New Markets Advisors takes a unique approach to working with clients through the spectrum of issues they confront in creating, prioritizing and commercializing new sources of growth. We leverage experience from dozens of similar challenges to ask the right questions about potential opportunities, help focus clients on the critical issues, and lead established firms to behave in an entrepreneurial fashion.

Clients engage New Markets to:

Industry transformation often creates as many viewpoints about growth options as there are employees in a company. When old business models decay, there can be a bewildering set of choices about how to stretch a company into new areas. Frequently firms approach this challenge by assessing what they do best and finding new businesses that exploit those competencies. We believe this method is like driving by looking only into the rearview mirror.

Instead, companies need to think broadly about the areas where they can play. UPS, for example, determined that it is in the logistics, not the freight, business, and today its supply chain services can contribute half of the firm’s total profit. Companies can re-conceive their playing fields by starting with a set of target customers and delving into their underlying problems and needs, many of which may be unarticulated.

Firms should also look at where they play in an industry and assess whether the profits may be migrating to a different place. Intel, for instance, has long dominated the market for high-end microprocessors. Yet it saw that small laptops, tablets, and mobile devices were ready to fuel much of the growth in the computing market in coming years and invested in creating chips that help these machines consume less power. This decision created a multi-billion dollar platform for profitable growth.

Occasionally a company’s environment contains so many uncertainties that the best approach is to map out scenarios of industry evolution. The goal is to determine the desirability of various scenarios, the ability of the company to affect the outcome, early signals that the market may evolve in a particular direction, and things the firm can do today to either help bring about that endpoint or hedge against that risk. Wargaming may be useful in these situations.

With a market-centric rather than a company-centric view, a firm is better positioned to ask how far the company can be stretched in unfamiliar directions. Oftentimes the new growth platform can leverage many of the firm’s pre-existing competencies. The challenge is to avoid bringing along unhelpful baggage from the old business model, and to start new initiatives in a way that does not cause too much dislocation to the current business, which is likely to be supplying the profits that fund this endeavor.

We believe that effective strategies amidst industry turmoil are both proactive and humble. They have a clear point of view about how they want the industry to evolve and take a series of steps to bring about that future. Equally, they are conscious of the many events – regulations, mergers, new technologies, etc. – that can suddenly impact strategies for new markets, and they account for how the company's approach may need to shift in these circumstances.

Exploration requires structure.

A company seeking new growth platforms first needs to determine a target market. Too often, we have seen companies pursue instead a hodge-podge of opportunities driven by personal interests and senior management’s pre-existing pet projects. The resulting set of initiatives can often comprise one-off opportunities that lack the coherence of a sustainable platform.

To settle upon a target market, we would seek to answers questions such as:

• How common is this customer type, and are their numbers growing or shrinking?
• What are all the relevant circumstances that potential customers find challenging, or which are over-served with options that are too expensive or hard to use? What drives the most important differences between customers?
• What trade-offs are customers making when assessing potential solutions (which frequently include doing nothing)? How well do these solutions rate along a wide variety of performance criteria?
• How important is this market to competitors? How flexible are those competitors to respond to new entrants?
• What gets in the way of achieving excellent performance today (often this may have little to do with a product or service in itself, but be more about the context in which it is used)?
• What is the value that excellent performance would create?
• Does the company have assets (such as a brand, salesforce, or intellectual property) that would give it unique advantages in serving these customers?

These questions would give an idea about the potential revenue and profit in a market, the dimensions along which innovation might occur, and the extent of competitive resistance to a company’s entry. The exploration would not yet produce specific concepts or a business plan, but it would indicate that this is particularly interesting place to fish.

Sometimes, a company needs to start from a different place – it has a unique technology and is seeking where to best deploy it or how to generate usage. In those situations, our questions would follow an alternative course that would center on the unique attributes of the technology, who would find those attributes most useful, what constrains their consumption, what value the technology would create for customers, and what elements of the business model could be most powerful in unleashing growth. We are keen to find “footholds” – small groups of customers that would readily adopt a technology, prove its utility, and serve as beacons to broader numbers of customers in the future.

Once an exploration has identified promising fishing holes, a company needs to find the fish – it needs detailed ideas that can underlie business plans. The key to this endeavor is to profoundly understand the world in which customers live, not simply to ask them what they want. As Henry Ford reputedly said, “If I had asked my customers what they wanted, they would have said a faster horse.”

We find that idea generation can be relatively straightforward if a problem is very robustly defined. To arrive at a good problem statement, it is essential to frame things as customers would, not as the company might. A customer might say “I want to protect my family if I die, but my financial circumstances change a lot and I need flexibility.” Few customers would say “I need a universal life policy with a no lapse guarantee rider.” Seen this way, the competitive set for a life insurer consists not just of similar companies, but includes a wide range of other options such as support from extended families, retirement accounts, and a spouse attaining an advanced degree that improves earning power. The dimensions available for innovation become commensurately broad.

