selecting an opportunity: gate 1 estimating market size and customer scenarios

Carnegie Mellon Qatar ©2011 - 2012 Robert T. Monroe Course 70-446

Selecting an Opportunity: Gate 1Estimating Market Sizeand Customer Scenarios

Robert MonroeInnovative Product Development

February 8, 2012

Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446

By The End Of Class Today, You Should:

• Understand the purpose of the Gate 1 review, the questions that need to be answered at this gate, who should participate, and the criteria used to make the gate 1 decision

• Be able to compose a simple customer scenario that illustrates the key idea(s) or observation(s) underlying the POG you are proposing moving forward with

• Recognize and be able to apply multiple approaches to doing initial, rough, and very simple estimates of the size of the market opportunity


Gate 1: Initial Decision On Pursuing An Opportunity


The Good News: Lots of Ideas

SET

JTBD

Job Scoping

Nine Boxes

Lots of Ideas

(POGs)


The Bad News: Limited Resources

OrganizationalResources

NPD

ResourcesAvailable forInnovativeNew ProductDevelopment


The Problem

Lots of Ideas

(POGs)NPD

Resources


Gates: Go/No-Go Decision Points

• Gates are key decision points in the process– Always a cross-functional group of gatekeepers– Gates should force a decision to be effective

• Possible outcomes from a gate meeting:– Go: move ahead to the next stage, commit appropriate resources– No-Go: the project does not meet the criteria required to move forward. Stop the

project and reallocate project resources.– Recycle: the project shows promise but has not yet met the criteria for moving to

the next stage. Continue work in the current stage, return with additional information. Resources are allocated as needed to get requested information

DecisionCriteria

DeliverablesFrom Previous

Stage

Decision,ResourcesAllocated,Outputs

Source: [CE09] page 10.


Stage 1: Identify The Opportunity

• Goals:– Identify and evaluate a set of promising Product Opportunity Gap (POG’s)– Choose the most appropriate POG to move forward with

• Primary results:– Product opportunity statement (hypothesis)– Initial scenario that illustrates the opportunity

• Methods– Brainstorming, observing, researching Social, Economic, and Technology (SET)

factors– Generating POGs based on SET factors– Evaluating and filtering POG ideas generated– Scenario generation, feedback, and refinement

Source: Cagan and Vogel, Creating Breakthrough Products, Chapter 5.

Launch* Realize Conceptualize UnderstandIdentify


Managing Risk With Stage-Gate

Level of risk and uncertainty

Time(Stages)

Resourcesallocated

Stage 1


Exiting Discovery Stage (Passing Through Gate 1)

• Gate 1 is where we go from idea generation (discovery) to scoping (starting to really understand the customer)

• Required deliverables– Statement describing the Product Opportunity Gap– Scenario description of one or two paragraphs that illustrates and brings to life

the who, what, why, how, and when for the identified POG– Commitment of resources to complete stage 2

• Supplemental deliverables include JTBD’s, SET analysis, etc.

• Questions:– What criteria should we use for exiting gate 1?– Who should the gatekeepers be for this gate?


Customer Scenarios


Scenarios – Making Your POG Resonate

• POGs, on their own, can be very abstract and dull

• By illustrating your POG with scenarios, which describe a real person, in a real situation, dealing with the real problems or challenges you have identified, you can bring the idea you have to life for your audience, and convince them that this is an idea worth pursuing

• Scenarios are short (1-2 paragraphs) descriptions of a person or people in a specific situation.

• A scenario should illustrate who your target customer is, what their need is, why they have that need, how the task is currently accomplished, and when it happens.

Source: [CV02] pp 181-182


Scenario Example: Ahmed The Carpenter

Ahmed is a skilled construction carpenter. He typically works alone or with a crew of one or two. When he arrives at the work site in the morning, he drops off his larger equipment as close to the work area as possible. Setting up a work area typically means carrying sawhorses and boards as well as large ladders and tools. Most of the equipment is heavy and many trips to a destination far from the truck can be time- and energy-intensive.

