Determining the market potential of technologies

If you are considering commercialising the results of your R&D work, whether by setting up a spin-off or another form of cooperation with the business, we suggest that you pay attention to what to do to conduct an initial self-diagnosis of the market potential of the technology.

The essence of the solution

Try to enter the role of an observer and analyze the concept of technology. How does it compare to other technologies meeting the same need? What are the competitive advantages? What factors should be considered as weaknesses? This step will give you an initial idea of the relationship between your technology and solutions currently on the market or under development.

This will help you identify potential business partners and anticipate uncomfortable questions that may arise from future customers or investors. It is also worth keeping in mind that the novelty of the solution itself, i.e. reaching the same result, but in a different way from the current market standard, may not be enough to arouse the interest of the audience in your project.

Possible applications

If you’ve recently thought of the phrase “my technology has a very wide and varied range of applications” this should probably be considered a yellow flag. While it is worthwhile to start with a long list of considerations about the direction of technology implementation, generalization is usually not very well perceived by investors.

This is due to the fact that when coming for capital support for project development to a seed or, we usually do not yet have evidence of real market interest in our project. This could be confirmed by e.g. results of prototype tests on an industrial scale, sale of the first batch of products based on the technology, a signed letter of intent, an estimate of the benefit/cost ratio of implementation supported by a feasibility study.

From the investor’s perspective, the more potential directions of implementation, the more time (and money) is needed to find an appropriate business model that would work in a given niche and thus the greater the risk that it will not recover the invested funds (not to mention the profit, which expectations are usually high).

Nature of the target market

Having a defined direction of implementation, it is necessary to consider how the entities (customers and contractors) that form a given niche function.

When analysing the factors shaping the market, it is worth noting this:

  • whether it is dominated by global corporations or rather consists of very many small entities operating locally,
  • whether the customers are individuals or rather institutional recipients – companies, government agencies,
  • how big the market is, how fast it is developing and what determines this development (or decline),
  • how is the market geographically shaped, can international sales be made from one place?
  • Are there regulations that significantly restrict market access, e.g. through the need to obtain a licence?
  • what political, economic, social and legal trends shape this market.

The source of this information may be, for example, the financial statements of entities operating on the market (we will find in them the size of revenues, margins, cost structure), their websites often containing a section “knowledge base”, industry reports, as well as reports from industry media. When looking for information, play the role of a detective, trying to maintain objectivity.

Sales opportunities

This step allows you to see how difficult it will be to identify and reach your customers and whether potential customers have sufficient purchasing power. To do this, analyze who your potential customers are in each of the previously identified applications.

Are these groups numerous? Or does it turn out that your technology will be interested in three entities on another continent? This will give you an idea of how best to structure your commercialisation and market entry strategy and what costs it may entail.

Intellectual property

The choice of an appropriate patent strategy, combined with appropriate protection of know-how, is an important factor determining the market attractiveness of a technology. When analyzing issues related to IP (Intellectual Properations, intellectual property), it is also worth paying attention to whether your actions and your technology do not violate the rights of other people or entities.

An important factor is also who formally owns the ownership of the technology you intend to commercialise. If you are not the sole owner of the technology, it is necessary to obtain appropriate approvals from the other entitled parties. It is worth bearing in mind that although even the most thought-out protection strategy does not guarantee commercial success, it will create a legal barrier to competition.

The presented factors are interdependent. The economic potential of a technology cannot be considered in isolation from the business model, which is created in an iterative way, as the needs of the target audience are known. This means that the same technology, whose potential has not been fully recognised in one industry, can be successfully applied in another.

When analyzing possible directions of technology implementation, it is worth looking at the market widely, looking for an attractive niche. If in a given case we do not manage to concretise the needs of our customers, it does not mean that we have to resign from implementing a given technology immediately.

In some cases, a small change in the business model may turn out to be the key to creating a completely new market, the existence of which nobody was aware when deciding on commercialization.

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