This is a series about work. I am doing a strategy consultancy job in a global engineering company — well, it sounds weird but all the companies are trying to pivot up/down the value-chain. My firm has well-established planning and engineering design businesses in the built environment, it is venturing out to solve businesses, technologies and processes challenges that are faced by the cities.
I will share tools, approaches and interesting stuff in my work regularly. Hope some of these can be useful or entertaining for you. This is inspired by the book Show Your Work.
Recently I have been working on a Market Entry Study for a building system provider, analysing the market in Southeast Asia for a particular type of building system product A. The objectives are to understand the size of the market, drivers of demand and the competitive landscape of A, so that the client can develop the contextualised market strategies to grow A’s market share.
Market Sizing
First of all, we need to define how big is the opportunity. It is always the case that you want to do everything, however, you have limited resources. For my client, there are 5 potential markets (aka 5 Southeast Asia countries) — we need to understand the size of each potential market for prioritisation in the resource allocation.
Because it is a high-level study, the top-down approach is good enough to estimate the market size:
- Step 1: get the real estate market information (sqm of the selected segmentation, such as residential/commercial/industrial etc.) for the past 10 years;
- Step 2: calculate the Compound Annual Growth Rate of the real estate market, and use the CAGR to forecast the real estate market size for the next 5 years (sqm/year);
- Step 3: multiply the cost of the specific building system ($X/sqm, varies by the segmentation) to arrive at the total annual market size for the building system ($Y/year).
The 3-step method looks extremely simple on paper, but when conducting the analysis, there are many more steps before the conclusion. For instance, Step 1 can be further broken down into data acquisition (it can be quite tricky in some countries), data cleaning and additional processing (frequently you might face fragmented data — some years are missing, segmentation is not done according to your pre-defined framework etc.). And there can also be Step 4, 5, 6 to further segment the real estate properties to narrow down the total market into the addressable market, to give the client a more realistic picture of the market size of product A.
At the end of the market sizing exercise, the client is aware of the total market size and addressable market size as illustrated below.
Demand Analysis
As we are clear about market size $$$, the next step is to dig into the drivers of demand. Only with the understanding of the driving force behind the demand, the client can make winning market strategies. There are some key questions to be answered: what are the factors shaping the demand? how are the factors evolving? who are the customers? what do the customers want? how much do the customers weigh different factors?
In general, the approach I use to drive such demand analysis involves 3 steps (yes, 3 sounds like consultant-ish):
- Step 1: identify the key stakeholders who are involved in the ecosystem around the target product. In this case, they are the relevant regulatory bodies, real estate developers, building system designers, local distributors, commercial building tenants, facility management crews and homeowners;
- Step 2: map out the various inputs needed from those stakeholders, and define the means to collect the inputs. For instance, I need the current sustainable building regulatory requirements from the local government, which can be obtained from desktop research. To understand the potential regulatory changes that might happen in the next 5 years, I ll add subject matter expert interview on top of the desktop research;
- Step 3: synthesis of the information and present the insights. Upon the information collected in Step 2, the key questions laid out at the beginning should have been answered from different perspectives. One way to draw out the “so what” for the client is to summarise “Right to Play” (the basic requirements to be fulfilled so that it is allowed into the market) and “Right to Win” (the differentiators to meet the changing demand so that it can expand its market share).
Competitive Analysis
The consideration of customer and competitor always go hand in hand. Sun Tzu said that if you know your enemy, you need not fear 100 battles. The client needs to know these competitors, who they are, where they came from, where they want to go.
Similar to the way I approach demand analysis, it is another 3-step mapping-collecting-synthesising process:
- Step 1: identify the key competitors who have established the market presence for the product A and the equivalent. Personally, I think subject matter expert interview works better than Google. Speaking to a few distributors and building designers is more efficient and sometimes fun.
- Step 2: collect relevant information about the competitors. It can be the classic 4P — Price (what is the price point offered by the competitors), Product (what are the features and functionalities offered by the competitors), Place (how are the products distributed locally, what is the coverage of the competitors’ sales network) and Promotion (how do the competitors market their products). There are also other perspectives, such as market perception, local partnerships, logistics and manufacturing. The key here is to stick to the RELEVANCE so that the study does not drown in the ocean of information.
- Step 3: highlight the “so what” for the client. Perhaps it is a competition of price — what the client needs to consider for a potential toe-to-toe price war, or if there are things to be leveraged (e.g. a brand image) to drive the upgrading of the local consumption.
Endnote: I was trained in engineering. Such type of proxy-based, qualitative analysis used to be a black box for me. I try to summarise the methodologies and processes in a simple way so that people without any business background can also understand the thought process, and take a crack at similar problem-solving.
Some topics I will touch on in the future posts:
- Scenario Planning
- Multi-criteria Analysis
- Benchmarking
- Digital Transformation Programme Management
- Smart City Strategies
Please leave a comment to tell me how I can improve the post to make it more helpful :)