If Ahmed can work near his truck, he often uses the tailgate as a cutting or work surface, even for eating lunch. Ahmed’s truck has side-mounted toolboxes that he installed and both a ladder rack and a towing hitch that were installed professionally. This means that he has no free space within his truck bed and that his tools often have to be put on the ground during unloading, which is damaging to both the tools and his back.

Source: Adapted from [CV02] pp 181-182


Scenario Example: Grandma Mary

Mary is 70 years old and lives alone. She loves to bake and often entertains her family for holidays. She has developed arthritis and is no longer comfortable reaching into the oven to lift things out. Losing the ability to bake things has been very depressing for her to contemplate. Mary is hesitant to have her family over and no longer feels confident entertaining in her home. The product is for older women who have lost the strength and flexibility to lift. They become the core market. Review of the literature should focus on this group. The expert advisor for this program are health care workers who work with the elderly and doctors that work with seniors and are experts in rheumatology. It is also important to know about ovens, specifically the type of ovens that older women might own. It also requires looking at ADA guidelines. Other stakeholders are people who install ovens and sell appliances, organizations that promote products for seniors, and doctors and healthcare workers that might prescribe this for patients. The primary customer base is the women themselves; it is important to find women that fit in this category. Some may have already developed naïve but novel ways of addressing the opportunity. Although applicable to man as well, the majority of the elderly population is female. Any particular issues for woman may make the product better meet the majority needs, wants, and desires of this population.

Source: [CV02]


Estimating Market Opportunity Size


Sizing The Market Opportunity – Early and Often

• One of the important criteria for moving beyond gate 1 is convincing stakeholders that your POG points the way to a market opportunity that is large enough to be of interest to your organization– So how big does that mean the opportunity needs to be?

• The main goal of estimating at this stage is to frame the potential market appropriately– These choices guide research and discovery in the next stage– You don’t need very precise or accurate numbers yet


A Quick Estimating Process

• Define what you will be estimating

• Devise a formula to calculate estimates

• Find the data you need to complete the formula– Your existing proprietary organizational data– Secondary research (market research, trade groups, etc.)– Search the web– Estimate based on experience– Find proxies for figures that will be difficult or expensive to get accurate, primary

measurements on– … (it’s good to be creative here)

• Iterate until you are comfortable that you have estimates within the margins of error you need to convince your organization that you have a sufficiently large market opportunity to move forward, or you have convinced yourself that there is not a sufficient market opportunity to move forward (both are useful discoveries).


Estimating Market Opportunity

• Initial criteria you may want to use:– Number of potential people or business in your target market– Money currently spent daily/weekly/monthly/annually by

your target customers to do the JTBD(s) you’ve selected– # of your current customers who might purchase additional

products or services (up-sell or cross-sell)– Revenue and profits your competitors selling similar products

or services bring in (best for mature markets)– Estimates of the value that your customers would find from a

good solution to this problem (start with value, work backwards)

– Others?


Estimation Exercise

• One-by-one we will:– Describe how you framed the size of market opportunity – What units did you use?– What values did you come up with to estimate market size?– How did you arrive at these values?

• After we have done this, work for a few minutes as groups to review the individual results you came up with and come to a consensus statement on:– How you should calculate the potential market size– How you will find data, do research, and/or measure the results to

complete your calculations– How accurate and precise you need to be to pass the next gate


Challenge Problem 2

• Details posted to wiki• Same groups, extend challenge problem 1 with an

updated POG statement and a customer scenario• Due at the start of class on Monday, February 13


References

[CE09] Robert G. Cooper and Scott Edgett, Successful Product Innovation, Product Development Institute, 2009, ISBN: 978-1-4392-4918-5.

[CV02] Jonathan Cagan and Craig M. Vogel, Creating Breakthrough Products, Prentice Hall, 2002, ISBN: 0-13-969694-6.

[SSD09] David Silverstein, Philip Samuel, Neil DeCarlo, The Innovator’s Toolkit, John Wiley and Sons, 2009, ISBN: 978-0-470-34535-1.

selecting an opportunity: gate 1 estimating market size and customer scenarios

Documents

monroe course

ideascarnegie mellon

gate meeting

initial decision

current stage

decision pointsgates

exiting discovery stage

project resources