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.
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
- Trends & Foresight
- Competitor Landscape
- Industry and Commercial Projections
- Enabling and Emerging Technologies
- 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?
- What unmet needs & pain points among this audience do we see?
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?
- Which future predictions relate to our opportunity space?
- How will these trends inﬂuence the behaviour and needs of our target audience?
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)?
- What do the top 2–3 competitors look like and what is their USP?
- What new solutions to the problem space are emerging?
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?
- What is the current market size and forecast? How many of our target audience can we potentially reach?
- Is it a local, regional, or national market with prospects for going global?
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?
- How far along are these technologies (proof of concept, early stage, mature)?
- What are useful applications today and in the future?
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.
- Develop deep understanding of your target audience’s needs and how they are changing short-term and long-term
- Use a platform like Notion Web Clipper, Pocket or Pearltrees to capture interesting articles, blog posts, and especially “weak signals”.
- Be quick to incorporate trends and adapt to the changing needs of your target audience — pivot if needed!
Tip #3: Reality Check.
- Does the opportunity or venture idea fit a number of macro trends, or is the trend a short-lived hype?
- Do you have evidence that you are solving a real problem or need for your audience?
- Can you verify your claims through reliable and reputable external sources?
- Have you considered broad and unbiased information, or is your information skewed to positively make your case?
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.
- US Census Bureau: stats and demographics.
- Pew Research: Public opinion polling, demographic research, content analysis and other data-driven social science research.
- MarketWatch: Stock market and industry news.
- Trendwatching: Subscription service with a few free reports on consumer and macro trends.
- World Bank Open Data: Free and open access to global development data.
- Economic Indicators: Offers free economic, demographic, and financial information.
- Google Trends: Discover what people are searching about and how search volume on important topics is changing over time.
- Statista: statistics and trends.
- World Economic Forum: Free global reports on macro and industry trends.
- Mintel: Several free reports on market research, innovation insights and consumer trends.
- HolonIQ: global intelligence and data platform for education and EdTech.
- App Annie: a comprehensive data and analytics platform for the mobile app economy.
- CEB Insights: market intelligence platform.