Market Opportunity Analysis: Where Will The Business Compete?

Market opportunity analysis
where will the business compete?

Learning objectives
1. What is market opportunity analysis?
2. How to identify unmet and/or underserved
customer needs?
3. How to identify the most attractive customers?
4. How to assess your competitive advantage?
5. How to assess your resource needs?
6. How to assess the market readiness of
technology?
7. How to craft an opportunity story?
8. How to assess the market opportunity’s
attractiveness?
Learning objectives
customer needs?
technology?
attractiveness?
What? A tool to identify and assess the attractiveness of
business opportunity
Why? Unique e-commerce environment:
• Competition across (vs within) industry boundary
• Competition between co-opetitors (vs competitors)
• Competition on speed of response
• New ways to bring value to customers
• New ways to reconfigure value chains & value
systems
A value chain: a set of value creating
activities within a firm
A value system: a set of value creating
activities connecting a firm with other firms
and customers
Considerations for value creation:
Trapped value: efficiency, accessibility,
customer empowerment
New value: personalization, extension,
community-building, collaboration
Horizontal plays: improve functional
operations
Vertical plays: improve industry specific
business activities
Create More Efficient
Markets, e.g., eBay
Enable Ease of
Liberate Access, e.g., Gap
Trapped
Create More Efficient
Value Systems, e.g., FedEx
Look at Value Disrupt Current Pricing

System to Power, e.g., Priceline
Discover New
Business
Opportunities Customize Offerings, e.g. MyYahoo
Extend Reach and Access, e.g.,

Introduce keen.com
New-to-
the-World Build Community, e.g., MyFamily.com
Value
Enable Collaboration, e.g., ProjectPoint
Introduce New Functionality/Expertise,

e.g., C-Mode
Questions for value creation:
• Is there a high degree of asymmetric information
between buyers & sellers that trap values?
• Are significant amount of time & resources
consumed in bringing people together to make a
transaction or complete a task?
• Do customers view activities as more collapsed
than do industry participants?
• (see pg.81)
How? Using a market opportunity analysis framework that revolves
around four key elements:
 Analysis of the customer environment uncovers unmet or
Customer
Customer underserved customer needs, as well as the market they occupy
 Analysis of the technology environment reveals the readiness of

Technology
Technology the particular technology, as well as any alternative technologies,
on which the manager anticipates deploying the firm’s offering
 Analysis of the company environment provides the current state of

Company
Company the company’s resources
 Analysis of the competition environment reveal the structure of the

Competition
Competition industry and market, key competitors in the marketplace, and the
firm’s relative advantage to each of the key players
Identify
Identify the
the Unmet
Unmet and/
and/ or
or Underserved
Underserved Customer
Customer Need
Need
Customer
Customer
Identify
Identify the
the Specific
Specific Customers
Customers aa Company
Company Will
Will Pursue
Pursue
Competition
Competition Assess
Assess Advantage
Advantage Relative
Relative to
to Competition
Competition
Company
Company Assess
Assess the
the Company’s
Company’s Resources
Resources to
to Deliver
Deliver the
the Offering
Offering
Technology
Technology Assess
Assess Market
Market Readiness
Readiness of
of Technology
Technology
Specify
Specify Opportunity
Opportunity in
in Concrete
Concrete Terms
Terms
Assess
Assess Opportunity
Opportunity Attractiveness
Attractiveness
Learning objectives
customer needs?
technology?
attractiveness?
Identify customer needs
The “Customer Decision Process” framework: analyze and discover customer needs
Gift Interested in Need for Activity/Class

Problem
ProblemRecognition
Recognition Author/Subject Matter
Prepurchase
Information Read Reviews Search for Availability Review Contents

InformationGathering
Gathering
Evaluation
Evaluation Price Quality Availability Fits Needs
Purchase
Purchase
PurchaseDecision
Decision Purchase Online Purchase Offline
Satisfaction Arrived on Time Good Quality of Contents Easy Buying Experience

Postpurchase
Satisfaction
Repeat Purchases High Percentage of

Loyalty
Loyalty Consumers’ Book
Purchases
Identify customer needs
Questions to reveal unmet or underserved needs:
• What is the ideal customer experience?
• Is there a gap between customers’ actual and
ideal experience?
• What are customer beliefs and associations
about the buying process?
• What barriers block some/all potential
customers?
• What are the opportunities to enhance the
customers’ experience?
Learning objectives
customer needs?
technology?
attractiveness?
Identify specific customers
Market segmentation approaches: identify customers (must-haves vs nice to have)
Segmentatio
Geographic
Identify specific customers
Actionable segmentation:
– easy to identify
– readily reached
– described in terms of their growth, size, profile & attractiveness
Meaningful segmentation:
– Customers within a segment behave similarly, while customers
across segments behave in different ways.
– provides some insight into customers’ motivations.
– corresponds to the set of barriers customers face when they buy
or use a product or service.
– corresponds with how customers currently (or could) buy or use
the product or service.
– correlates to differences in profitability or cost to serve.
– differences are large enough to warrant a different set of actions
by a company.
Learning objectives
customer needs?
technology?
attractiveness?
Assess competitive advantages
Direct competitors
– Firms offering products or services that are “close
substitute”
– Rivals in the same industry
Indirect competitors
– Substitute Producers
• Firms that, though they reside in different industries, offer
products and services that perform the same function
– Adjacent Competitors
• Firms that have the potential to provide products or services
that are substitutes
Competitor mapping
– Assess competition intensity
• Identify underserved and most competitive areas;
• Identify current competitors’ strengths
• Identify collaborators
– Assess competitive hurdles
Competitor mapping:
High performance level Medium performance level Low performance level

