How To Evaluate Market Opportunity → When To Launch A New Product. Part 1, The Tools
A good article today is like any other (good) product: aligned with the audience (aka our lilliputian attention span), easy to get and with one single clear benefit/idea. So, I decided to split my initial work in three (yeah, that magic number) distinct parts:
The Tools, the fundaments: how the innovation is propelled (desirability, feasibility, viability), innovation models (Gartner Hype Cycle, Rogers/Moore technology adoption lifecycle), and the challenges (the Chasm, Death Valley)
The Box, connecting the dots: how the models can be unified and get one single view in evaluating market opportunity
The Toolbox, an use-case: evaluating market opportunity for smart home products
Have you ever heard about the KIDD framework for innovation? Sure you didn’t, because is not a framework (yet), is just the way I’m starting this article
The greatest ideas spark in discussions that combine four main ingredients: Knowledge, Interlocutor, Debate and Drinks.
It happened a few days ago, when a friend of mine (and a fellow product veteran), revealed that he was interviewed by Google and got this question: “Think on your entrance door. Tell me why this product is/isn’t good and how you would improve it.”
He argued the smart home market is still in its infancy, the early adopters phase. Smart locks haven’t yet scaled to mass market, main blockers being the lack of real benefits, technology understanding and privacy concerns.
On some points I agreed, on some not. Therefore, I dared to dig more and see who’s right and try to respond in an analytical way to the question: Is there a real, big, and actual market potential for smart locks?
Let’s see…
How is innovation propelled?
A game changer product/technology skyrockets by three engines:
- desirability → fuelled by people and their aspirations
- feasibility → fuelled by execution and engineers
- viability → fuelled by market and people’s needs
The lateral boosters (Desirability and Feasibility) are propelling the shuttle during the initial liftoff phase. Once the system overcame the forces that are pulling it back (gravity, inertia or mentality), the shuttle’s engine takes over and puts the spaceship on the orbit.
Desirability
Desirability is pure perception, it’s the most emotional driver from the three. Desirability is about people’s desires, not needs. It’s about how we are relating to subjects like global warming, security, privacy, future, and social status.
Back in 1995, Gartner analyst Jackie Fenn proposed a standard adoption model for new and emerging technologies. The Gartner Hype Cycle for Emerging Technologies is now an institution in high tech, with billions of dollars flowing across industries, according to how the dots are moving along the curve in the Gartner annual report.
For the sake of easy reference, let’s call it “The Waves” or the “Hype Wave”.
The model basically describes how the media hype and people’s expectations on the new and innovative products are changing over time. The Hype Wave is mapping only the expectations, not market penetration or user adoption.
Fenn and Gartner had identified five stages of people’s perception:
- Emergence: “The Technology Trigger”
- Excessive enthusiasm: “The Peak of Inflated Expectations”
- Excessive disappointment : “The Trough of Disillusionment”
- Gradual, practical adoption: “The Slope of Enlightenment” and “The Plateau of Productivity”
What The Hype Cycle is missing, is the last stage, when the product is dying and goes in peace where all the greatest humanity’s inventions are ending sooner or later. And it will be in a good company, surrounded by swords and fancy carriages, steam engines and crinoline skirts, DVDs and Walkmans, or flat Earth (uhm, well…)
Feasibility
Feasibility is not only about how (or if) a new product or an innovative technology can accomplish its tasks but it’s also about the standardisation madness that all young products are struggling with. The lack of interoperability is one of the main blockers for a new technology to emerge and establish.
For example, in the Smart Home space, it can be hard for the user to deal with all the proprietary communication protocols currently present on the market: some products work only with Apple’s HomeKit standard, others only work with Zigbee, others are operating through WiFi and require a gateway, others use Z-wave.
Viability
Last but not least, the market viability → how the product fits on people’s needs and how willing are they to buy and use the new product.
Viability is about utility. It’s about people needs, the benefit I would have if I’m adopting a new technology or using a product. In opposition to the Desirability (which is emotional), Viability is pure pragmatic.
In 1962, Everett Rogers, professor of rural sociology, published Diffusion of Innovations, a theory that seeks to explain how, why, and at what rate new ideas and technologies spread.
The theory wasn’t new, its roots come from the ’20s and ’30s when some sociologists tried to understand how new farming technologies and ideas are spreading across the farmers in the midwestern United States.
The theory claims that the first people to use a new product are the “Innovators”, followed by “Early Adopters”. Next, come the Early Majority and Late Majority, and the last group to eventually adopt a product, are the Laggards. For instance, a laggard may only use a smart bulb when it is the only remaining bulb on the shelf, but they may not have an in-depth technical knowledge of how to use the product.
The process is illustrated as a Gaussian normal distribution or “bell curve”. So let’s call it “The Bell” from now on.
“The Bell” was extended by Geoffrey Moore in his cult book Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers
Moore’s point is that the key of scaling up a product to mass market is to move from the first initial group (Innovators and Early Adopters) to Early Majority. In other words, to fill the gap between visionaries and pragmatists.
By crossing the Chasm, businesses are opening the gate to the “tipping point”, the point at which a trend catches fire — spreading exponentially through a social group or a target market. The idea suggests that change can be promoted rather easily in a social system through a domino effect.
(Remember the space shuttle?… It’s on the orbit now, no friction around, just a small sprinkle of gas can change the direction or speed it up with thousands mph. The shuttle has reached the “tipping point”)
The best real-world example is maybe how the big tech is pushing the voice enabled hardware assistants, like Alexa. Companies like Amazon and Google are heavily subsidising their products, pumping billions in pursuit of the tipping point.
As a startup, you can’t tug money in the abyss or build stepping stones by dollars. As a result, your adoption curve might look like this:
Valley of Death is the scariest phase for startups. More than a half of young companies and products die here. There is a ton of literature on this topic, but, in just a few words, Valley of Death is the place where the product is launched, has some revenue, see some traction, but not enough to self sustain the growth and neither to rise a new investment round.
Don’t get it wrong, and don’t overestimate all the these models, curves and fancy names: they are nothing more than a way we, as humans, are trying to understand our own nature. Which is not only complicated, but also innacurate.
But stay tuned for the next part, The Box → we’ll put the tools in the box, see how the models can be unified and get one single view in evaluating the honey pot market opportunity.
