Conducting an Opportunity Analysis the TBR Way

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Opportunity analysis is one of the most critical and complex forms of research. It frames the big bets that technology, telecommunications and professional services companies make.

What Is Opportunity Analysis?

Opportunity analysis is the process of conducting an external evaluation of a given market sector(s) to assess the viability of pursuing a business opportunity in the sector and to determine the best-fit strategic actions to take in pursuit of that opportunity. The process is usually oriented around a company’s overall and/or business strategic and financial objectives.

 

Opportunity analysis is a broad concept. An opportunity analysis might influence an entire shift in corporation direction or shape the launch of a specific product and/or service for a specific subset of customers. There are multiple dimensions that define the context for an opportunity analysis, including:

 

  • Time Horizon: Is it a 1-, 3-, 5- or 10-year opportunity? Longer-term than that?
  • Business Segments: Does this opportunity relate to a current business line and/or new business line? Is it corporatewide?
  • Products and Services: What are the implications for the other products and/or services that the company offers
  • Geographies: What regions and/or countries does this apply to?
  • Customer segments: Does this opportunity impact existing and/or new customers? What industries do those customers play in? What is their core business? What are the firmographics of those customers?
  • State of Pursuit: Are we already pursuing this opportunity at all? If so, how, and at what level? What decisions have already been made?

 

Depending on the scope of the opportunity analysis, the specific data and insights you’re aiming to gather may vary. Broadly speaking, a comprehensive market opportunity analysis would typically consider elements such as the following:

 

  • Total size and forecast growth of the addressable market opportunity
  • Profile of the current customers in the market
  • Macroeconomic and socioeconomic factors that impact the market opportunity
  • Competitive landscape, including level of competitive fragmentation and key competitors’ market share, financial performance and strategic positioning
  • Business models and strategies used to serve the market, including aspects such as:
    • Product and service offerings
    • Go-to-market strategies
    • Monetization and pricing models
    • Service delivery models
    • Supply chains
    • Availability of talent
    • Client delivery strategies
    • Acquisitions and alliances opportunities

Why Is Opportunity Analysis Important?

Opportunity analysis is important for many interrelated reasons. At the most fundamental level, opportunity analysis is critical to ensuring that the strategic decisions your firm makes align with corporate financial and strategic objectives. Without an opportunity analysis, the firm lacks external inputs and risks making decisions based on internal silos.

 

Opportunity analysis provides quantitative, objective, outside-in data and insights, ensuring that the actions your firm undertakes are validated by the market. Opportunity analysis helps you consider a strategic action and/or investment across each of the following critical vectors:

  • Revenue: What is the potential revenue and growth associated with this opportunity? When will that be realized? How likely are we to achieve those goals?
  • Cost: What are the real capital expenses and ongoing operating costs that we will incur by undertaking this opportunity? What are the opportunity costs?
  • Risk: What are the risks associated with this opportunity (e.g., people, governance, environmental)? Are we comfortable with those risks? How do we minimize those risks?

 

By evaluating the opportunity across each of those key vectors and leveraging outside-in data and insights, you are also able to objectively conduct an opportunity gap analysis. The opportunity analysis may reveal an unquestionable market opportunity, but that still raises the question: Is your firm well positioned to capitalize on that opportunity? By building a full picture of the opportunity, you can conduct a SWOT analysis of your business across all of the elements of the opportunity to understand where you may have gaps that need to be addressed to pursue the opportunity.

The 4 Key Types of Opportunity Analysis

Building an opportunity analysis involves many different workstreams and interrelated projects. In our experience, however, opportunity analysis efforts most commonly take the following forms:

 

  • Market Forecasting: Projections of opportunity size and velocity, and market trajectory for an offering or market segment, based on analysis of customer plans, competitor motions and ecosystem needs
  • Strategy Design: Assessment of a vendor’s market opportunity and recommendations on long-term strategy positioning based on inside-out and outside-in customer and competitor analysis
  • Acquisition Screening: Identification, prioritization, analysis and recommendation of a short list of potential acquisition candidates for pre-diligence evaluation and support, based on target fit, value add and strategic alignment
  • Alliance Screening: Identification, prioritization, analysis and recommendation of a short list of strategic alliance partners based on vendor target fit, value add and strategic alignment

How to Conduct a Market Opportunity Analysis

Structuring a Market Opportunity Analysis

The approach and research methodologies used to conduct a market opportunity analysis vary by type of project. Each type of opportunity analysis outlined above requires slightly different tools and methodologies. In this section, we provide an overall framework for how to conduct a market opportunity analysis, as well as some specific guidance on each type of project.

 

A market opportunity analysis, like any effective analysis, should start with a hypothesis. A hypothesis forms a point of view that will be validated or refuted by the analysis. The hypothesis should focus on your company and/or business unit’s key financial and strategic objectives. The hypothesis should be derived from a critical problem or challenge the company is facing in pursuing a financial or strategic objective.

