When choosing to launch a product or service it is important to first analyse the attractiveness of the given market for that product or service, an analysis that must take into account multifarious components that will directly impact the success or otherwise of the endeavour. A vital aspect that can determine the attractiveness of a market is the competition that the product or service will face. A market without any well established competitors is an attractive market, whereas a market which has a large number of competitors operating in the same industry does not lend itself to new entrants. Similarly a market where international, national, regional or local government provides support, be it through attractive fiscal incentives, funding opportunities or a favourable regulatory framework, is an attractive market. These elements are key components of the EU’s Single Market Strategy. Finally it is important to size the market that one is seeking to service. 

When sizing the market it is useful to ask the following:

• What are the possible potential markets?
• What is the total size of the market?
• How do you segment the market for an innovation?
• What are the requirements for good segments?

However, establishing the market size must be understood within the context of the end user of the product. This user-centric approach allows for a realistic vision of what a successful outcome would look like for the product or service, and therefore whether the commercial venture is viable. A starting point in making this assessment is to find out the Total Available Market (TAM), which is the value of the total market, or total possible demand, for the product or service. Having established the size of this market it is then possible to work out the Serviceable Available Market (SAM), which is the value of the market based on the specific product or service being offered. This market can be viewed as the target market, from which one can determine the Serviceable Obtainable Market (SOM) which is the portion of that market which can be realistically reached with available resources. Therefore through this exercise both the short-term market (SOM) and the long term target market (SAM) can be established, an essential component of ensuring the commercial viability of the product or service.

As with the approach taken in conducting the research that is being commercialised, so too the hypothesis that underpins the commercial value of the venture must be tested. In this context the entrepreneur must establish the “Beachhead” market, a term derived from its military connotation and which refers to a small and relatively protected area from which one can expand.This test can determine how much clients are willing to pay for the product and allows the entrepreneur to prove the effectiveness of the product prior to expanding to larger markets, thus safeguarding the venture from reputational damage. 

Illustration of the Value of a Beachhead Market for market penetration and expansion

The initial customer will be vital to the successful launch of the product and service and therefore they must be chosen with care, ensuring that they are well-funded, easily accessible to the entrepreneur and have a good reason to buy the product. This provides the customer with both the means and the motivation to adopt the product or service, provided that the customer must also be open to test and experiment with the new product. Additionally an ideal initial customer may even be open to co-funding the product or service, or they may provide the entrepreneur with the ability to leverage that relationship to other customers. 

While assessing the market for the product or service is vital in ensuring the feasibility of the venture, it is also important to ensure that the venture has a sustainable value proposition which takes into account the value generated to all stakeholders and any adverse impacts the product or service may have on these stakeholders. It is also important to understand your competitors and what additional value your solution can offer when compared to alternatives in the market, as we discussed in our last article. In the preparatory courses offered to participants of the Entrepreneurial Residency Programme we discuss all these topics and more. These courses are intended to prepare participants to pursue collaborations across academia and industry through the Venture Alliances collaboration platform, and to stimulate new opportunities for commercialising research. 

To find out more about this programme and register your interest to join our industry-academia collaboration platform, click here: www.venturealliances.eu.