Market Strategy Development Series
ENTREPRENEURWORKBOOKSMarket Strategy Development SeriesBuilding Block 1The Analytical FoundationMaRS Discovery District, December 2009See Terms and Conditions
MaRS – Market Strategy Development Series MARKET STRATEGY DEVELOPMENTIntroduction: What to expect?In his book Outliers, Canadian author Malcolm Gladwell looks at the relationshipbetween statistical probabilities and the chance of success in your chosen field ofwork or sports. His essential claim is that you need around 10,000 hours of practiceto become really good in a particular field.This workbook will not take 10,000 hours to complete, so you should not expect thatyou will become an expert in Market Strategy by going through the activities outlinedwithin. Rather, the purpose of the workbook is to help you understand and focus onthe key issues in the field of Market Strategy, and to introduce you to frameworkswithin which to think and discuss essential areas of your business. The processoffered will provide sufficient grounding in the topic so that you will know whatquestions to ask advisors and consultants, and, in the case of consultants, how toevaluate their work.Additionally, this workbook provides a launch point for a number of vital businessdecisions you will have to make to develop your start-up. As a best practice, itis critical to return to these workbooks and revisit facts and assumptions on acontinuous basis. This will ensure not only that you build on your learning experiencebut that you adjust your assumptions to maintain the right course for your business.Building Block 1: The Analytical FoundationThis workbook is part one of three covering market strategy. It is designedspecifically for entrepreneurs in the high-tech space.The market strategy development process consists of three major parts, or “BuildingBlocks,” each adding to the foundation of the previous one:Building Block 1:Building Block 2:Building Block 3:The Analytical FoundationCritical Value FactorsStrategic Marketing ApproachEach of these Building Blocks addresses an essential part of your market strategy.Once you have finished all three workbooks, you will have a complete marketstrategy document for your company.With this document in hand, you will be ready to begin work on tactical programsdesigned to implement your strategy, including sales, marketing communications,and product management.Business Planning: If you are seeking external financing, the market strategyworkbook will also help you generate most of the analytical information you need tocreate a business plan, a pitch deck and other required documents.Part 1 – The Analytical Foundation
MaRS – Market Strategy Development Series How to use these workbooks1. Make it a team exercise—but make it quick!Creating a market strategy can be very time-consuming, especially if you do a lotof market research upfront. But it does not have to be. We believe that much of theinformation you need is already known to your management team and advisors, sowe recommend that you make the creation of your market strategy a team effort.However, time is of the essence for high-tech start-ups. Work through the BuildingBlocks thoroughly, but as efficiently as possible.2. Record and test your assumptionsAs you go through the exercises in these workbooks, record all your key assumptionsin the accompanying planning document so you can test them later. This will behelpful when you do your market research, which will validate (or invalidate) the keyassumptions you made when creating your market strategy.3. Use the icons for helpThe workbooks are structured under the assumption that this is the first time you,the reader, has undertaken a market strategy planning exercise. To help providecontext for some of the ideas in these workbooks, we have clarified the ideasby defining key terms and offering real-world examples. In addition, we haveprovided links to online articles. For this reason, you may find it easiest to use theseworkbooks on a computer with an Internet connection.Look for these icons:denotes a key HR term that will recur in these workbooksindicates an example drawn from a real-world business in order toillustrate an important ideadenotes a link to a more in-depth online article, video or templateappears wherever you are asked to record something in theaccompanying planning document while com pleting the exercisesindicates key information for your business plan, pitch deck or otherdocuments you might be preparing for potential external investorsPart 1 – The Analytical Foundation