 

For example, perhaps a key objective for your business is to “expand revenue growth internationally.” A problem while pursuing that objective might be: “We lack brand awareness in western Europe, which is our top-priority geographic market for expansion in the next five years.” That naturally lends itself to an opportunity hypothesis. This could look something like, “If we made a strategic acquisition, we would expand our brand awareness and drive cross-selling opportunities that would grow our market share in Germany, France and the U.K. from 10% to 20% by 2025.”

 

Developing a hypothesis is easier said than done. There will likely be a lot of internal debate, meetings, decision-making tollgates, and other interactions that need to take place to form that hypothesis. Perhaps you need to do some research before undertaking the opportunity analysis research to formulate that hypothesis.

 

Once you have your hypothesis, it’s time to frame out your opportunity analysis. The first step is to take the opportunity analysis dimensions we outlined above and evaluate your hypothesis across each of those areas. This will translate your problem statement and hypothesis into a structured framework that can be evaluated in your research. Using our example from above, this might look like:

  • Time horizon is two to three years (2025)
  • Scope is companywide from a portfolio perspective, focused on three geographies (Germany, France, U.K.)
  • Covers all portfolio products and services
  • All target customers that we serve in our ideal customer profile
  • Currently operate in these markets but lack brand awareness

 

An opportunity analysis is starting to take shape. The next step is to determine the key opportunity analysis questions you would need answered to either refute or validate your hypothesis. This comes from brainstorming and prioritization. For our hypothesis example, key questions might be:

  • What is the addressable market size, serviceable available market, and serviceable obtainable market and forecast growth for our offerings in those regions?
  • What is the vendor market share of that opportunity?
  • What competitors are playing in those markets today? What strategies are they undertaking to pursue growth? How effective are those strategies at delivering on those growth objectives?
  • What are customers looking for in those regions?
  • What is the current perception of our company in those regions?
  • What are the available alliance partners and/or acquisition targets that we could pursue in those regions?

 

Are these starting to look like questions that could be fodder for a research project? Good, because that’s the next step: conducting outside-in research on the market, competitors and customers to answer those questions. For that step, you may choose to conduct your research with internal resources and/or partner with an analyst firm or other third-party market research providers.

Opportunity Analysis Research Methods

The methods we use for opportunity analysis vary based on the focus of the project. Projects typically will incorporate financial modeling, secondary research and primary research (interviews and surveys). We’ll use the example outlined thus far to illustrate how these approaches are put into action. This example includes elements of market, competitor, and customer analysis, as well as alliance and acquisition partner screening.

 

For the market sizing and forecasting piece, we have a six-tiered financial modeling methodology that incorporates public data, secondary research and primary research. If you subscribe to research from an analyst firm, you may have access to some off-the-shelf data that can help here as well.

 

We typically build initial estimates using both top-down and bottom-up methodologies. With top-down methods, we seek to estimate overall addressable market size. With bottom-up methods, we start with vendor-specific revenue data and build upward to a total market size forecast. Building models requires stitching together multiple different sources, as well as making and documenting assumptions.

 

The second element of this project is a competitive landscape and customer analysis. For the competitive analysis, we would conduct an overall assessment of the company’s peers, drawing on public sources such as their websites, annual and quarterly reports, newsrooms, brochures, offerings collateral, and related documents. The goal of the competitive landscape analysis is to understand what vendors are playing in the geographies we’re pursuing, and to what degree.

 

Customer analysis would rely on a survey and/or interviews with in-market customers and prospects, where you would seek to gather customer insights on vendor performance, perception, unmet needs, and selection considerations. Customer analysis can also provide a view of the competitive landscape overall. The outcome of this type of analysis would be an objective evaluation of the competitive and customer landscape, and an opportunity gap analysis of how your company fits.

 

For the alliance and acquisition partner screening, we use a structured methodology to identify in-market candidates, score those candidates based on fit, and profile them for further diligence. Typically, we start by using a resource such as PitchBook or Crunchbase to filter for companies in a particular market that we are focused on. For example, in this case, we would filter for other companies that provide the same or overlapping products and services and are located in Germany, France and/or the U.K.

 

The resulting list of companies forms our “long list” of candidates. We would then establish 10 to 15 other criteria to use in evaluating these candidates. What we’re looking for here is signals of performance. Things like number of customers, portfolio, acquisitions, alliance partners, year founded, revenue and growth, headcount, recent deal wins and other related factors are often good criteria. We gather this data on each company, build a scoring model to score each company based on that data, and generate a set of scores and a prioritized short list of partner and/or acquisition targets. That short list then informs the strategic actions that can be taken to pursue relationships with those companies.