Unexplored Marketplaces: Finding your goldmine
The chances of stumbling into an unexplored marketplace are getting rarer and fewer as technology advances and the whole world becomes clearer and accessible to entrepreneurs. However with this clarity also comes opportunity. If inventing is becoming less attractive and difficult, feasible options such as innovation are your best shots for success. With it, the opportunity to disrupt existing markets and take them to a new level become available for those who know how and where to look.
That’s exactly what we’ll be discussing today, how to find the potential for disruption in the current markets. While we are not going to be focused on exactly naming these markets, as it is becoming increasingly easy to do with the internet and all analytical tools at its disposal, we do think that the ability to spot their potential for disruption is something that the web can’t quite give you yet, at least not that easily.
Does size matter?
Market size is as important as it has ever been and it should be a priority in your analysis. Choosing a market with a sizeable TAM (total addressable market) must always be important for your business. Moreover, the market usually gets smaller when we talk about the SAM (serviceable addressable market) and it depends on your business’s resources and allocations to fulfill that market. People often forget that the market size they can really address and fulfill gets smaller when we talk about niche products. With disruptive ones, however, you should expect your TAM and SAM to be bigger and also have the resources to stay ahead of the competition for longer in order to maximize profit and the longevity of your product. How many startups have come to market with a great idea that ends up being stolen by a larger player in the industry? Lots, and addressing that market is usually a problem.The smarter choice if you do not dispose of the resources to address your market could be partnering with one of the existing giants that currently control them. Separating success from pride usually benefits the entrepreneur and could be the smartest choice in some situations.
Crowded Markets
It’s hard to go into a market where everyone is trying to solve the same problem more efficiently. Not to say that if you are definitely the best you shouldn’t try and go disrupt it, but the chances of you getting outplayed and even outnumbered are greater at highly competitive markets. Think about the products that usually go viral and have almost no competition in the first months of their launch. These are products exploring neglected and unexplored markets that usually haven’t had innovation in them for a while. Even if they try and copy your idea chances are they won’t get as far and deep as you have, after all not only did you have the head start but also the preparation to ensure you are delivering a high-quality product/service which is very hard to replicate by an aggressive copy. Lately, most companies get caught up in the technology bubble, trying to innovate in a crowded space where most are trying to overcome the next and so on. There’s a lot more that has nothing to do with technology and you should explore those markets for higher risk-reward opportunities.
Market Potential
So what are you looking for when identifying a market with potential? The first things to look at are its processes and the quality of its transactions. It will not come to a surprise that some markets are well behind technological trends and using the “if it’s not broken don’t fix it” philosophy. Identifying these and their potential for improvement could lead to unexpected and disruptive business ideas that are usually not being developed by other parties in this left aside markets. In a world where most companies are focused on the IT side of the equation making good use of the arising opportunities must be a priority for any entrepreneurs looking for disruptive business ideas. Once again innovation becomes the best path and main focus of our endeavor. It’s arguably harder to create new technology, but innovation can be the result of a different approach. Combining existing technology with out of date processes can lead to amazing progress in several markets that have been left behind in time. Now obviously it’s not that easy to spot these antiquated practices just with the glimpse of an eye, especially if you don’t really know the industries in which you are conducting research. That doesn’t mean you can’t do it, but the right amount of knowledge and research is definitely necessary. If you are not up for the amount of work it requires you might want to consider partnering with somebody inside of the said industry. Most likely their knowledge will be vastly superior compared to yours and some of their connections could come in useful in the future.
Can you be easily replaced or left out?
Sometimes innovation comes at a cost, especially when offering new ways to do something people are used to doing differently. In the case of new disruptive startups, like Airbnb for example, the ease of renting your own houses, rooms, etc, was disruptive for the huge market it inhabited. However, people soon found out that they could use the platform but avoid its service fees by contacting the owner or host directly through social media or telephone. What did Airbnb do? well, they updated their policy’s and greatly increased both host and guest insurance and help. Now both of them wanted to stay on the platform for the additional security and peace of mind it brought to them. The lesson? Not all companies are as lucky as Airbnb and the chances of you being able to cover all your bases are sometimes slim for a new business with limited resources. So be mindful of the possibility of this happening while at the same try and cover the most important workarounds people can find while using your product/service.
Are the profits worth it?
Now let’s say you have your potential market and product, what’s next? Revenue. Is it really worth it for you to go all in and focus your energy into it? While it’s been said more times than I can count, do the numbers, do they add up? Simple math can tell you whether its a viable business for you or not. Why for you? Well don’t forget to distinguish the TAM and the SAM, the latter being the most important and relevant one. While a lot of people could target the overall market (TAM) they often forget about their SAM (Serviceable Addressable Market). That one mostly depends on you and your companies resources and reach so you must take it fully into account while doing the math.
Use the existing processes
While trying to innovate is a great way to run a start a new business, tossing the existing processes away is not the smartest choice you can make. They are there for a reason, simply they currently work and have information you could use for your new business. Let’s go back to the Airbnb example, they innovated in the rental business while at the same time keeping the foundation of the market alive, renting real estate online. They didn’t invent that from scratch but provided an easier, safer, and much convenient way for both owners and travelers to make use of it. In a way, they used the current market conditions to their favor. Don’t disregard what is currently working as it is there for a reason, hold those factors into account and use them as leverage for your business. Many times you will find that using the existing structure is possible and beneficial for yourself.
So there you go, there’s no need to go into a billion dollar market and struggle to survive for every second you are in it. Opportunities are available for those who know how and where to look. Find those small gaps and develop a business around them, it could either blow up into something huge or be sufficient enough to make a company thrive in that space.
