(2.6) Myth 6: Market Intelligence insights are unambiguous

Throughout my career as a market intelligence professional I have always found it hilarious to watch people discuss market numbers. Even four simple datapoints could often lead to fervent –and lengthy- discussions about their exact meaning. I stopped laughing, however, when I started to realize that the length –and the fever- of these discussions was my own fault.

Why is this? Well, say you have to make an investment to grow a product or service, and you have to make a choice between two countries in which to make this investment (don’t worry, the same logic would apply on other strategic decisions as well, I use this simplified example just for the sake of argument).

In its most basic form, this choice would be made based on the size of both market (the ‘Addressable Market’, which is the total spending on products and services similar to yours; or, put more simply: this would be your revenue if you had no competitors). This would look like this, for instance:

Quite obviously, you should invest in Market 1, since its potential is so much bigger than Market 2. Right? Wait a moment. What exactly is our starting position in these markets… Would it be easier to benefit from the additional  opportunity in a market where we have a high market share already? Or rather the opposite?

With this extra dimension, two different scenarios emerge:

Which market is the most promising now?

Say the lighter bars represent your turnover, and the darker bars represent the untapped market potential (so the proportion of the light orange to the overall orange bar represents your market share). Both these scenarios will now lead to completely different conclusions about the market to develop and where to get additional growth from. In the second scenario for instance, the portion of the market that you don’t cover yet is much tinier in Market 1 compared to Market 2.

Okay, so dependent on which scenario turns out to be true, we now have our answer. Right? Not so quickly. We need to take a third dimension into account. The market sizes might be different, our starting position (our market share) will probably be different, but the overall market growth is likely to be different as well.

See the example beneath, where just one of the possible scenarios is highlighted for our original question to know in which market to invest in order to maximize the overall growth potential:

This provides a more subtle view of our market potential already, and certainly a better insight to know in which market to invest. Our Market 1 now finds itself in a quadrant with low growth (horizontal axis), high market share (vertical axis) and a big size (bubble size). Our market 2 finds itself in quite an opposite situation: high growth, low market share, and relatively small market size.

So it’s clear now, no? Invest in Market 2. Any market share point gained in this market, will leverage more in terms of turnover growth (since the market itself is growing faster). Easy, right?

Not quite yet. It appears that we have much more to gain in Market 2 indeed, if –and only if!- we have the means to gain market share in this market. Are our sales people sufficiently trained to chase this market? Are our channels sufficiently loyal to support us in this endeavor? Or are they likely to promote our competitors instead? Do our competitors have special advantages over us in this market, like locked-in, multi-year contracts (which would reduce our available market)?

And, combined with this, we need to ask additional questions about Market 1: can we leverage our solid market position to introduce new products or services with success? Is perhaps our install base in this market due for renewal in the coming year(s), hereby increasing our market potential? What is the risk of losing market share in this market, and how would this affect our overall turnover?

An answer to all these questions would require many more dimensions than those we used up to now, but you will have noticed that the answers to these questions are starting to be much more qualitative than quantitative. So, in a way, the bubble chart with  the three dimensions has provided a –perhaps sufficient- basis on which judgment can be used to come to conclusions.

We will see in chapter 2 how even qualitative judgments can be quantified and put to use to give decisions more factual weight. But the point for now is that market insights are anything but unambiguous. The conclusions we draw from them are subject to interpretation and are dependent on the number and type of elements we take into account when building the insights. These elements can be numerous, but will never be endless. After all, not all of them will be of value for the strategic choices we are facing.

But on the other side, as this chapter aims to demonstrate, we need to be careful to use a sufficient amount of elements or ‘dimensions’ in our insights, to reach the level of granularity with which conclusions become as ‘unambiguous’ as possible. There is a simple rule anyone can use: just as long as people involved in the decision process are still arguing about the interpretation of the data (‘what does it mean?’) instead of the decision at hand, it means that the market insights has not yet reached the ideal level of granularity. Dig deeper.