Exploration & Discovery

New markets and diversification

Economic history suggests that one in four forays into new markets fails. If we consider it’s parallel in diversification projects, the number just goes up. It’s not a pretty sight. Errors are made by experienced executives and start-ups alike. Usual suspects can be cognitive biases or over-reliance on inside views. However, the factors that make entry successful are generally agreed: timing, relative scale of competition, ability to leverage complementary assets and so forth. So, why so much failure all around us? Especially, when the costs of miscalculation can be so high.

Happily, there are a number of steps that executives and start-up founders alike can use to mitigate some of the cognitive biases that loom over them.

Just to provide some examples: objective predictors of success can be used to build a reference class of similar entry decisions made in the past by other companies. The resulting comparative data will provide invaluable reality-checks. Internally, we may complement this with industry lifecycle analysis as well as involving management from diverse parts of the organisation to better understand the inter-relation behind decision making on key items like value propositions, capabilities, market size, competitive landscape, market share or costs. The key benefit here is eliminating the confirmation trap, which is the act of searching for information to confirm our own hypotheses. This is achieved by bringing broader data-sets to the decision making table.

Other key items to consider

  • Improve the inside view by removing internal bias from the decision making process
  • Evaluate the core value proposition skills which are necessary (Hint: the closer you stay to core, the higher likeliness of success)
  • Potential competitors: the new market might be worse or simply different than you thought!
  • What share and revenue can be reached? Failing to factor in the likely market responses is a typical error
  • What’s the price tag of the new entry or diversified service? Failing to calibrate this well can make or break the venture
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At Vaibmu we address these issues with our customers in a disciplined and agile manner, so together we can build the most objective and transparent picture. We have worked with media companies, start-ups, SaaS platforms, SMEs and public service organisations globally, assisting them in making more robust market entrance decisions.

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Case Studies

Market assessment for a global media player into a new market for digital classifieds

Vaibmu was requested to make a market analysis for a global media company looking to deploy it’s existing successful classified advertising platforms in both C2C and B2B segments in a new geography.

Approach

  • Assembly of a reference class, identifying and documenting six similar decisions made in the recent past
  • Competitive benchmark of +12 native digital players and traditional players on the market
  • Analysis of value proposals
  • Analysis of capabilities
  • Market size
  • Share
  • Revenue
  • Operating costs estimates
  • Benchmark of innovative upstarts and alternative models (from quantitative research on-site)
  • Overview of regulatory environment (media, transaction platforms, digital payments)

Deliverables

  • Reference class analysis
  • Comprehensive competitive benchmark report
  • Conclusions on market structure
  • Recommendations and Action Plan

Outcomes

  • The analysis was used by the Board to make a market entrance decision worth in excess of 28M euros.
Finnish online start-up seeking a fast validation of the Spanish market

A Finnish start-up company which offers a B2B platform for global business tendering wanted a short project to gauge interest of its core customer group in the Spanish market.

Approach

  • Assemble a list of 50 valid companies in the core target customer group (Madrid, Barcelona)
  • Conduct solution interviews with key decision makers to achieve first insight into their perception of the service
  • Follow-up with high interest companies
  • Arrange management interviews for the customer to make on-site sales visits

Deliverables

  • Report of companies inclusive of key data (sector, size, key contacts)
  • Report on solution interview outputs and consolidated conclusions
  • Plan for immediate action high interest companies
  • Plan for follow-up action on remaining target customers

Outcomes

  • As a result of this light and fast project the Finnish company secured it’s seven first Spanish customers and opened discussions with a further 17 from the initial target group.
UK tech provider to the media industry seeking selected international markets

A UK based tech provider with a strong domestic footprint but no international operations wanted to prioritise three strategic European markets for expansion. They were looking to launch an existing and profitable product and to test demand for a new product undergoing customer-testing in the UK.

Approach

  • Pre-evaluation of 17 markets on key aspects (size, competition, value proposal)
  • Prioritisation, based on previous, of three strategic markets
  • Competitive analysis of each market, including predictors of success (size of entry vs minimum efficient scale; relatedness of market entered; complementary assets; order of entry; stage of the industry life cycle; level of technological innovation)
  • Solution interviews with 12 target customers in each of the three markets (for core product)
  • Problem interviews with 15 target customers in each of the three markets (for new product)
  • Analysis of value propositions and capabilities per new market
  • Potential market sizing per new market
  • Competitive analysis per new market 
  • Estimations of market share and revenue per new market
  • Cost estimates per new market

Deliverables

  • Prioritised market entry plans
  • Action plan and order
  • Analysis of solution and problem interviews
  • Report with full data and strategic recommendations
  • Annex on test product and strategic recommendations

Outcomes

  • The client used the analysis and recommendations to successfully enter two markets; deferred entrance to a third one by one year. Test product was launched in domestic markets and a launch plan was revised one year later for international deployment. 

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