MaRS – Market Strategy Development Series AssumptionsThese workbooks are designed to assist entrepreneurs and leadership teams in earlystage high-tech companies with discontinuous innovations—that is, offerings that arefundamentally new to the market.The workbooks are based on tried-and tested-strategy concepts and marketingtheories that are relevant for start-ups within a wide range of industries includingmedical devices, software, clean-tech, advanced materials, and high-tech electronicand IT products. They are less relevant for start-ups in the biopharmaceuticalindustry, because of the regulatory environment surrounding that sector.Many start-ups in Ontario fall into a broad group that is variously called Web 2.0,interactive media, or digital media. These companies build businesses using theInternet as an access/distribution platform for applications they developed usingstandard web technologies. In most cases, their offerings are not truly discontinuousinnovations: they are evolutionary rather than revolutionary. These companies willstill find these workbooks helpful, but should assume that their starting point is theChasm (see below).Before you startBuilding a market strategy in the technology industry is a bit like playing the dark,because entrepreneurs may know little about the market—and the market, in turn,knows very little about their technology. In trying to improve this situation for ourclients, we decided to take the work of Geoffrey Moore (author of Crossing theChasm) and Paul Wiefels (author of The Chasm Companion) as starting points forthis series of connected workbooks on market strategy. Both authors are well-knownexperts in the field of technology marketing, and many in the technology industrywill be familiar with their work.A key concept in their work is the observation that technology markets developdifferently than normal market lifecycles. In Crossing the Chasm, Moore points outthat, following a time in the Early Market, disruptive technologies enter a pause ofindeterminate length in their market development which he calls “the Chasm” (seefigure below).Part 1 – The Analytical Foundation
MaRS – Market Strategy Development SeriesNote: In these workbooks, we will focus on the first three stages: the Early Market,the Chasm, and Niche Markets. These are the most relevant for start-ups. Once acompany is ready to move beyond these three stages, it is typically able to hire thestaff and service providers needed to grow.For those who are not familiar with the Chasm theory and its implications, thefollowing link (see icon) will take you to an article summarizing its key ideas.Much of the terminology introduced in this article will be used throughoutthese workbooks. We strongly advise you to familiarize yourself with thetechnology adoption lifecycle before moving on to the market strategyprocess. In the figure below, we have used an example to illustrate the Chasmtheory.Learn more about using the technology adoption lifecycle.Part 1 – The Analytical Foundation
MaRS – Market Strategy Development SeriesLanguishing in the ChasmHere is an example of the Chasm, as described by marketing guru GeoffreyMoore:One of the hottest technologies in the early 1980s was artificial intelligence(AI). Dubbed “brains in a box,” AI was featured on the covers of majormagazines and newspapers, and early adopters embraced pioneering companiessuch as Intellicorp, Symbolics and Teknowledge. They saw the potential for usingcomputers to help humans make better decisions.However, almost three decades later, the early majority in the mainstreammarket has still not embraced artificial intelligence. There are many obstaclesyet to overcome: its incompatibility with familiar hardware, its inability tointegrate with existing systems, and a lack of people with the specialized trainingneeded to use it effectively. Several businesses continue to develop artificialintelligence, but none of them trumpet that phrase in their marketing material.Although it remains a promising technology, AI is still languishing in the Chasm.Source: Moore, G. A. (2006). Crossing the Chasm: Marketing and Selling Disruptive Products toMainstream Customers. New York: Collins Business Essentials.Part 1 – The Analytical Foundation
MaRS – Market Strategy Development SeriesBuilding Blocks of Market Strategy DevelopmentPart 1 – The Analytical Foundation
MaRS – Market Strategy Development SeriesBUILDING BLOCK 1: The Analytical FoundationThis section will help you generate the basic insights and background data needed tocreate a market strategy. It will address the following questions: Where are you?Why are you here?Where are you headed?What are your options?1. Mission Statement & Business Ideaa. Mission statementA mission statement explains your reason for being in business. Developing it shouldbe a team exercise: everyone should agree on what it says about your company. Agood mission statement will have a motivating effect on your organization, so youshould formulate it carefully.A mission statement may be as brief as one sentence, or as long as several pages.Use the following questions as guidance: What business are we in? What (generic) needs do we serve?Why do we exist?What is the scope of our business? What markets do we (and don’t we)occupy?How do we believe these markets will grow and develop in the future?What type of organization is this? What assets and skills do we bring to themarket?How do we serve our customers?For the purposes of this exercise, we suggest keeping the mission statement short—about a sentence in length.Learn more about formulating a mission statement.Part 1 – The Analytical Foundation
