When we conduct our Grassroots Strategy workshops, the first step in our framework, “Market Definition,” aims to change the mindset of the teams from thinking product forward to thinking market back.  We start this process by defining the market as, “the problem you solve for a set of customers.” One of the exercises in this session is to imagine dimensions along which your current business could expand and display it as a market “cube.” Because of the nature of B2B markets, it can be extremely insightful to think about your markets and market opportunity in this type of multi-dimensional space.

Market Definition

Theodore Leavitt and Roger J. Best have been two of the most well-known advocates for expanding our view of Market Definition. Leavitt most famously said, that “people don’t want a quarter-inch drill bit; they want a quarter-inch hole” and so argued that a market definition should include not only your product but also include all other means by which a customer can solve the same problem. For example, Best famously argued that CocaCola should define its market as “non-alchohlic beverages” rather than “soft drinks” thus expanding its market opportunity dramatically. These were impactful perspectives but pertained mainly to the consumer world. The dimension of expansion of the market was other “units of demand” (i.e., customers or purchase occassions) who needed to have the same problem solved but were not currently using the product you provide.

The Market Cube

In B2B markets, your offering is often a small piece of a customer’s total solution, so this one-dimensional thinking about markets is not enough. To make sure we do not overlook opportunities for business expansion, we encourage participants to think about their market in a multi-dimensional space (see exhibit). Ideally the currently served market is a ‘small cube,’ defined by current scope, technology, customers and channels. But typically (and especially in B2B markets) this is not the whole picture. There are channels that stock, modify, install and service our products. There may also be adjacent markets, appplications or technologies solving similar problems. There may even be different business models where we act as an integrator selling a solution or an outcome rather than a product.

For example, one of our clients manufactured and sold the components for residential fire alarm systems. Their initial stab at a market definition was something like, “we sell active components through distribution for professionally installed residential fire alarm systems.” They were comfortable with this definition because they had a relatively high market share of this market; and further, it reinforced their thinking that the cirtical customer was the distributor. In fact, adding new products when distributors asked had been key to their historical growth.

Obviously, this is a self-limiting definition. The cube below shows just how limiting that definition is. As usual in B2B markets, the ‘product’ does not solve the end-customer problem – no matter how well you take care of distributors, a fire alarm system does not do its job unless it is designed correctly, installed correctly, maintained correctly and monitored 24 hours per day. As they discussed it more, the team settled on three dimensions that could lead to a dramatically expansion of their market.

The purpose of the cube is NOT to suggest that we can serve this entire expanded market, rather it is to broaden our search for problems we can solve.  Are there adjacent channels, technologies or business models that might represent “blue oceans” https://www.amazon.com/Blue-Ocean-Strategy-Expanded-Uncontested-ebook/dp/B00O4CRR7Y/  where we can create a market rather just continuing to compete in our current ‘red ocean’ space with known customers and competitors? In this case, the company starting talking to end-customers and quickly realized that one of the major painpoints was false alarms. This lead to new products and services designed to address this previously undiscovered need.

As another example, one of our recent clients manufactured specialty fibers and industrial threads. One application where their products are used is the stitching to hold together seatbelts in an automobile. As we ran the cube exercise with them, we had one dimension on scope of offering – as we expand our scope, we could offer: the thread, the webbing, a complete seatbelt, a complete seatbelt system (including mechanical parts and tensioners, etc.), or a complete seat system. Getting a little carried away, at the extreme end of this axis, we wrote “entire car.”

Obviously, that last was in jest. Given this company’s focus and capabilities, it would be nonsensical to make the massive investments necessary to build an entire vehicle. Nor do car buyers base their purchase decisions on the thread in the seatbelts. However, this line of thinking proved productive. Thinking from the vehicle OEMs’ perspective, we realized that the seatbelt system is critical in passing the “crash test” to certify a vehicle before production. The crash test is costly and critical because it requires an entire vehicle – it has to be done near the end of the development process and any need to retest will almost certainly lead to delays in production start.

