Start with the Foundation.
Before jumping into a boundless market sizing exercise, ask yourself and your team these four foundational questions:
Growth strategy needs to be well defined and granular. From an external
attention span, a new market is defined differently than a highly competitive one.
New market structures, or new S curves, are different than competitive markets.
If you’re a new entrant, disruptor or participant, you’ll face different parameters,
including entry barriers. B2C is different than B2B. It is not one approach fits all.
“You need direction, yeah you need a name
When you're standing in the crossroads every highway looks the same
After a while you can recognize the signs
So if you get it wrong you'll get it right next time, next time.”
No need for a competitive context?
Excluding competition is one of the biggest misses in sizing. Internal-minded sizers think this way: “my company TAM is $10m, my company SAM is $2m and my share, $1.0m, 50% SOM. However, this view actually defines the market size by the company’s own limitations, rather than by customer choices.
If the company were externally attentive, it would realize it is a niche player, and one of five different customer choices. External-minded sizers redefine the market as TAM $50m, SAM at $20m, and niche company has a SOM of 5.0% not 50%.
Over-stating company market share by understating SAM is a growth challenge. It’s internally self-indulgent and understates competitor performance serving customers. It also understates the company’s strategic opportunities with a false reality. When the objective is to profitably grow, it’s best to know and deal with what is real.
And if you get it wrong, get it right next time…quickly.