Experts can become generalists, but generalists can seldom become experts
3 minute read
23rd December 2022
At the beginning of its journey, no product or service – however amazingly brilliant it is – sells itself. Any start-up needs to get its offering right, but it also needs to figure out who it is for and why those people might be interested in it.
Every entrepreneur knows this, which is why the one slide that appears in every pitch deck is the one that talks about TAM: the total addressable market. For businesses with high aspirations and deep beliefs, it can be tempting to believe the whole world is going to want your stuff. But there are very few offerings that have genuine mass-market appeal straight out of the gate.
While there is no harm in wishful thoughts about long-term market domination, it’s more important to learn how to walk before trying to run. It isn’t about finding the largest conceivable market that might be addressed, it’s about focusing on the market that is most likely to be engaged.
By definition, all companies start off small. But some deliberately target a distinct group of people with a clinically focused proposition. They offer something different or better in a clearly defined space. These businesses grow by broadening their audience as their own reputations build, and by broadening their offering once they have established expertise in a very specific area.
Strava is now an iconic brand in the world of health and fitness, with over 50 million members sharing over a billion activities each year between them. Each month, more than a million new people join the community, uploading their runs, rides, swims, hikes and other activities. But it started out with a modestly stated desire to offer technology that could connect semi-elite cyclists to what CEO and co-founder Michael Horvath describes as “the feeling of camaraderie that comes from being on a team”.
Once established as the primary platform of choice for those who take their cycling seriously, soon a much broader swathe of bike users began buying into the benefits of planning, navigation, monitoring and motivation that Strava offers even to the casual rider. As it grew, its core constituency evolved from the cycling specialist to the sports generalist. The obvious evolution was for the company to offer performance data collection across a number of similar activities, such as running, hiking, swimming, skiing, ski touring – the culmination of the original mission of finding individuals who participate in communal activities and bringing them together.
Of course, Strava has been helped by some winds of fortune beyond its own control. There has been an exponential growth in cycling in the past decade that has seen it usurp golf as the preferred sport of management networkers. The COVID-19 pandemic increased interest in keeping fit, as well as accustoming us all more to using technology to share information with each other. But without that solid foundation of focused expertise on serious cyclists, Strava wouldn’t have been in a position to take advantage of it.
The start-ups that succeed are the ones that know what they stand for and over-commit to it even if it comes at an early price. They are the ones that identify themselves by what they do and believe in as well as, critically, what they don’t do and don’t believe in. Powerful positioning is as much about what you exclude as what you include. It’s what gives exclusivity its lure.
It is much smarter to target a niche and conquer that comprehensively. It is better to be over-valued by a few than under-valued by the many. It allows you to develop your story, establish a reputation and start to build advocacy.
“Everyone will want this” betrays not only a certain naivety, but also a likely failure. If what you have to offer really is that fantastic, the mass market will wait for you. Whether you get there or not will be down to the strength of your first steps, not their size. Before anything you need to establish your expertise. And as Niels Bohr, co-founder of quantum theory, observed, “An expert is a person who has made all the mistakes that can be made in a very narrow field”.
Instead of fixating on the potential size of your market, concentrate on why someone would want to be your customer and how you can provide an excellent answer for that particular person. That allows you to build your story and identify the best market. Stop thinking in terms of your TAM, and start thinking instead about your OEM: the Optimally Engageable Market. Because the right people aren’t necessarily the most people.