Recognize a Potential Market

Market potential is the entire size of the market for a product at a specific
time. It represents the upper limits of the market for a product. Market
potential is usually measured by either sales value or sales volume.

Objectives
:

1. Recognize the characteristics of a potential

market. 2. Identify market problems. 3. Build
products to meet customers’ needs.

Determine Market Potential

Once you have established that an opportunity matches your business’s

vision, goals, and financial indicators, you are ready to assess its market
potential by examining specific key factors. Market research will enable
you to more accurately assess the following points:

Ability to compete ​– Which opportunity offers the potential for you to

compete most effectively in the marketplace based on a price/cost
advantage or market differentiator? If you will not be able to compete
effectively, be wary of such an endeavor. Build on your strengths to
increase the chances of future successes.

Duration of the opportunity ​– Will the opportunity last long enough for
you to seize it and reap its rewards? Duration is critical to determining
attractiveness. For example, a new product or service based on a
long-term trend, such as a changing demographic, has an enduring
window of opportunity. One based on a fad, such as the latest fashion
trend, has a limited life. Another consideration is how long you have
before competition might flood the marketplace.

Growth potential ​– In many cases, long-term growth rather than

immediate rewards make one opportunity more attractive than another
does. An entrepreneur may decide to offer a new product in a growth area
rather than pursuing sales of existing products that have minimum growth
 potential. Is the sales potential sufficient to make it worthwhile? Even if
you can dominate a small market, it may not be worth your while.

Risks and rewards ​– A certain amount of risk is involved in all

entrepreneurial ventures, and growth is no different. How much will the
opportunity cost to pursue in terms of time, money, and physical
resources? What is your potential return on your investment? Are the risks
acceptable to you and your business? Do the rewards compensate for the
risks?

Keep in mind that typically the risks associated with growth opportunities
increase as you move away from products and markets you know into
products and markets that are new to you. Costs for researching and
developing new products and researching and penetrating new markets
will also increase.

Identifying Market
Problems

To deliver products that solve your target customers’ problems, you must
first identify market problems. These problems may be stated directly as
customer needs or implied indirectly.

Your market consists

of:

Existing customers: ​People who have already purchased your product

Prospects: ​People who have not yet purchased your product but are
considering it ​Target market users: ​People in your target market who are
not currently looking for a solution

Traps to Avoid When Listening to Your

Market

Ensure that you listen to all of the people that comprise your market to
avoid falling into the following traps. Each trap is not entirely bad, but can
become problematic when it becomes your only focus. The key is to
balance your focus to ensure that you are really listening to your entire
market at the same time.
 1. ​Focusing only on innovation and the
competition.
As an entrepreneur, it is easy to focus on building innovative solutions
that do not connect directly to market problems; just because you can
innovate, does not always mean that you should.

It is also easy to pay too much attention to what competitors are doing
and expend resources on trying to beat them to market. In many
cases, the customer does not care about extra features.

Instead, ask the following questions to ensure that you are solving a
problem for your target market:
● What problem does this solution
solve?
● Is this a problem experienced by my target
market?
● What would my target market do if I did not solve this problem? While it is always a
good idea to keep abreast of what your competitors are doing, ensure that
the market wants the problem solved.

2. Focusing only on
customers.

Henry Ford said, “If I had asked people what they wanted, they would
have said faster horses.” Customers understand problems, but they
cannot help you to move your product forward. They know what you
provide, and tend to stay inside that mindset.

Customers are a source of input, but not the only source of input. This
is why talking to prospects and target market users (who have not
purchased your products) is key to rounding out the picture. They often
see things beyond your current product.

3. Focusing only on
revenue.
By listening only to prospects, and delivering only what the next
customer wants, you will gain revenue but miss market opportunities. It
is critical to find a balance between prospects and customers to ensure
that your future revenue is protected, while still keeping existing
customers happy.
 Stated Versus Silent Market
Needs

Stated needs are explicit statements from your market that declare, “I
want a product to do X.” While stated needs are important, they are not as
powerful as silent needs, which are problems with yet undefined solutions.

When interviewing potential users, your goal is to understand your target

market’s everyday problems; whether or not you believe that, you can
initially solve those problems.

Exampl
e:

While doing market research, a major TV manufacturer uncovered the

problem that people regularly misplace their TV remote control.
Customers did not identify this as a problem that needed solving, but it
was a common issue.

By listening to the customers’ silent need, the company was able to

develop a feature that resonated with its target market (a “remote-control
finder” button on the TV itself).
Using this outside-in approach enables you to concentrate on and solve
your target market’s problems. It removes the guesswork from product
development and reduces concerns related what your competitors are
developing. Listening to the market is the best research you can do to
ensure that you build the right solutions.

The Three Pieces of

Entrepreneurship

In today’s world, especially living in the San Francisco Bay area, everyone
has his or her stereotype of what an entrepreneur is. Are they someone
who wears a hoodie? Someone who eats pizza and plays video games at
work at 3 am? On the other hand, someone else who neglects all for her
garage laboratory? They might be entrepreneurs, but at the real heart of
entrepreneurship are three things: the ability to identify or recognize
opportunity, the ability to review or assess opportunity, and last but not
least, the ability to successfully execute and realize opportunity. While
these tasks seem straightforward on paper, the skills you need for each
one are very different, and it is difficult to be good at all of them. To be a
successful entrepreneur, you need to excel at all three, all at the same
time.