MaRS – Market Strategy Development SeriesExamples: Mission statements3M: To solve unsolved problems innovatively.Amazon: To be Earth’s most customer-centric company; to build a place wherepeople can come to find and discover anything they might want to buy online.Bayer: To prevent, diagnose, alleviate and cure diseases; to contribute toensuring a sufficient supply of high-quality food for an ever-increasing globalpopulation; and to help people to lead fulfilling, active lives through thecontributions made by our products in the fields of communications, mobility,sports and home living.Bristol-Myers Squibb: To extend and enhance human life.Bullfrog Power: To provide practical energy choices that enable people tocreate a sustainable world for future generations.Dell: Dell listens to customers and delivers innovative technology and servicesthey trust and value.Facebook: To give people the power to share and make the world more openand connected.Google: To organize the world’s information and make it universally accessibleand useful.McDonald’s: To be our customers’ favorite place and way to eat.Nike: To bring inspiration and innovation to every athlete in the world.Opera Software: To deliver the best Internet experience on any device.Write your company mission statement in the corresponding section ofthe Analytical Foundation planning document.Part 1 – The Analytical Foundation
MaRS – Market Strategy Development Series10b. Business ideaWhile the mission statement defines the space you operate in and the high-levelreason for your existence, the business idea defines your specific concept, productor invention. The purpose of this section is simply to describe the key aspects ofyour idea so that we have a clear understanding of the starting point for the marketstrategy process.In the corresponding section of the Analytical Foundation planningdocument, describe your business idea. (If your product is not yetready for launch, describe what the product will be like at the time oflaunch). Use the questions below as a guide. What is the name of your business/product/service idea?What kind of problem do you solve for the customer? Is this an importantproblem for these customers? Is there a big potential market for your idea?What is your competition and how do they solve this problem for theircustomers today?What makes you qualified to solve this problem better than your competitors?What is unique about your way of solving the problem? Is your uniquenesssustainable over time or will others be able to copy your idea easily?As you describe your business idea, bear in mind the assumptions on which youridea rests, including customer problems, market potential, competition and your ownqualifications.Once you’ve defined your business idea, the remainder of the market strategyprocess will help you systematically validate the rationale and assumptions behindyour business idea. It will also flesh out the market approach via a succinct valueproposition (Building Block 2), and a sound business model and strategic marketapproach (Building Block 3).Part 1 – The Analytical Foundation
MaRS – Market Strategy Development Series112. Setting ObjectivesSetting objectives will help your company stay focused during its strategic andtactical decision-making. Start-ups tend to be consumed by the needs of shortterm survival, without much opportunity to think about the long-term. However, itis important for young companies to regularly analyze their business to determinewhere they would like to take it. Together with the rest of the leadership team,you should map out your key objectives on a quarterly basis for the next 12 to 18months to make sure you stay on track.In the early stages of the start-up, your objectives will be mainly financial: liquidity,cash flow, and financing. A number of marketing objectives are intertwined withthese financial objectives. Potential investors will be concerned about your product’smarket possibilities, so be prepared to do the following: demonstrate that your target market is big enough to allow your company togrow recruit charter or pilot customers in the target market, and generate positivefeedback as evidence of market acceptance validate your business model by showing you can produce an attractive mix ofrevenue show market momentum by adding customers and revenue from quarter toquarter prove scalability by ensuring that the cost of new customers is substantiallyless than the revenue addedRead more about setting objectives.Note that setting objectives is an ongoing process: you may have to revisit andchange your objectives as you learn more about your market and customers.Changes in areas such as technology, financing, competition and the regulatoryenvironment may also require you to revisit your objectives.External investors will want to know the milestones you haveachieved, and which you will target over the next 12 to 18 months.Part 1 – The Analytical Foundation
MaRS – Market Strategy Development SeriesExamples: Market objectivesIn 2009, Bayer HealthCare plans to achieve currency-adjusted growth ratesahead of the market average in all divisions, aiming to further improve theEBITDA* margin before special items toward 28 percent.In the direct-to-consumer communications of Bristol-Myers Squibb, the goalis to have the right patient get the right medicine at the right time.Google’s goal is to provide a much higher level of service to all those whoseek information, whether they’re at a desk in Boston, driving through Bonn orstrolling in Bangkok.Opera’s main business objective is to earn global leadership in the market forPC/desktops and embedded products.3M Canada’s goals are to achieve: growth, productivity, and customer satisfaction employee satisfaction the enhancement and protection of 3M’s reputation*EBITDA earnings before interest, taxes, depreciation, and amortizationWrite your market objectives in the corresponding section of theAnalytical Foundation planning document.Part 1 – The Analytical Foundation12
