An opportunity assessment study is undertaken to evaluate a business idea, concept, or opportunity, with the ultimate goal of determining whether there is sufficient strategic, market, and financial merit to invest in a specific product or service. There are several use cases where opportunity assessment studies may be considered, such as the following:
- New product penetration. A company may have an idea to develop a new product. However, while the idea seems good on paper, the company is unsure whether there is a market for the product and may have other concerns, such as competition, regulatory barriers, sizing the opportunity, and market acceptance.
- New market development. A company may plan to develop new markets for their existing line of products and services as part of their strategic growth roadmap, and may wish to evaluate the success rate, risks, and potential returns for the new markets under consideration.
- Due-diligence for M&A. A corporate group may wish to buy into a new market (or faced with an offer for sale on the table). As part of the due diligence process, an opportunity assessment study is conducted to help rationalize the size or feasibility of the deal.
- New market entry. A multinational company may wish to enter a new market which it has very little local ground knowledge about. An opportunity assessment study is conducted in order to determine whether the investment is a go or no-go.
- Business diversification. A company may be contemplating diversifying its business into unrelated markets as a strategy for growth. The company may conduct opportunity assessment studies in different target markets in order determine which markets hold the highest chances for success.
As observed above, opportunity assessment studies are used in a variety of settings to help support strategic decision making decisions where the stakes are high and taking a wrong or sub-optimal decision may result in substantial losses, monetary or otherwise. The comprehensiveness and holistic assessment approach of an opportunity assessment study are the reasons for its effectiveness in high-stakes research, and the research typically requires a prolonged period of time to conclude effectively (although components of the study can be customized to some degree to fit resource requirements).
Due to the nature of the business problem that the opportunity assessment study attempts to solve, the findings of the study are often deliberated at the senior management level of the organization. Some key features of the findings for senior management level decision making include:
- Risk Assessment. What are the downside risks associated with the decision, and whether they are within the acceptable risk appetite?
- Return on Investments. What is the potential return of making an investment? How quickly can break-even be achieved?
- Opportunity Costs. What are the opportunity costs associated with the decision?
Segment Prioritization. Which segments yield the highest rate of returns? What is the positioning strategy?
- Business Unit Strategies. How should business units be structured for maximum effectiveness? What partnerships should be established?
- Competitive Advantages. What are the competitive advantages that need to be sustained, enhanced, or added to maximize success?
- Key Success Factors. What are the key success factors that need to be accounted for?
Opportunity Assessment Research Approaches
Opportunity assessment studies are often outsourced to third-party research specialists due to the scale of the groundwork that needs to be covered; although with enough resources, experience, and personnel, they can be conducted in-house as well. Several factors need to be take into account for an effective opportunity assessment study.
- Market Size and Share. Market size and market share reveal information about the attractiveness of the markets in question. Typically, market size and share are the first pieces of information to be considered, as a small market size may not be attractive enough to warrant further investigation into the market.
- Market landscape. Assessing the market landscape reveals information about the growth drivers, barriers, and development trends of the market. The assessment is conducted at both national and regional levels, as there are typically differences (and different opportunities) at the regional and national levels.
- Customer Insights. Understanding customer behavior in a new market is critical, as behaviors may differ in new markets even for established products. A customer intelligence study may be conducted to ascertain characteristics and expectations of the market.
- Competitive Insights. Assessing the level of competition in the market reveals the relative competitive advantages between market incumbents and the new entrant. In particular, value propositions of the competitors are established and their relative positions in the market are mapped out.
- Pricing and Positioning. Pricing and positioning analysis reveals information about product segmentation and their relative price position in the market, which is critical when considering product penetration strategies. The relative growths of individual product segments are also assessed.
- Value Chain. Value chain analysis covers both supply and distribution chains. In particular, the structure of the value chain is mapped out and key players along the value chain are identified. In certain markets or product segments, establishing strategic partnerships may be necessary, thus should be evaluated.
- Gaps Analysis. Finally, a gaps analysis is carried out to identify unmet needs and/or areas of opportunities in the market, based on the organization’s goals, resources, networks, and competitive advantages backed by evidences and facts from the entirety of the study.