Customer insight stems from interaction. We have long experience in both conducting research ourselves as well as guiding outside market researchers, or a client’s own employees, through creating a detailed research plan suited for the unique challenge of idea development. We also help to draft appropriate questionnaires and interpret results. When possible, we prefer for a client’s own staff to conduct research directly with customers, as this experience makes the findings more visceral than a synthesized report ever could.

We believe that creating novel ideas for new markets is different from generating concepts for the extension of existing product lines. We lead our clients to become immersed in customers’ lives; this might involve research techniques such as ethnography, in-depth interviews, or quali-quant Internet surveys. That immersion leads to a rigorous charting of what customers are trying to get done, how they measure success, how they come to consider the solutions they use today, and what is preventing market growth. We then help clients create detailed ideas to address very specifically-defined circumstances, and we aggregate those concepts into overarching growth platforms. The process focuses on how firms can compete asymmetrically, introducing totally new performance dimensions and changing the playing field to one where they have clear advantages.

Frequently, we find that firms have no lack of good ideas. The challenge is to prioritize them into a handful of well-articulated concepts that underlie realistic business plans. New Markets is expert at creating objective mechanisms for assessing concepts and establishing a balanced portfolio of ideas to carry forward.

Idea evaluation cannot be formulaic – the challenges in new markets are too multi-dimensional to have such a simplistic view. We believe in starting out with a robust but manageable set of assessment criteria, producing a first rough cut of ideas into obvious favorites, ideas with potential but some trouble spots, and those best left behind. For the more promising concepts, we then delve into the certainty and impact behind the assessment of various criteria. For instance, an idea might rank very highly on many factors, but have a modest chance of regulators disallowing it. This is critical to bring out, as it will impact how to shape the portfolio of surviving concepts.

A good personal investment portfolio will have a mix of asset classes. For example, bonds might have modest yields but provide stability, while emerging market stocks might have excellent long-term prospects but introduce volatility and risk. Project portfolios should follow this model. We lead our clients to consider the balance between the size of risk, the type of risk (e.g. technical, regulatory, competitive, market demand, etc.), timeframe of investment, ultimate pay-off, and other factors.

Next, we help to develop business plans behind the leading ideas. We believe in an iterative approach to business planning, recognizing the dynamic nature of launching ventures in new markets. Seldom does an entrepreneur’s first business plan end up powering a successful business – the nature of new markets is that much waits to be discovered through trial and error. The key is to have the seed of a great idea coupled with an intelligent approach to business iteration so that mistakes are made early and inexpensively. We view a good first business plan as typically containing:

• An in-depth assessment of market demand and how the solution can address this demand
• A detailed view on how to attack the first foothold segments within the market
• Financials that focus on “what you would have to believe” analysis rather than pinpoint estimates loaded with false precision
• An exhaustive consideration of risks and how to sequence their mitigation
• A near-term action plan that can be implemented right away
• A longer-term assessment of needed capabilities and how to fill any gaps
• A view on how the development of the business can be staged and what success metrics to use for each of those stages

Good entrepreneurs understand that when a venture is attacking new markets, the most powerful assets are learnings. As they find out more from the marketplace about key assumptions and risks, entrepreneurs can quickly iterate business plans, stop investing in things that will never work, and double down on bets that look like winners. If entrepreneurs can structure a series of learning initiatives, they can enable their businesses to evolve rapidly and beat competitors.

In contrast, we have sometimes seen established companies follow a path to doom. Using the same processes as for their core business, where they understand the market very well, they ask a project team to produce a detailed plan for launch, sell the initiative to the firm’s senior management, and push the staff to make the new offering as big as it can, fast. The team runs at lightning speed to book revenues, invests prodigious sums in the business, and only then learns from the marketplace about innumerable elements in the business plan that should be revised. At this point it has already spent a lot, earned little, and set marketplace expectations about the offering. Rather than throw good money after bad, management loses interest or simply ends the initiative.

Counterintuitively, an approach toward new markets that spends cautiously and learns voraciously will frequently lead to a successful business faster – as well as less expensively and riskily – than an ambitious, take-no-prisoners assault on an opportunity area. The challenge for established companies is to follow the disciplines needed to make this approach work. They must plan a rapid series of efforts to learn about the market, adopt the scientific method wherever possible to discern what causes marketplace experiments to succeed or fail, routinely assess market signals, and adapt their plans quickly to emerging realities.

If established companies embrace these approaches, they can create repeated waves of growth from new markets. They usually have the necessary resources. They must master new ways of acting if they are to triumph.