The coronavirus pandemic has abruptly disrupted the business models of many startups. Markets have collapsed, customers are changing their spending behavior, and suppliers are going out of business. As a result, your value proposition and business model may no longer be valid.
So, to survive this crisis, companies need to quickly adapt to the new circumstances. They need to find new markets and customers as well as generate new business models. But, how?
During my career, on several occasions, I was asked to turn-around a struggling business. In those cases, I faced similar challenges to those that many startups and existing companies are facing today. I had to use existing assets, technologies, and capabilities to develop new value propositions and business models. Consequently, I’ve designed a simple four-step process that produced great results.
Recently, I was happy to learn that the Lean Startup team have developed a new tool — the Market Opportunity Navigator — that can help entrepreneurs discover new opportunities. This tool actually embodies my process, but in a nice structured format. Furthermore, it expands on my original process to create a broader, long-term growth strategy.
However, in this post, I will focus on my process. I think it’s simple, fast, and most importantly, effective.
How to Find new Markets and Customers
Step 1 – Define Your Core Technologies and Capabilities
The goal of this step is to clearly and objectively list your company’s core capabilities. Therefore, this requires that you and your team be as objective and honest as you can. You need to define in simple terms what is it that your technology does, or can do. Also, what are your main capabilities, know-how, and IP? What real assets do you have?
For instance, these can include technologies and products that you have developed, skills and unique experience that your people have, etc. The goal here is to create a list of real abilities that your company has. Moreover, you should spell out these capabilities in simple terms that are not application specific.
For example, one of my previous companies developed a highly-integrated microprocessor that was originally designed for the PC market. However, we decided to exit that market. But, we wanted to repurpose that product. We realized that what we really had was an x86 microprocessor that was much smaller in size, consumed much less power, and had a much lower cost than an Intel CPU. Defining its core capabilities in these abstract terms enabled us to identify new and better market opportunities for that product. As a result, I built a whole new business unit that focused on new market segments. That business went on to be highly profitable.
Step 2 – Identify Which Problems can be Solved with your Core Capabilities
Once you have a list of your core capabilities, you can search for new applications or problems that you can address. For instance, if we use my CPU example above, you can start your search by asking: what applications require good CPU performance but have limited space (need a small footprint)? Or, what applications need good performance, and yet, have severe constrains on power consumption or heat dissipation? Also, what CPU market segments are very cost driven?
Such questions, derived from your core capabilities, can lead you to identify several new applications. Ideally, you want to identify significant problems that your core capabilities can uniquely solve. And, that can give you a strong value proposition.
Step 3 – Identify Which new Markets Segments and Customers you can Serve
Next, for each application that you have previously identified, you need to find new markets and customers.
For example, using our famous microprocessor above, let’s assume that one of its potential applications are tablets. So, your target customers could be developers and manufacturers of such devices. And, for a thin client terminal application, your list of customers will be a different set of manufacturers.
The idea is to be as specific as you can in order to identify new and unique market segments. This can consequently give you a significant competitive advantage and value proposition.
For example, in our CPU case, we were able to identify, what was at the time, an emerging market of thin client computers. We moved quickly and developed an optimal platform for that market, based on our existing x86 processor technology. As a result, we won a dominant position with greater than 80% market share. And, that led to a fast growth, highly profitable business.
Step 4 – Prioritize your new Market Opportunities
After developing a list of new opportunities, it’s time to select the best one. This step is always challenging.
First, each person on your team has her own preferred application or market. Second, there could be more than one really good opportunity on your list. And, there is the fear of selecting the wrong opportunity. However, it’s essential that you select one, and only one opportunity to focus on.
The best method to make this decision, while addressing the above issues and concerns, is to create an objective list of criteria. In a previous post, I offered a method to select your target market. The list of criteria, which I suggest there, is very much applicable to this exercise. And yet, you can also go with the list that’s offered in the Market Opportunity Navigator toolkit. I find it also to be very useful.
Whichever criteria you choose, make sure that it evaluates both the potential and risks of each option. Most importantly, the end result should be a ranked list of opportunities from 1 to n. From here you can proceed to developing your new business model and work plans.
Looking Beyond Survival
In summary, this crisis will not be a short one. Indeed, many experts also expect the recovery to be slow. So, while you need to adapt fast and find new markets and customers in order to survive, you should also continuously monitor your markets for additional opportunities.
Look beyond the immediate opportunities of existing customers and markets, and think how you can identify new and emerging market opportunities.
Because, inevitably, every crisis brings with it new opportunities. New problems to solve, and new needs to serve. And those companies that can be first to spot them, can do more than simply survive, they can thrive.
[Image credit: Bulat Silvia, HBR]