Opportunity
Recognition

The people who typically excel at opportunity recognition are the

right-brain creative type people. These people are clever and look at the
same situations that everyone else does, but envision something different.
They see new angles, new possibilities, and new ways to do things.
Scientists, especially those in the heavily analytical fields, often struggle
with this phase. Being a scientist, we strive for reproducibility and have the
mindset that if A + B = C today, then A + B = C tomorrow. People who
excel at opportunity recognition often look at a situation and say, what if
tomorrow, A + B = D? Then what? Opportunity recognizers truly think
outside the box, stretch the limits, and are combinatorial in non-traditional
ways.

While the opportunity recognition phase is crucial when beginning a new

enterprise, it is important to seek new opportunities throughout the entire
lifetime of any enterprise. To stay ahead and on top of the market,
companies must constantly recognize opportunity as they continue to
grow and evolve. Steve Jobs is the quintessential opportunity recognizer
of our era; his iterations of Apple have successfully capitalized on
opportunity after opportunity. Facebook also excels in opportunity
recognition. As Facebook usage increased, advertisers wanted a piece of
the action, thus the ability to “Like” “Pages” was born.
Opportunity
Assessment

The opportunity review phase is where scientists generally stand out in the
entrepreneurship process. The opportunity review is when the analytical
assessment of the opportunity that was recognized occurs. During this
stage, an entrepreneur must assess potential strategies and business
models as well as conduct market and economic analyses in order to
establish an answer to the question: Can I bring this idea to market in an
economically successful way?

Next, it is time to construct a business plan, a concept any MBA student

knows all too well! A good business plan will answer several key
questions: What is the market for my good or service? What does the
market need and/or want? Who are my competitors? How will I create and
sustain a competitive advantage? Is my product or service distinct and
unique? If you are a “me too” enterprise, meaning that you are simply
imitating another business’s product or service, then you will only be able
to do as well as the firm your imitating, never better. To be better, you
must differentiate yourself in some way such as differentiation by price,
value, features and benefits, guarantee, location, retail availability, or
specialization.

Other questions to consider during the assessment phase: What are the
intellectual property implications of your core idea? Do you plan to
trademark, copyright, or have proprietary information? Are you going to be
able to get the start-up capital to trademark or copyright without divulging
the uniqueness of the company?

What is the model that builds in sufficient revenue compared to cost? How
will you pay back investors, on top of all ongoing costs, supporting
employees, maintaining raw materials and all of your other expenses?
How impressive do your income statements and balance sheets look?
How would you price this technology, idea, or product?

The 2007 book by Heath and Heath titled Made to Stick: Why Some Ideas
Survive and Others Die talks about the difference between things you hear
once and never forget and things you hear over and over, but fail to
remember. For example, we all remember hearing “you can see the Great
Wall of China from outer space,” but the best part is – it’s not true! No
matter how many times this has been put to rest, it has never left the
public consciousness (the Great Wall of China is about as wide as a
highway; you cannot see highways from outer space). So how do you
make your company that memorable? According to Made to Stick, you
need to have a “sticky” tagline that is simple, unexpected, concrete,
credible, emotional, and told as a story.
Just like opportunity recognition, the opportunity assessment process
never actually ends in a business. A plan is necessary, for sure, but an
entrepreneur must be nimble in the face of market changes and forces.
Perhaps the most difficult challenge of a start-up company or a budding
scientist is to make the correct decision between staying the course with
the plan and determining when it is most beneficial to detour from the plan
based on reactionary forces. As an entrepreneur, this is the largest
struggle I personally face.

Opportunity
Realization

The opportunity realization is what I call the “Get it Done” phase. During
this phase, it is time to take advantage of the situation and execute all of
the great ideas and projections ascertained from the two prior phases. In
my experience, many scientists struggle with this phase. This phase is
tough and unpredictable. It is a combination of doing things by the book
and dealing with inimitable people and unique situations. Now it is time to
build a team, raise money, develop a marketing strategy and a sales
approach, implement your sticky idea. From a scientist’s point of view, this
can feel a lot like publishing a peer-reviewed manuscript.

Implementing the plan is often not as simple as it seems. You are

suddenly faced with a completely new set of questions: is your business
scalable? Does your team work well together?

A great book published in 2010 that explores the realization side of the
business is Stuart Diamond’s Getting More: How to Negotiate to Achieve
Your Goals in the Real World. Getting More takes the premise that there
are pretty standard ways of dealing with common life and business issues.
If you change how you approach these common situations by changing
your behavior, can you change the behavior of the people around you?
Can you train yourself to be a tougher negotiator, to get more out of every
situation? When is it more efficacious to be nice? To be tough? How tough
is too tough? This book is a definite must-read for any aspiring
entrepreneur.

In theory, everything that makes a good scientist should make a good

entrepreneur. However, as a current graduate student, I feel that we are
not often taught how to become applied scientists or even made aware of
different aspects of our professional lives that could be used toward
entrepreneurship. Just like delivering any paper, patent or scientific
discovery, being an entrepreneur means having several ideas, exploring
the most “sticky” ones, and finally implementing the winning initiative with
full force.

Entrepreneur: ​A person who organizes and operates a business or

businesses, taking on greater than normal financial risks in order to do so.
Investor: ​Allocates capital with the expectation of a future financial
return.

Market Potential: ​The entire size of the market for a product at a specific
time

Opportunity: ​A set of circumstances that makes it possible to do

something.

Revenue: ​The income that a business has from its normal business
activities, usually from the sale of goods and services to customers.