A total addressable market or TAM is the available market for a product or service. That is a metric usually leveraged by startups to understand the business potential of an industry. Typically, a large addressable market is appealing to venture capitalists willing to back startups with extensive growth potential.
A microniche is a subset of potential customers within a niche. In the era of dominating digital super-platforms, identifying a microniche can kick off the strategy of digital businesses to prevent competition against large platforms. As the microniche becomes a niche, then a market, scale becomes an option.
In simple terms, market validation is the process of showing a concept to a prospective buyer and collecting feedback to determine whether it is worth persisting with. To that end, market validation requires the business to conduct multiple customer interviews before it has made a significant investment of time or money. A transitional business model is an example of market validation that helps the company secure the needed capital while having a market reality check. It helps shape the long-term vision and a scalable businessmodel.
Market orientation is an approach to business where the company focuses more on the behaviors, wants, and needs of customers in its market. A company will first target a niche market to prove a commercial use case. And from there, it will create options to scale.
In a tech-driven business world, companies can move toward market expansion by creating options to scale via niches. Thus leveraging transitional business models to scale further and take advantage of non-linear competition, where today’s niches become tomorrow’s legacy players.
Digital and tech business models can be classified according to four levels of transformation into digitally-enabled, digitally-enhanced, tech or platform business models, and business platforms/ecosystems.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable businessmodel. And as the product is offered at wider and wider market segments, it’s important to align product, businessmodel, and organizational design, to enable wider and wider scale.
Developing a successful business strategy is about finding the proper niche, where to launch an initial version of your product to create a feedback loop and improve fast while making sure not to run out of money. And from there create options to scale to adjacent niches.
Key Highlights
TAM, SAM, and SOM: These are metrics used by startups to understand the market potential for their product or service. TAM (Total Addressable Market) is the total available market, SAM (Serviceable Addressable Market) is the portion of the TAM that the business can realistically target, and SOM (Serviceable Obtainable Market) is the subset of SAM that the business can realistically capture.
Niche Targeting: Niche targeting involves identifying a specific subset of potential customers within a broader market. This approach can be effective for digital businesses to prevent competition against large platforms. As the niche grows into a market, scalability becomes a viable option.
Market Validation: Market validation is the process of testing a concept with potential buyers to determine its worth. This involves collecting feedback from customer interviews before making significant investments in time or money. Transitional business models can be used for market validation to secure capital while gaining market insights.
Market Orientation: Market orientation focuses on understanding and addressing customer behaviors, wants, and needs. It often starts by targeting a niche market to prove the commercial viability of a product. From there, options to scale can be explored.
Market-Expansion Strategy: In the tech business landscape, companies can expand their market presence by targeting niches. Transitional business models can help companies scale further and take advantage of non-linear competition dynamics.
Stages of Digital Transformation: Digital business models can be classified into levels of transformation: digitally-enabled, digitally-enhanced, tech/platform business models, and business platforms/ecosystems.
Platform Business Model Strategy: Platform business models create value by facilitating interactions between different user groups. These models often have two sides: supply and demand. Effective initiation of interactions between these sides is crucial for platform success.
Business Scaling: Scaling a business involves transforming the product from being validated within a small market segment to capturing wider market segments. It requires aligning the product, businessmodel, and organizational design to enable broader scale.
Strategy Lever Framework: Developing a successful business strategy involves finding the right niche, launching an initial version of the product, gathering feedback, and iterating. The goal is to create options for scaling to adjacent niches.
Framework
Description
When to Apply
Advantages of Following It
Drawbacks of Not Following It
TAM (Total Addressable Market)
The total addressable market is the entire market for a product or service, representing the full revenue potential if a company captures 100% of it. It is used by startups to assess industry potential and attract investment.
When evaluating business opportunities and seeking funding.
1. Attracts potential investors with the promise of significant growth. 2. Provides a clear picture of the market size and revenue potential.
1. May overestimate the market size and growth potential. 2. Can lead to unrealistic expectations and investment strategies.
