‘Functional’ Approach to Uncover Profitable Markets
Your Existing Resources are the Gateway to Profitable Markets & Products
Budding entrepreneurs or startups in the present times need mentoring and advice like never before due to the slowdown that the present pandemic has brought with it. Startups have been forced to pivot their business models and some have even switched or planned to switch to entirely different sectors. SMBs (Small & Medium Businesses) also have no different story. Indeed they are the ones who have been most severely hit by the outbreak.
Thus companies have been left with no other option but to innovate. The role of mentors and advisors for such companies is now more pronounced and instead of offering just advice for various aspects of businesses, the need is now for an in-depth strategies & roadmap that can help companies make a forecast about their business, pivot if required, or switch to entirely new businesses. Companies now need to think beyond the product or price.
In line with our mission to support startups, entrepreneurs and SMBs, we share a very effective approach to help businesses with a small team size or lacking brainstorming activities within their setup (though the multifold benefits are achieved if it’s used with brainstorming).
We call this strategy as ILAC (identify, list, analyze, and combine). ILAC has proven to be quite effective in bringing out the new profitable markets or product ideas using most of the existing resources that the company owns. The tool for executing this strategy helps to fully exploit the resources of a company in a manner that is rarely thought by the owners or founders.
The strategy is broken up into 4 steps for your clear understanding and effective implementation.
Step 1: ‘Identify’ your Resources:
This is the first step in the process to uncover profitable markets. In this step, the resources are identified and categorized. They are mainly three types of resources:
- Direct resources
- Other People resources
- Indirect Resources
Most of the time, startup founders or entrepreneurs can identify the resources they are directly related to. For instance, the intellectual property they own, the employees and their skill sets, the capital assets of their company including machinery & equipment, or the business processes, tools, and technologies used within the company. These are called direct resources.
The resources can also come from partners, related or analogous products existing in the market or from open source technologies. For example, you as a company owner may strategically convince your partners to use their logistics infrastructure like transportation or warehouses or you may use the open-source or free software in the public domain to manage your business operations like inventory management, customer relations, etc. These types of resources can be put under a category called ‘Other People’s Resources’ or OPR.
The third types of resources usually missed by the entrepreneurs or startups are indirect resources which play a major role in uncovering new markets or products. Following are the indirect resources related to startups, SMEs, or even big companies:
- The unutilized innovative ideas of the core team members & employees.
- Previously conceived business models for other offerings by the company.
- Tools developed or utilized by the employees in their previously handled projects or professional experience.
- Tools used and solutions suggested by the external consultants if hired anytime by the company.
- Raw materials, finished goods, components used in finished goods, manufacturing processes in companies producing physical goods.
Step 2: ‘List’ all Industries under different sectors:
Identify the sectors that are growing or expected to have a high growth rate in the future. Then pen down all industries falling under those sectors. Here it’s also important to add all the industries falling under the sector in which your current business operates, irrespective of whether it is growing or not.
For example, if your industry is garments manufacturing, your sector is textile. So you can list all industries related to textiles like manufacturing, trading, or consulting in dyeing, printing, etc.
Step 3: ‘Analyze’ your resources on functional grounds:
Resources are usually utilized by their face value i.e. they are deployed to fulfill planned objectives or get expected results as against surprising or unexpected ones. You may find it surprising that the resources of companies can even be utilized to fulfill entirely different objectives or serve purposes they are not meant for. This is achieved by what is called functional analysis of resources. Here you analyze your resources based on the functions they perform or can perform. In simpler words, their core abilities are identified.
In this step, you list the functions of each resource identified in step 1.
Step 4: ‘Combine’ the industries and resources as a matrix:
As a final step, you combine the list of industries and resources in the form of a matrix in which all resources along with their corresponding functional abilities appear against each industry. This enables an easy structuring of data where all industries (that represent market) and resources are rendered comprehensively.
The following table shows how industries and resources are arranged in the form of a matrix. Only a small portion of the table can be displayed due to a large number of columns in the table. Cells marked in green and purple color are the resources.
Uncovering New Markets
From the matrix from step 4 above, you will uncover several pairs of similar functions or similar abilities of different resources corresponding to different industries. Even the unrelated industry may have a resource performing a function similar to that of a resource of an entirely different industry. These pairs with similar functional ability correspond to new markets or help ideate new products that solve pain points or satisfy real market needs. One such pair is shown in the following table.
It is clear from the above table that cardboard which is a product of the paper manufacturing industry can be used to make emergency beds for patients in hospitals. This is an example of real-world innovation; a hospital bed made out of cardboard. Video displaying this innovation can be seen here.
Methodology to explore & identify the functional abilities of different resources is the key to finding new markets & products with high-profit potential. The approach described above can help identify those resources within your industry that have the potential to uncover high-profit markets.
Do you feel there is something more to be included? Kindly write to us. We will be more than happy to consider your valuable suggestions.