Comments on: The Cranky Product Manager Sez Go Big or Go Home

By: The 1% market size fallacy « Empirical Insights

The 1% market size fallacy « Empirical Insights — Tue, 17 Nov 2009 05:07:01 +0000

[...] 1% market size fallacy The Cranky PM has an insightful take on the usual ‘conservative’ take on marketing sizing. In the [...]

By: PeteW

PeteW — Mon, 16 Nov 2009 23:53:46 +0000

The idea of grabbing (or creating) 1% market share is a long tail tactic to market entry dependent on a niche opportunity. As long as the cost of entry is low, finding a niche on the long tail is a low risk approach: just do it. Hopefully it sustains itself, or better, with a little feeding of additional capital, it grows.

But what’s the point? Do you deliver a business case just to show you “can” do it? The real question is SHOULD you do it? What are the opportunity costs? What’s the value of that 1% share? Could the niche become disruptive enough to move up the tail and deliver more return?

It seems to me an objective of 1% is more a milestone than a goal. It needs a growth strategy.

By: gander

gander — Sun, 25 Oct 2009 15:14:39 +0000

@paco – Wow. What a great post. I just left the world of hardware where all the factors you describe are crucial to planning and success, and entered the world of enterprise SW. Of course, I joined a mature organization with an established track record, so the idealists are not in charge, but the mentality of PM’s from the SW world that I interviewed when i was seeking PM’s for my hardware world match your comments exactly.

Also, my wife writes screenplays (only one sold to date, but the dreck that keeps getting produced keeps her hopes alive), and you pegged the LA scene too.

Even being in a startup, it would be hard for me as a marketer, let alone as a PM to think that I would ever pitch 1% as a goal.

Great post CPM, as always.

Geoff

By: The Cranky Product Manager

The Cranky Product Manager — Sat, 24 Oct 2009 12:56:52 +0000

Hey Linda, Sure…. the Cranky Product Manager sees your point about not confusing the Total one-day Potential Market with the Total Market using the product today. It doesn’t really matter to the the thesis of this post, though, which is “don’t make 1% market share arguments because 1% is unsustainable and a failure position”. Doesn’t matter whether you are talking 1% of the Total Potential Market or the Total Market TODAY.

By: Paco

Paco — Fri, 23 Oct 2009 22:09:26 +0000

Funny thing – after I moved out of the Bay Area, I stopped meeting so many dipwads who spew exactly these sort of “business plans” for totally inane product ideas.

Actually, my first stop after the Bay Area was LA, and there you just replace “business plan” with “screenplay” and the concentration of dipwads with dumb ideas is comparable to the Bay Area.

Part of the problem I think we have in the software industry (and I mean the royal we) is that we produce products and/or services that require very little in the way of big capital expenditures for labor, manufacturing facilities, etc. When entering an industry requires you to sink tens of millions of $$ into fixed costs right off the bat to get a company started, the 1% argument won’t get you a loan from a bank. Hell, banks even screen out people with genuinely good business plans :)
But the software industry is perversely self-deluding:


Do you need a factory?  Nope.
Do you need boxcars full of raw materials?  No.
Do you need to hire hundreds of laborers?  Nuh-uh.
Do you need CAD designs and pre-production prototypes to pass through numerous regulatory agencies?  Hellz no.

Do you need tens of millions of dollars in initial investments before you can ship and sell the very first unit of your product? Of course not.
In fact, here’s the checklist for most self-styled interweb entrepreneus who believe they’re going to launch the greatest, most killerest (I just made that word up) app ever made:
Got an Amex card? Yep.


Got two friends who talk like they're super hardcore software hackers?  Check.

Got enough room in your Mom's basement to setup a couple more desktop computers and another X-Box for Halo 3 breaks? Yes.

It’s GO-TIME melon farmers!

By: Don MacLennan

Don MacLennan — Fri, 23 Oct 2009 15:54:48 +0000

I think a market share model is simply the wrong concept for cases of emerging or “1.0″ technologies. Which is where business cases get used most often. After all, there often isn’t (yet) a market to measure. I’d rather focus on tangible customer pain, and have faith that a solution to a big enough pain can find its own customer budget.

For those markets that do exist, any business plan is probably about serving the market in a different way. There are lots of “2.0″ market entrant examples, sort of along the lines of Christianson’s (sic) “Innovators Dilemma”. And in those cases, current markets are also poor measures, since the business model is meant to be disruptive and defies comparison with present market models.

By: Scott Sehlhorst

Scott Sehlhorst — Thu, 22 Oct 2009 13:13:25 +0000

When I hear “one percent” I like to ask – what is your strategy, that will be effective for one percent, but not for two percent?

Who exactly is in the market segment made up of 1/100th of the market, what makes them different (so that they will value your solution over others) and why do the other 99/100 customers prefer other solutions?

I also like to ask “when do you get the one percent?”

By: Henrik Kenani Dahlgren

Henrik Kenani Dahlgren — Thu, 22 Oct 2009 06:40:05 +0000

Great rant!
I heard a VP of Sales for Bharti Airtel (Telecom Operator) who said repetedly, we are not here to each your lunch (compete with the carriers) but the only thing I heard… We are not settling for 1% =)

By: Linda Merrick

Linda Merrick — Wed, 21 Oct 2009 18:08:40 +0000

Cranky, I get where you’re going with this. But I think it confuses two things:
1. The total size of the potential market. That’s the big number that founders love to throw around to attract VCs. That’s when the 1% comes in handy.
2. The number of customers using your product, of all customers using products in the category (your share of the current base). This is the bigger percentage, but may still be a pretty small slice of the potential market. Gotta figure out the overall penetration rate in the category, and figure out just how much upside is left to grow into.

In every market, there are users who adopt soon, and users who adopt later, and users who adopt almost never (ref: TALC).

Sure, we all want a 38% share of “the market”. But which market are we talking about?

By: Scott Sehlhorst

Scott Sehlhorst — Wed, 21 Oct 2009 15:14:58 +0000

Awesome!

The only thing worse than the “one percent solution” is when they not only have that, but can’t articulate a plan to achieve even that.

OK, there is one thing worse that I’ve seen – “No one offers EXACTLY what we plan to offer, therefore, we have NO COMPETITION.”

feh.

Great rant, welcome back