The Big Picture, Not a Snapshot in Time
By Ken Donaven
We’ve urged caution about the dangers in relying on “bottom-up” insights alone when working to analyze a given market size — advocating for the process of “triangulation” that too few explore when doing Market Size Analyses. In an ideal situation, you do not rely solely on survey data to attain the market size intelligence you’re looking for. Nor are you simply interviewing the company leadership, competitors and industry experts for their anecdotal, top-down analyses. In a perfect world, you use both methodologies and scour publicly available information and published reports to provide the triangulation stool with three solid legs and firm standing.
In a similar vein, we feel it is important to caution against doing such analysis in a vacuum, or as a one-time evaluation. Especially in times of volatility and market dynamism, things change…and change quickly. What is true today might not be true tomorrow. And what was true yesterday may not be the complete story of where we are today.
Instead, it is important to approach market sizing studies holistically — both vertically and horizontally. By vertically, we mean depth: the aforementioned triangulation approach and the application of both quantitative and qualitative methodologies to ensure that the totality of relevant inputs is being considered, so that deep, authentic, meaningful and complete insights can be attained and analyzed.
Horizontally, then, refers to the full timeline of relevant events that make what we learn about the current market size more relevant, clear and actionable. It’s not a point in time (the present) that we need to understand, but rather the past, present and future of the given market, so that the intelligence can provide a competitive advantage for our clients, both today and in the future..
In other words, it’s not just a matter of the size of the market, but rather why, and how we should respond, position and innovate to improve market standing, future outcomes, and overall profitability.
Horizontal Analysis: Past, Present and Future
The best place to start is right at the very beginning. And the beginning almost always occurred in the past — not where we sit today. For a full-spectrum, horizontal Market Size Analysis, we study, analyze and understand the three primary chapters in the market’s history.
Historical Market Growth. We often begin by looking at trends and data from the past three to five years in the market being studied. Has the market expanded, contracted, or remained stagnant? What are the influencing factors that contributed to, or even caused, the change…or lack thereof? Did a major player enter or exit the market? Were there technological advancements or other innovations that impacted the market size? Was there an identifiable shift in market demand or consumer preference and behavior? And what, if any, relevance do any of the historical events have on the present and future of the market?
Present Market Size. Of course we want to understand the current reality as well. But we want to make sure we are fully understanding the complete picture of the market size as it exists today. The only way to do that is triangulation — the synthesis of studying published reports, gleaning top-down analysis, and capturing bottom-up insights. Once we feel confident about what the past says about our present state of affairs, we can begin to “predict” the future.
Projected Market Growth/Contraction. When you are able to have meaningful conversations with sometimes difficult-to-reach industry players that have a true finger on the pulse of market dynamics, you can attain a deep understanding of what the “insiders” are expecting, projecting, and perhaps even “betting” on. Perhaps there’s a game-changing market trend or innovation on the horizon. (There were a few clamoring about the future of AI not too long before it emerged as a world-changer, for example.) We rely on these expert voices to reliably project what significant changes or external factors might be coming down the pike. Perhaps what we learn will suggest that the market is poised to grow steadily (or even exponentially); or maybe the market is due to contract because it’s becoming oversaturated. In some cases, cost considerations may cause customers to consider older, low-tech solutions that “get the job done” at a much lower cost.
For example, at the same time when most media reports were extremely bullish about the near-term future of the electrical vehicle market, many industry insiders knew that access to the raw materials necessary for battery manufacturing was problematic and consumer adoption in the real world was far underperforming versus often pie-in-the-sky projections. Those prognosticators and foretellers are typically out there; you just need to know where to find them and how to access their inside intelligence. Without them, the Market Analysis is missing important pieces to the puzzle.
Headwinds, Tailwinds and How to Tack for Smooth Sailing Ahead
If you want to truly understand the external forces and future events with the potential to either bolster or hinder your future growth and profitability, it’s best to examine them in their totality. And not just once. Market Size Analysis is most effective when it’s executed in a time-series fashion, so that the proverbial finger can be kept on the pulse, now and going forward. Conceding that the only constant is change, it would be incomplete at best and dangerous at worst to assume that a single study capturing a snapshot in time is enough to inform the decisions you will make in the future.
If you take the long view, on the other hand — looking both backward and forward — you can more confidently project future market realities that will allow you to better plan for today and the future. Whether facing headwinds or being bolstered by tailwinds, big and weighty strategic decisions should be grounded in the most accurate read on reality, whether it’s in product development, a merger and acquisition strategy, market diversification, or even marketing and advertising plans.
Who, what, where, when and why. They’re all important to consider and understand, so that you know how to optimize and strategize for whatever the future may hold. Off-the-shelf reports are typically chronicles of past events or an accounting of existing reality. And that’s usually not enough to get the full analysis of market size and opportunity.
Because, as they say, past performance is no guarantee of future results.
Ken Donaven serves as Senior Director with Martec. He can be reached at [email protected].
