Because the world’s money spent has to go somewhere, right?
A sound Top-Down Market Sizing should go after getting a picture of a world as encompassing as possible.
And part of why it is important to do it this way is because when you go from the biggest most aggregated data possible, to then sift down to the parts that are specific and relevant to your case, you are going to realize how many gaps are there still in terms of knowledge about what kind of solutions work, and how successfully they have been adopted into a market.
Before looking into the process, it’s important to remember that when it comes to startups, market research and product development are two sides of the same coin. Half of your job is to build a great new product. The other half is to create a new understanding about a section of the market.
Time to get dirty
0. Optional: Get some world metrics
From net national product, or incomes, to internet access, or device ownership. But pick flows over stocks: Don’t pay attention to who is biggest, but who is growing the most.
1. Megasectors, subsectors
Many of the lessons above apply. Do not be content with the latest data. Get a couple of years’ worth. Figure out if positive but reduced growth rates are temporary, or a sign that the market is approaching saturation. (And that your idea may not be so radical.)
A business consultant may recommend you to look up data according to the standard industry classification. In the US that would be NAICS, whose codes for Education start with 61 and for Information at 51. It’s sound advice but make them a starting point for further data requirements.
2. Geocache it
If you look at the official definition and categorization of innovation (that would be the Oslo Manual), existing technologies introduced in a given population for the first time are meaningful, regardless if they exist elsewhere. In fact, some argue that given the vast inequalities among regions, it is much more effective to work on spreading thoroughly tested solutions where they are most needed, rather than reinvent the wheel.
(This argument inevitably leads to discussions about intellectual property, patents and so on. Fortunately Moodle is Open Source, which makes us feel authorized to leave it at that.)
Trying to extrapolate broad sector data on the region level is one of the most common roadblocks. Time to make educated guesses and be ready to get it wrong. Smartphone penetration could be lower than average on lower-income places, unless they do not own desktop computers. And so on.
3. Wring it out
Sort it, split it, turn it upside down. The value of data series lies in its ability to show several dimensions of an issue. This is only possible if you are willing to look at it from many angles. And since you already have a broader landscape, you will be able to make more educated guesses about why it’s evolved the way it has.
An important exercise at this level is to look for effects from seasonality. Is there a time of year your customers usually consider renegotiating their deals? In this case having monthly or quarterly data is a key asset, if you can get ahold of it.
4. Get real about your TAM
Hopefully, the data gathering process you’re embarking on should inspire you to act with more precision and awake a culture of constant listening.
But at the end of the day, there is one answer everyone demands from your research: What is the size of your Total Addressable Market?
It’s usually answered in terms of currency. Supporting units, such as users or items sold, can help make the picture rounder.
This is the endgame of the Top-Down method. It only leaves one tiny question left: How big a piece of that pie can you grab for yourself over the coming days, weeks, months and years? To address it, all you have to do is to begin your research all over again. Only this time, starting at the Bottom.
This Moodle Practice related post is made possible by: eThink Education, a Certified Moodle Partner that provides a fully-managed Moodle experience including implementation, integration, cloud-hosting, and management services. To learn more about eThink, click here.