This is the second posting in my series of “Five Steps to Technology Commercialization.” Earlier, I introduced a commercialization framework for new and innovative business development (click here to read it).
Similar to designing your business, this step needs to be completed before you embark on development. The key objectives of articulating your Go-To-Market Strategy are:
- Articulate why your target market(s) care about your product/service, i.e., your value proposition
The importance of this step is obvious to many people but it is difficult to actually do it. Putting yourself in the shoes of your target customers and thinking like them require effort. It is not a do-it-yourself-at-your-spare-time activity.
- Specify your market penetration strategy and articulate how you intend to do so
Many people develop top-down market estimates, which look like this: “Global market is $X billion, my geographic target is $Y hundred million, I will capture very conservatively 1%, resulting in a $Z million market.” I’d rather see a bottom-up approach: “There are X thousand organizations that could use my product/service, each spends $Y on my product/service and takes D days to make their purchasing decisions. I am budgeting Z full-time-equivalent sales people in my financial forecast. As a result, I will target so-many dollars in my first, second and third years.” This approach helps you identify how you penetrate the market with realistic assumptions.
- Design your market penetration experiments to validate them
Everything you have done so far is based on assumptions. Specify small, quick and cheap experiments to validate as many of them as possible early on. Some of these experiments can only be done when you have prototypes, some earlier. If you know who you will sell to and how they will buy (see earlier steps), you can design your validation experiments without ambiguity.
- Develop financial forecasts
Financial forecasts help you in two ways:
- Understand your cash flow situation – While you are creating your financial forecast, you are forced to make assumptions about your fixed and variable expenses. Write down your assumptions and monitor them when you move to later phases of commercialization.
- Establish financial targets – Yes, your forecasts are just guesses but they also set targets for you. If you cannot generate the revenue you forecasted, you have to take action. If you do generate more revenue (fast growth), you need to take action. If your fixed or variable expenses are different from what you forecasted, you need to take action. I guess you understand what I am trying to say here. Your “estimates” become your targets in operations.
Here is how you achieve these objectives:
- Create industry map(s) for target markets and plan actions to penetrate them.
- Self and competitor analyses (tools like SWOT, Five-Forces help).
- Definition of product and process requirements for target markets. Product/service requirements and mapping those requirements to the key features that your target customers want/need.
- Validation of (1) & (2) through early proof of concepts & market contact.
- Pricing and marketing strategy. It is hard to get your pricing right the first time around. Think of it early on and check out market reaction.
- Financial forecast (3- to 5-year) model. It is best to prepare the first year monthly, the rest quarterly. Anything beyond year-three is a wild guess but do it now and modify when and if you ever make to your forth year.
I welcome your comments on my blog. Please share this posting if you find it helpful. If you have any questions, comments or thoughts, I would love to hear from you.