Market Analysis for Entrepreneurs: LEGO Ventures’ Research Methods for New Ventures
27/10/2020

Market Analysis for Entrepreneurs: LEGO Ventures’ Research Methods for New Ventures

In this article, Sabine Müller, Research & Insights Lead at LEGO Ventures’ Incubation Studio, explains the benefits and best practices in conducting detailed desk research for new ventures.

Sabine Müller
Written by
Sabine Müller

In the LEGO Ventures Incubation Studio, we’re building new, early-stage ventures from scratch. But before we start building, we explore the problem area with thorough market research to substantiate the new business opportunity. It’s the quickest and cheapest way to understand the space that we want to tackle. It’s a wide exploration of a high interest area that can hold many opportunities or solutions.

Desk research is a structured method to review all of the literature, data, and insights available relating to the idea. It’s the first due diligence for the business opportunity — the point when you ask yourself “is this even a good idea?”. During the desk research phase we start understanding the true nature of the opportunity space and its potential — is it a whitespace or a crowded red ocean? Does the technology exist? Would enough users even want or need this?

It’s our experience that the better we understand our audience’s needs, the emerging market trends, enabling technologies and industry projections, the better we are able to find our unique advantage and space in the market.

So, how do we substantiate an opportunity through research?

When we conduct research, we review a wealth of qualitative and quantitative data. These insights come from external sources as well as internally-accumulated knowledge from the LEGO® Brand entities. We try to scan everything relevant from scientific articles, reports, insights from past experiments, statistics, patent databases, news articles, blog posts, app analytics, and market size reports.

This can quickly become information overload! Which is why we structure the exploration into five topics:

  • Deep Human Insights

  1. Deep Human Insights

In this category we explore everything related to the target audience’s needs, pains, wishes, ambitions, and behaviours; and how these might be changing according to technology, the economy, the environment, and society.

  • What do we know about the target audience? Who are they?

2. Trends & Foresight

Here we review the micro and macro trends that influence the audience’s needs and behaviours as well as the business opportunity or business model. We try to evaluate where the business opportunity is on the trend curve (S-curve) — to see how far along the trends are to becoming the “new normal”.

  • What trends are we tapping into?

 

 

3. Competitor Landscape

In this area we map out all the potential “fish in the sea” — the small or big players in the space — which helps us understand how crowded the market is. Moreover, we get a good understanding of whitespaces, with little startup and investor activity, versus red oceans that are typically crowded with many competitors and copy-cats. This step is key to understanding how unique the opportunity is (or not)!

  • Who are the competitors in this space? Mature vs early stage? How many competitors are in this space (is it highly competitive, or only few)?

4. Industry & Commercial Projections

We also reference statistics and projections for the broader sector. Estimating market size and forecast for early stage opportunities is quite difficult (and sometimes impossible!), especially for ideas that don’t have a defined market yet. In this case, we still try to estimate how many consumers or users we could reach and have a look at the overarching sector to determine potential growth or decline. We review data from international industry associations, trade statistics, industry news, policy documents, and VC funding data.

  • What is the expected CAGR (compound annual growth rate) of the sector?

5. Enabling & Emerging Technologies

Here, we review all current and emerging technologies that could accelerate our business opportunity. We look at innovations that could be relevant for the product or service itself, the go-to-market strategy, the supply chain, monetization mechanisms, or any other important aspects of the business model. We try to be very specific here and include manifestations and valuable applications of new technologies or “old” technologies reimagined in new ways that can really disrupt the opportunity space. You can find some good examples here.

  • What are the relevant technologies in this space?

Our Top 3 Tips

Tip #1: Desk research is not a one-off.

You need to continuously iterate and update as you develop your business and as new information emerges. You need to keep an “ear to the ground” on what is happening in the environment surrounding the business.

Tip #2: Build your knowledge repository — and follow the leads.

  1. Develop deep understanding of your target audience’s needs and how they are changing short-term and long-term

Tip #3: Reality Check.

  1. Does the opportunity or venture idea fit a number of macro trends, or is the trend a short-lived hype?

Connecting the dots and iterating

Connecting the dots and iterating is key. Ideally, the outcome of desk research is not just a huge accumulation of loose information — connecting the dots is a must. These interesting and meaningful connections across and between data points and insights are really the creative juice that guide our new venture concept development and positioning. When the insights overlap or contradict that is worth exploring more.

Tools you can use

To help with the task of connecting the dots, we use the platform Miro. For insight gathering, we use numerous online resources:

  • SEMRush: find competitors and other players in the market.