Conduct Market Research
You now have a solution to a problem you care to solve, and you want to test your idea. How do you know if it will work? How do you figure out if it is a good idea? Fundamentally, speaking with various customers and stakeholders will allow you to assess and refine your idea.
Who are your customers? Can you segment your customers? This will help you determine who to speak with to learn more about the value of your idea.
What assumptions do you have about what your customers want? How will you minimize that bias in interviews?
As per the last post, establish the value proposition of your business. As you speak with customers to learn about what they value, how can you align your product or service with what they care about to achieve buy-in?
As we walk you through these steps, we will also draw from the experience of Dr. Nadine Hachach-Haram at Proximie to guide you by example.
CUSTOMER DISCOVERY 101
Your venture is creating a product or service to fill a need or solve a problem of a customer. Consider who your specific customers are and — segment them. For example, they could be researchers, device manufactures, patients, providers, payors, and so forth. It is worth acknowledging the fact that some of your customers may not actually be the ultimate end users of your product or service, but these individuals will be important decision makers that may make or break your product getting to market.
Take some time to compile a list of assumptions about what you believe your customers care about. You can draw inspiration from conversations you may have had with individuals as you were trying to determine what problem you wanted to solve. Your job as an innovator is to ultimately learn what various stakeholders and customers value and how your company can cater to their needs.
What do they value?: Saving time? Improving outcomes? Improving quality of care? A combination of the above? It is important to carefully assess the key factors that you believe stakeholders care about and build your solution and accompanying business model to address these points of value. What is the unmet need?
How do you add value?: How do you think your product or solution may benefit a given stakeholder? For example, does your solution save time for a busy social worker, or provide an additional stream of revenue for a provider? Does your solution improve patient experience over the current standard of care? What value is generated across the stakeholder landscape?
Why should they choose your solution?: How do you believe your product or service will compare to that of the status quo? Doing things differently, using a new platform, and engaging with a new therapeutic or device all take time and energy. How can your solution streamline this process? What about in relation to your organization’s potential competitors?
Create interview guides with a list of questions for every customer segment that can allow you to assess your assumptions.
REACH OUT TO CUSTOMERS
It is now time to reach out to customers to assess your assumptions and learn more about what your customers actually want.
We recommend reading The Mom Test to learn more about how to speak with customers to determine if your product or service is a good idea, as it guides you through how to ask the right questions. Another short but impactful practical guide is Talking to Humans that outlines how to structure your customer discovery and market research in more detail, especially if this is your first time doing so.
Dr. Nadine Hachach-Haram is the founder of Proximie, “an [augmented reality] platform that allows clinicians to virtually ‘scrub in’ to any operating room or [catheterization] lab from anywhere in the world” that allows health professionals to teach, train and collaborate remotely, thus digitizing a given surgeon’s footprint and creating a borderless and inclusive operating room.
Below is an example of a matrix outlining how a company like Proximie could go about customer discovery.
MARKET SIZING STRATEGIES
In addition, through speaking with customers and your own scrubbing of reputable websites and market reports, gauge the size of the overarching market opportunity your product or service aims to target. Is it large enough?
How many potential customers are there (i.e. total available market, or TAM)?
How many customers could your product or service potentially serve (i.e. serviceable available market, or SAM)?
What customers should you start with (i.e. serviceable obtainable market, or SOM)?
Sandra Saldana aimed to tackle the problem of stroke when she co-founded Alva Health:
There are ~40M individuals at risk of stroke. These include individuals that already have predispositions, such as hypertension, type 2 diabetes, and so forth. There are approximately 0.8M annual cases of stroke, and the United States spends $46B to treat these cases. Given this, the total available market (TAM) would be ($46B/0.8M individuals)*40M individuals) $2,300B, as it would cost this much to treat all individuals at risk of stroke.
The serviceable available market (SAM) in this case would be $46B for the 0.8M stroke patients that are currently treated.
There are two types of stroke — ischemic stroke, which represents 90% of cases, and hemorrhagic stroke, which represents 10% of cases. Saldana wanted to serve the larger fraction of patients, meaning that her serviceable obtainable market (SOM) would be 90% of the 800,000 patients, or 720,000 patients.
While we are not going to get into all of the details, there are two general ways to size the market – a top-down approach or a bottom-up approach.
Top-Down: This is usually the easier way of sizing a market. In this case, you start with the largest possible size estimate. There are publicly available industry reports with market data that you can find online that can help you obtain an estimate. These reports state the total size of a market in a given year. You can narrow in on your target market by slicing up the total market based on which customers you can target, and ultimately, which ones you aim to target first. For example, the market size for all ophthalmic drugs may be $45.8B, but you may want to focus exclusively on glaucoma, for example, which comprises ~30% of the market, meaning that your total addressable market is $13.7B. You can further slice up the market by restricting to a particular type of glaucoma, such as open-angle glaucoma, a particular type of drug modality, such as small molecules, and so forth.
Bottom-Up: In this case, you are starting with the basic units of your business to estimate how large you can scale your business. Some of these metrics can be learned as you speak with customers. For example, what are customers willing to pay to use your company’s digital health app? What about the added cost of in-app features customers may purchase? How many total customers will use your app (i.e. what is the demand)?