Whenever you are doing an analysis of the market or doing a post mortem of why an iteration did not wok out, one of the biggest things to bring out in the open is the “Assumptions” based on which you have chosen to take an action.
A simple mathematical example will show the problem. Most often people like to say the market for some broad category is X billion dollars per annum and growing at Y percent. Now you have chosen a niche in the segment whose market size could be 20% of the X billion dollars. Suddenly you have lost 80% of the market size. This could be growing at 50% of Y per annum. So assuming that X billion was the market today and it was growing at CAGR of 12%, then this category would become 2X in 6 years.
Now your chosen niche however is only 20% of the X billion dollars and this is growing at 50% Y or 6% rate. Which means this market will double in 12 years. Suddenly your niche is not so attractive as the overall category.
Now suppose that the growth rate is dependent on the availability of a key raw material which comes from only one country and if there’s a problem in the production of this product then this growth rate could become 10% of the projected Y or 1.2%. At this rate the market will double in 60 years and it may not be worthwhile for you to invest in the market at all.
Yes you could come back saying what is the probability that this scenario would occur. Maybe not much. However if you don’t identify it and list it as an assumption even though the odds are low, then you can be caught completely unawares if that scenario plays out.
In marketing – Murphy’s law – paraphrased by me – if anything has to go wrong, it will and at the most inappropriate time – always plays out. Most of the times it is sheer laziness on part of the team or sometime even arrogance / ego which causes us to not list out the assumptions. This happens especially when we have had a string of non-stop successes.
If you call out all the assumptions that you are making, then it becomes far easier to plan and execute on your strategies.
In technology buying a very small dependency like availability of trained resources to work on the technology can cause your product to not get the same traction. I remember the RDBMS market was growing in double digits about 20 years back, what with UNIX, Windows and Linux all giving an impetus to the growth. However there were 2 companies which took a major portion of the market because the other companies did not realise that the trained manpower needed for running these RDBMS was not there. even though most of these RDBMS were very good, they were not able to garner any worthwhile marketshare.
Inspite of the fact that I am writing this post, I have also happened to miss assumptions a lot of times. And chances are that the assumption I missed calling out, was the one which came to haunt me for the failure.
Till next time then.