Introduction
The role of a Product Manager often extends to uncharted territories, particularly when assessing the potential of emerging technologies. Candidates for PM roles, especially at innovative FAANG companies, must demonstrate foresight and strategic thinking. Let’s explore the question: Assume there is a 3P company that can detect smell. How would you understand the market opportunity and which market segment you will target?. This article will guide aspiring PMs on how to analyze market opportunities for novel technologies using structured frameworks.
Detailed Guide on Framework Application
To address this question, the TAM, SAM, and SOM (Total Addressable Market, Serviceable Available Market, and Serviceable Obtainable Market) framework is particularly useful for understanding and quantifying market opportunities. Here’s a guide on applying the framework:
- Step 1: Total Addressable Market (TAM): Estimate the broadest market potential for the technology.
- Step 2: Serviceable Available Market (SAM): Narrow down the market to segments that can realistically be reached and served by the company’s current business model and capabilities.
- Step 3: Serviceable Obtainable Market (SOM): Further narrow down to the portion of the SAM that the company can capture in the short-to-medium term, given factors such as competition, entry strategies, etc.
For our hypothetical scenario, let’s apply the framework:
- Total Addressable Market (TAM): The TAM for a smell-detection technology could include industries like food and beverage, perfumery, safety and security (e.g., detecting gas leaks), and healthcare (e.g., identifying diseases through scent). Estimate a market size by researching the average spending in each relevant industry.
- Serviceable Available Market (SAM): Suppose, after initial exploration, the company’s capabilities align most closely with the needs of the food and beverage industry, particularly regarding quality control and flavor consistency. This refines the SAM to this specific sector.
- Serviceable Obtainable Market (SOM): Next, you examine current competitors, possible partnerships, and any regulatory barriers in the food and beverage industry, to estimate the SOM. Perhaps you’d target boutique brewers or artisanal cheesemakers as an entry segment given product fit and market receptiveness.
The data needed to accurately define a market segment might not always be readily available, but as a PM, you’d be expected to seek out industry reports, use analogous benchmarking (like looking at similar technologies’ adoption rates), or even extrapolate from small pilot studies.
During the interview, communicate your analysis in a clear, structured manner, articulating how each stage of the framework helps focus the market strategy and includes consideration of various market forces and trends.
Conclusion
The TAM, SAM, and SOM framework is a powerful tool in the Product Manager’s arsenal, helping to systematically break down market opportunities for innovative technologies like a smell-detection capability. From exploring expansive potentials (TAM) to honing in on targeted strategies (SOM), this framework prepares PMs to demonstrate their strategic thinking in interviews. Practice applying this framework to a wide array of products and technologies to refine your skills for assessing market entry and growth opportunities.