment of the world which will buy your product. For instance, does your product suit the enterprise or SMB market, a specific vertical or a segment of the population? Once the addressable market is identified, it is rather easy to obtain data that shows quantities and types of customers within that market.
Customer Buyer Profiles: In depth interviews will help the CEO understand the customer buying process. The conversations should include the problem being solved, the size of the problem, the solution to the problem and the buying process.
Value: The value that your product brings to the market needs to be addressed as a hard financial value proposition. A good value proposition will have a revenue driver, i.e. increase revenue by $1 Million. Value propositions that increase revenues are typically get access to buyers and bank accounts. The value propositions should be built from speaking with your customers.
Competitive Differentiation: If you are a small company with the same features and functions as a large company, your company will most likely lose the deal. Likewise, a small company with the same features and functions of another small company lengthens sales cycle.
Sustainability: Many CEO’s believe that they have no competition which may or may not be true. What they don’t realize is that a large company can sometimes develop a product quickly. CEO’s should investigate defensive postures like patents to ensure sustainability.
There is a tremendous amount of effort that goes into understanding a market, often beyond the capacity, resources, and bandwidth of a CEO.
Heritage Ventures: We are Silicon Valley.
For more information about Heritage Ventures and how we share in your risk, please contact either Cameron Ackbury at Cameron@HeritageVentures.com or Chris Wheeler at ChrisWheeler@HeritageVentures.com