Market exploration vs mining: when to focus in?

Moving from market exploration to mining is a critical inflection for a new technology business; how to discover which are the most valuable current and future application areas in order to build and scale a business.

Traditional marketing theory suggests you should start by understanding the needs of your target customer and then see what you can create to satisfy them (and make a profit). This has worked well in the past for creating incremental innovations — new flavours of ice-cream, new form-factors of well-known products, new applications of the same product — but for breakthrough technologies the users and their requirements may not yet be fully understood.

Breakthrough technologies have a history of finding unexpected applications that vary greatly from their original intended purpose. The art of value creation for a technology led start-up rests in its ability to successfully navigate the vast lands of exploration and move into sector mining (ie. to work out when to focus in a specific opportunity, build product and scale-up).

If you only focus on exploring you will uncover lots of opportunity but may never realise any value. If you only focus on mining you may miss larger opportunities and may quickly exhaust resources. Selecting the right mix of both activities and adjusting this over time is what allows a fledgling technology business to survive and then thrive over time.

You need a formalised approach to market exploration and mining:

1. Build your market exploration team

Engineers + Scientists + Detectives

Keep it small and simple; a mix of technical and market development expertise. Culturally this team needs to be happy operating with high levels of uncertainty, making things happen and adapting quickly to market feedback. They need to be orientated towards action as a form of research and learning. They need to be open to make new discoveries and have strong conviction in their overall mission (ie. the reason the business was setup in the first place).

They need to be prospectors and they need conviction.

2. Put out your probes

Start by trying to validate your current assumptions on which market areas you think will be most valuable. Reach out directly to contacts, analysts, investors and old colleagues who can help you start to sort and validate the numerous opportunities ahead of you.

Over time it’s valuable to have some near and long-term probes out in the market reporting back on how various opportunities are developing and maturing.

3. Gather primary intelligence

Start to make direct connections with businesses in your target sectors. Use this process to make and hone your pitch, elicit feedback and more detailed requirements. Ask lots of questions and start to evaluate which sectors to explore more deeply. Try to understand which sectors are ready for your solutions and understand what their current adoption barriers are.

Phase your next few rounds of exploration focus; which sectors have value now and which are likely to have value in the future.

4. Break ground

Move your chosen engagements into proof-of-concept projects and pilots. Work with target customers to validate your proposition, technology and business model. Start small and progress as you build confidence on the product fit and future value of the application domain.

Continue to make new discoveries and evolve your exploration plan accordingly.

5. Objectively evaluate results

Scrutinise the results of your first projects — what validation is there for your proposition, technology and the market area? How much value is there? Does the business model work, is it profitable, large enough, scalable, defendable?

Be careful not to subconsciously ‘salt’ your results… you need to see past any hype (internal, media or customer) and focus on critical metrics that suggest future opportunity. Is there a willingness to pay you money for your services, how deep is the engagement, are there other adjacent opportunities to explore, is there already commitment, what is the real value of your product to the customer?

6. Validate your results more widely

Once you see value with a few partners validate that your results are repeatable and that specific customers’ requirements are transferable across the sector. Gather more primary data points on the future potential size of opportunity (number of customers, AOV, CPA, geographic spread etc) and decide whether the time is right to scale up for mining in the area.

7. Deploy mining resources

There needs to be a formalised process for agreeing when to start mining in a specific area; ie. when to reduce exploration efforts and to focus in on an opportunity. Once the decision is made (usually at the point when the current team cannot keep up with demand) then you need to secure the necessary funds to build out the mining team (Developers + Support + Sales + Marketing + Finance) and scale-up operations.

Build your sector mining team to match the scale of opportunity and maturity of the market that has been identified. Some large opportunities may require a sizeable build-out from the start whilst other more nascent opportunities may benefit from a slower ramp.

Once in play monitor on-going yields and adapt operations accordingly.

8. Keep exploring

Simultaneously manage Exploration and Mining alongside each other; the balance of activity will depend on your overall business aims, your timeframe for success and access to funding. How much of the available market opportunity do you want to capture?

Regardless of how you weight these activities you need to work out your operating model that will take you from prospecting to a point where you have a scalable business. Some investors will support exploration but most prefer to back mining activities; you need to find the right partners for your stage of endeavour.

This is a model that has emerged from grappling with these two tensions over many years.

You will not always find exactly what you’re looking for and sometimes you may get more than you bargained for.

This story is published in The Startup, Medium’s largest entrepreneurship publication followed by +400,714 people.

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