Learning objectives
customer needs?
technology?
attractiveness?
Assess resource needs
Resource characteristics:
– central to delivering new benefits or unlocking
trapped value.
– Hold the promise for winning against current
and prospective competitors.
Three types of resources:
– Customer-facing: brand name, a well trained
sales force, and multiple distribution channels.
– Internal: technology, product development,
economies of scale, and experienced staff.
– Upstream: suppliers’ relationships.
Partnership: close resource gaps
– Complementary: Intel & Microsoft.
– Capability: AOL & Associated Press.
Learning objectives
customer needs?
technology?
attractiveness?
Assess technology’s market readiness
A high-level judgment on:
– Technology vulnerability
• What are the technology trends?
• How vulnerable is the opportunity to these trends?
– Technology adoption
• What is the customers’ technology penetration rate?
• What penetration is necessary to make the offering
financially viable?
• When is the minimum penetration likely to be met?
• Is there an introductory version that could be upgraded as
technology penetration increases?
A high-level judgment on:
– Technological impacts
• What new technologies could radically alter the
economics of delivering an offering or require
adjustment of the actual features and functionality
of an offering?
• How likely is it that your target population or
competitors will use these technologies?
Moore’s Law
• the processing power of successive generations
of microchips will double every 1.5 years
Gilder’s Law
• total bandwidth of communications systems will
triple every 12 months
Source: The Net Effect

Learning objectives
customer needs?
technology?
attractiveness?
Craft an opportunity story
• Describe the target segment(s) within the selected value system
• Articulate the high-level value proposition
• Spell out the expected elements of customer benefits
• Identify the critical capabilities and resources needed to deliver
the customer benefits
• Lay out the critical “reasons to believe” that the identified
capabilities and resources will be a source of relative advantage
over the competition
• Categorize the critical capabilities (and supporting resources) as
inhouse, build, buy, or collaborate
• Describe how the company will capture some portion of the
value that it creates for its customers
• Provide an initial sense of the magnitude of the financial
opportunity for the company
Learning objectives
customer needs?
technology?
attractiveness?
Assess opportunity's attractiveness
What? Attractiveness = f(long-term
profitability, relative competitiveness)
How? Determine the magnitude & character
of the opportunity:
– Level of unmet need and the magnitude of
unconstrained opportunity
– Level of interaction between major customer segments
– Likely rate of growth
– Size/volume of the market
– Level of profitability
Five attractiveness factors:
1. Unconstrained opportunity, e.g., eBay
2. Segment interaction, e.g., Zoomerang.com
3. Growth rate: 30-50% annual growth of
customer market
4. Market size, e.g., pet food and supplies market
generates $23 billion of sales
5. Profitability, e.g., profit margin at eBay’s auction
market is 80%
Priceline.com’s overall opportunity assessment:
Marketwatch.com
Step 1: Identify unmet and underserved needs
Process Steps Unmet and Underserved Needs
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Marketwatch.com
Step 1: Identify unmet and underserved needs
Marketwatch.com
Step 2: Identify specific customers
Marketwatch.com
Step 3: Assess competitive advantage
Marketwatch.com
Step 4: Assess resource needs
• Customer-facing resource: brand name and

CBS associations
• Internal asset: in-house writers
• Upstream resources: access to CBS news
outlets & reporting resources; existing
relationships with financial institution clients
Marketwatch.com
Step 5: Assess technology’s market readiness:
• Consumers: low-bandwidth services 

streaming video and broadband friendly services
have to wait
• Advertisers: receptive to alternative online
advertising placements  make technology
investment accordingly
• Licensees: seamlessly integrate modularized
content into their sites  ensure scalability of its
technology to meet increasing licensing
demands
Marketwatch.com
Step 6: Craft an opportunity story:
Marketwatch.com
Step 7: Assess opportunity’s attractiveness:
Positive
Factor
Neutral
Factor
Competitive Magnitude of Interaction Likely Role of Technology Market Size Level of

Vulnerability Unmet Needs Between Growth Vulnerability Profitability
Segments
Negative
Factor

Market Opportunity Analysis: Where Will The Business Compete?

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Market Opportunity Analysis: Where Will The Business Compete?

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Market opportunity analysis

where will the business compete?

Look at Value Disrupt Current Pricing

Extend Reach and Access, e.g.,

Introduce New Functionality/Expertise,

 Analysis of the technology environment reveals the readiness of

 Analysis of the company environment provides the current state of

 Analysis of the competition environment reveal the structure of the

Gift Interested in Need for Activity/Class

Information Read Reviews Search for Availability Review Contents

Satisfaction Arrived on Time Good Quality of Contents Easy Buying Experience

Repeat Purchases High Percentage of

High performance level Medium performance level Low performance level

Source: The Net Effect

• Customer-facing resource: brand name and

• Consumers: low-bandwidth services 

Competitive Magnitude of Interaction Likely Role of Technology Market Size Level of

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