MaRS – Market Strategy Development Series133. Internal and External Analysis (SWOT)After your team has agreed on market objectives, it is time to consider yourcompany’s strengths and weaknesses (an internal analysis), and to assess theenvironment in which you will conduct business (an external analysis).A common framework for this discussion is called SWOT: Strengths, Weaknesses,Opportunities and Threats. A SWOT analysis provides a solid basis for consideringstrategic choices. It is also versatile, as it can be applied to a product, business unitor an entire company. It has two key purposes: to help a company determine itsstrategic goals, and to provide the foundation for developing a strategy.Read more about SWOT analysis.Many have suggested the acronym should be TOWS, since the analysis starts withthreats and opportunities (i.e., the external analysis) before moving on to theinternal analysis.a. External analysisBusinesses use a number of common frameworks to evaluate their threats andopportunities: a PEST analysis, an industry analysis, the technology adoptionlifecycle, and a market analysis. While this might sound like a lengthy process,remember the initial premise for these workbooks: work quickly based onthe information that you and your team already know. As you go through thevarious analytical frameworks, you may realize you are unsure of certain facts;in these cases, make an assumption—a qualified guess, if you like—and moveon. The accompanying planning document has a section where you can recordyour assumptions so you can test and validate them once the market strategydevelopment process is finished, before you implement the strategy.Read more about PEST analysis.I. PEST analysis: PEST is an acronym for Political, Environmental, Social/Culturaland Technological market forces. This framework summarizes high-level trends asthey relate to your target customers, markets and technology. The key outcome ofa PEST analysis is the identification of opportunities and threats relevant to yourbusiness idea, including indicators of market size.Conduct a PEST analysis by answering these questions: What key political and regulatory changes are taking place now? How do thesechanges affect your market and customers? How do these trends affect yourPart 1 – The Analytical Foundation
MaRS – Market Strategy Development Seriesindustry, as well as your suppliers, partners and customers? Are economic changes affecting your company, your customers or yoursuppliers? Does this create opportunities, or does it threaten your marketpotential or your customers’ economy? What social and cultural changes are occurring? How are these changesrelevant to the potential of your business in the short- and long-term? What key technological trends are impacting your business? Consider alsotechnology changes that affect your customers and suppliers. Do any of thesechanges create opportunities or threaten your potential?Part 1 – The Analytical Foundation14
MaRS – Market Strategy Development SeriesExample: PEST analysisWhat might a PEST analysis look like for a grocery business in Toronto?Political factors In June 2009, Toronto enacted a bylaw forcing all retailers to charge at least5 per plastic bag. Concern is growing in the industry over the increased potential for theabuse of market dominance. Supermarkets in Toronto must now post a colour-coded health inspectioncard at the front door: green represents a pass, yellow if work is needed,and red if the store has been closed due to food safety issues.Economic factors Grocers face increased transaction fees imposed by credit and debit cardcompanies. Grocery stores expect to benefit from difficult
Building a market strategy in the technology industry is a bit like playing the dark, because entrepreneurs may know little about the market—and the market, in turn, knows very little about their technology. In trying to improve this situation for our clients, we decided to take the work of Geoffrey Moore (author of Crossing the
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1.2.2 The purpose of strategy-, mission, vision, values and objectives 7 1.2.3 Strategy statements 8 1.2.4 Levels of strategy 10 1.3 The Exploring Strategy Framework 11 1.3.1 Strategie position 12 1.3.2 Strategie choices 13 1.3.3 Strategy in action 14 1.4 Working with strategy 16 1.5 Studying strategy
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ZEV Market Development Strategy Overview 3. The Four Pillars of ZEV Market Development 6 Core Principles 8. ZEV Strategy Framework 10 GO-Biz’s Role 12. Current Status — Market Snapshot 14 Measuring Success (Metrics) 16. Roles and Responsibilities 19 The Process 24. Capturing Lessons Learned 26 Conclusion 27