Niche Targeting
Microniche targeting involves identifying a small, specialized subset of potential customers within a niche market. It allows businesses to start small and prevent competition from larger platforms.
When entering competitive markets or seeking a unique market position.
1. Reduces competition by focusing on a specific, underserved segment. 2. Enables businesses to establish a strong presence in a specific niche.
1. Limited growth potential if the microniche remains small. 2. Risk of market saturation if the niche becomes popular.
Market Validation
Market validation is the process of gathering feedback from prospective buyers to determine if a concept is worth pursuing. It helps shape a scalable business model and secure needed capital.
Before making significant investments in a business concept.
1. Minimizes the risk of developing a product with no market demand. 2. Shapes a business model based on validated customer needs.
1. Lack of market validation can lead to wasted resources on unviable products. 2. Difficulty securing funding without market evidence.
Market Orientation
Market orientation focuses on understanding and fulfilling customer wants and needs. It often starts with targeting a niche market and gradually expanding based on customer insights.
When aiming to build strong customer relationships and adapt to changing demands.
1. Enhances customer satisfaction and loyalty by meeting their specific needs. 2. Allows businesses to adapt to market changes and evolving customer preferences.
1. Risk of overlooking broader market opportunities by staying niche-focused. 2. May require constant adaptation and flexibility.
Market-Expansion Strategy
A market-expansion strategy involves leveraging transitional business models to scale by capturing multiple niches. It allows businesses to grow beyond their initial niche market.
When aiming to expand market reach and capitalize on non-linear competition.
1. Enables companies to enter new markets and increase their customer base. 2. Takes advantage of network effects as niches expand.
1. Without a market-expansion strategy, growth may be limited to the initial niche. 2. Missed opportunities for capturing adjacent markets.
Stages of Digital Transformation
Digital transformation stages categorize businesses based on their level of digital integration, from digitally-enabled to platform-based ecosystems.
When assessing the digital maturity and transformation progress of a business.
1. Provides a clear roadmap for businesses to advance in their digital journey. 2. Helps businesses stay competitive in the digital era.
1. Lack of digital transformation may result in falling behind digitally-driven competitors. 2. Missed opportunities in leveraging technology for growth.
Platform Business Model Strategy
Platform business models create value by facilitating interactions between users or groups, leveraging network effects. They typically involve two sides: supply and demand.
When building a platform-based business model or expanding into platform strategies.
1. Can harness the power of network effects for exponential growth. 2. Creates opportunities for monetizing interactions and user data.
1. Failure to establish interactions between supply and demand can hinder platform success. 2. Risk of competing with established platforms.
Business Platform Theory
Business platform theory explores the principles and strategies behind building successful platform-based businesses.
When developing or analyzing platform-based business models and strategies.
1. Offers insights and guidelines for creating and scaling platform businesses. 2. Helps understand the dynamics of platform ecosystems.
1. Lack of understanding platform dynamics may lead to suboptimal platform strategies. 2. Missed opportunities in platform-based business growth.
Business Scaling
Business scaling is the process of transforming a validated product into a viable business by reaching wider market segments. It involves aligning product, business model, and organization for growth.
When transitioning from product validation to reaching broader customer segments.
1. Enables businesses to capitalize on validated products and expand their market reach. 2. Aligns the organization and resources for scalable growth.
1. Without effective scaling, a validated product may fail to capture larger market segments. 2. Risk of resource misalignment and inefficiency.
Strategy Lever Framework
The strategy lever framework emphasizes finding the right niche for initial product launch, creating feedback loops, and scaling into adjacent niches for business growth.
When planning business strategy, product launch, and scaling efforts.
1. Provides a structured approach to entering markets, iterating, and scaling effectively. 2. Helps prevent resource wastage and misdirection.
1. Lack of a clear strategy lever framework may lead to uncoordinated efforts and inefficient growth. 2. Missed opportunities for targeted expansion.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
