Instructions for software import substitution: Market analysis
So, another foreign software vendor and the leader of another market is leaving the Russian Federation. We can repeat itbut it would be good to first think about how, what, why, and how much it will cost. We are thinking about whether to get in touch?
Of course, there are some bravura reports from consultants with the size of our market and forecasts for the future. But let's look at the details.
How reasonable are the numbers anyway? Let's look at the total revenue for last year. For example, sometimes a market assessment includes the supply of an unknown “product” to some Ministry of Defense, and half of last year’s market volume consists of this contract. “How much confidence can you have in the market's assessment?” – the question is rhetorical. We need statistics. A market exists where there are many consumers making rational decisions. And we throw away statistical anomalies.
How stable is the situation in our market? Is it mastered, shared, does the leader feel comfortable? Or does he lose share and move out at the expense of servicing past clients? What dynamics? Is it necessary to replace imports at all?
The market in the report is a kind of abstract thing; usually there is a comparison of products through the eyes of consultants – a large plate of products with pros and cons next to each feature. There is no valuable information in such a plate. Why? Because It's not features that are sold, but “business value”. There is nothing about her in the report. 🙂 The mechanical presence of selected buttons and forms does not promise a holistic vision of solving customer problems. And they buy it for it.
The market in the report is presented as a kind of single clearing with a set of different products. Let us remember that it is not features that are sold, but values, and if the market is stable, then different values are consistently sold to different clients. There are probably segments in the market, different products solve different customer problems. This means we are looking at a too general report. It is necessary to define segments based on the tasks customers solve using products, and think about working in the segment.
The figures in the report on total revenue and market shares are often taken “out of the blue” – by surveying leading players. Let’s remember the “and you say” joke:
— Doctor, I’m only 50, but I can’t do almost anything in bed anymore. And Rabinovich is 70, and he says that for him two or three times a night is a common thing. What should I do?
– And you say that too!What to do? If the market is stable and the leader leaves, look at his revenue. It is this that is not divided between the players. You can view its revenue using the financial statements of the local representative office. You just need to find its tax identification number – we will share the revenue of the import substitute, and not the entire market. You can go further and look at the revenue of all competitors at the same time. Often the vendor or its Russian representative office is transferred to a separate legal entity; you just need to find the invoice.
And in practice, a surprise awaits us: the real revenue of the market leader according to reporting turns out to be 20 times lower than the estimated one. For example, according to competitors, the market volume is supposedly 2 billion rubles per year, but the leader with 50-70% of the market has annual revenue of only 40 million rubles.
It turns out that the market leader earns differently, and this radically changes product strategy – monetization, MVP, marketing and much more.
Total: in one case, as a result of the exercises, the market valuation decreased from 2.5 billion rubles to 0.6 billion rubles per year. And the development plan turned upside down – they pay not the same And not for that what we came up with for ourselves, rushing to repeat.