So the team began to wonder how does the thread affect the crash test? Can we eliminate one potential source of failure? What would an automotive company pay to reduce this risk? Could we certify the thread, or offer a gaurentee that might be difficult for competitors without our labs and other resources to copy?

To date, this line of thinking has not dramatically changed the business or generated any incremental sales, but it has given our client a reason to better understand the auto OEMs, not just continue talking to the tier 2 suppliers to whom they sell directly. This work is ongoing, but will almost certainly uncover additional problems they can solve (see our blog on market definition: Warning, No-one Cares About Your Product.

Common Mistakes

In B2B markets, the market cube exercise is a key piece of the foundation, and as these examples highlight it can be eye-opening and create unanticipated opportunities. But it is also one of the more difficult puzzle pieces of the Grassroots framework. Watching teams go through the process over the years, we have developed a list of some of the more common mistakes:

• Confusing the market cube with segmentation – while your segmentation may be represented by a cube (if you happen to have three dimensions), it is a different cube. As we have discussed at length elsewhere, segments are always based on customer needs. The cube, in contrast, is based on the scope and focus of our offering (and/or the breadth of the problems you solve). Confusing the two can obscure the view of the full market and may cause you to overlook opportunities.
• Labeling the nested cubes without thinking through the dimensions –  Sometimes, teams are too anxious to apply names to the bigger cubes and don’t spend enough time to think through the axes that are driving potential market expansion – thinking this through first ensures completeness and can prevent rework later on in the process.
• Failing to think big enough – it is tempting to view the cube through the lens of our current business and reach conclusions like “we would never build an entire car,” or more commonly, “we can’t forward integrate and ship directly to job sites because that would be competing with our distributors.” Obviously, changes in business models need to be evaluated, but ruling them out at this stage will make it more likely that you fall back on the current small market definition.
• Fearing the big market size – sometimes teams are reluctant to show the big cube because the market size would be too big. Again, the goal is not to set more aggressive growth targets for current offerings, rather it is to expand the space where we are looking… and if the goal is finding the next $10million opportunity, that is likely easier in a $10billion market than in the $100million market where we already have 30 percent share.
• Thinking only about scaling up, not slicing your offering – sometimes a breakthrough can come from recognizing that the current offering is actually made up of smaller potential offerings. One of our clients that sold critical engine parts to vehicle OEMs realized that while they generally got paid per part, their offering actually consisted of design, product engineering, application engineering, component sourcing, assembly and testing. Expanding their thinking, they were able to unbundle their offering and price differently for the services that were most valued in some specific segments.
• Having dimensions that are redundant or overly correlated – It is very easy to define different dimensions of the cube that in the end are different ways of saying the same thing.  Make sure that the dimensions are mutually exclusive and truly describe a different vector – “can you imagine being at the low end on one dimension and the high end on the other?” is often a good test.
• Settling for easy dimensions – When teams rush through the cube activity, they can be a bit lazy and settle for dimensions like geography (which for a global company is a given), or our three existing product lines, and not push to ways to think differently and potentially expand the market. For example, it took the fire alarm team a while to tease out the difference between scope of product/offering and degree of intergration (for example, you could sell a broader scope of products, but still go through current distributors), but getting this right had profound implications on their business model.
• Not being able to draw the cube – we joke with our teams that drawing the cube in a way that represents three dimensions on a two dimensional flip chart is always a challenge. Artwork aside, no one can draw a cube with more than three dimensions. But sometimes there are four or five vectors for market expansion. Capturing these and thinking through the implications can be critical, even if the drawing isn’t pretty.

Like many of the concepts we use, the market cube can look obvious in retrospect – “well, of course that is our market.” However, failing to put the required energy into thinking broadly and settling for “simplicity on this side of complexity” can cause you to miss opportunities. As we have said before, if there is a way to deliver better outcomes for end-customers, you can bet that someone will do it. If you stay stuck in your current box, that someone will not be you.

To end on a side note, the word ‘cube’ comes into English from the Greek word for a six-sided die. So we close with the advice to take the time and get this part of market definition right – to skip this step is playing dice with your market strategy!