Food for Thought
A message from Leander, co-founder of The Innovation Curve:
“It is common start with an idea and get stuck without understanding what’s blocking you when building a business. As it can get quite frustrating (in addition to it being a lonely journey), I always try to take a step back and do a little reflection. My reflection led me to write this blogpost.”
This is my journey on how I applied the Innovation Curve on a business.
Currently, I am working with a client to help him BUILD his business in window panels. In Holland, it has been a long time tradition to make window panels from wood.
The company I am working with is able to produce high quality window panels against a competitive price. It has sufficient qualified staff for installation but lacks the sales capacity to promote the product and grow the business.
Hence, the assignment given to me was to assist the client to BUILD and SCALE the business.
This sounds great, we can’t wait to get started!
Where do we start to build and grow the window panel business?
Yes, this is a right question to ask but there are many other questions we need to answer first before thinking about building the business. Ideas are great, it may work for you but is this a solution that the market needs to solve the problem?
Examples of questions we asked ourselves where:
- Is there a large market potential in this industry?
- What is the current alternative solution customers are using right now?
- Do they need your service when they have an alternative solution?
- How much are they willing to pay to replace their window panel?
Estimated market size
My first step was to estimate the market potential. What could the potential benefit be? What is the margin, cost of sales and how much time needs to be invested?
Using the Bottom Up Calculation method, we managed to gather some findings.
We estimated that a 10% profit would be realistic and aimed to earn 10,000 Euro/month.
Our first question would be:
Would a sales target of 100,000 Euro/month be realistic?
Based on the calculation above and the segment we targeted, we had to contract 5 mid-sized housing associations.
With approximately 120 associations in our market, we were confident with the market size and assumed this was a realistic number.
Step 1. TEST your IDEA – Activity: Can I Earn Money with This Idea?
Talking to experts we learned find a better customer segment
We highly believe it is important to constantly test the water of the business. Hence, we talked to experts to learn about the challenges and quality of the product. We talked to customers to find out how much they are willing to pay for the product. This allowed us to identify several customer segments and understand their needs.
Our initial thought was to target the Housing Association Market mainly because of their Market size and relatively little sales effort needed to attract them.
We learned that they have a longer relationship with their suppliers and are usually not looking for alternatives.In other words:
Housing associations don’t have a problem that we can solve.
They are also asking for quality certificates making it less easy to create a prototype.
This was especially the case for the New Construction Market. We decided to leave this market untouched.
However, we learned that homeowners find it difficult to find suppliers and fail to understand their options (Depth/Pain). They searched high and low online for suppliers, product options and cost indications.
What if we :
- capture their attention and
- provide the information they need?
This would bring significant upsides:
We could solve their first pain by providing the information the needed. It would allow us buildup knowledge by solving their questions.
Talking to experts help us to select our target market:
Owners renovation their house in the Amsterdam area.
What we learned
In assignment is to BUILD and SCALE a company in window panels. To do so we calculated our target market size, selected a customer groups based on the best assumptions we could make in our first view hours at work.
We spend several days talking to experts we happen to know. For us these were housing associations, constructions companies, architects and home owners.
This talks let us in refining our customer segment and finding a problem we could solve.
We formulated new assumptions and started to test them.