When researching new verticals/industries, it's critical to understand the customer.
• How does the customer make the buying decision (workflow)?
• Who is the authority/-ies behind the decision? How much friction will an internal advocate face when buying/implementing? (B2B)
• What are the decision factors (criticality, budget, seasonality)? What's the job-to-be-done (see Clay Christensen literature)?
• What's the price sensitivity?
• Switching costs?
• What are the customers' alternatives (Porter's 5 forces)? What are the churn triggers (budget cuts, people change, disruption)?
• What are the macro demand drivers?
What you want:
• The right balance of static (customers are sticky) and dynamic (you can win market share).
• A purchase process that you can initiate and influence.
• Dynamics that favor your target company's strongpoints (e.g. low-cost operational excellence is great in commoditized markets, top-quality product superiority is great in high-risk, small-share-of-wallet situations).
The fastest way to climb the learning curve for thesis-driven sponsors and other industry newcomers is to consult with people with industry experience.
Thanks to Cyrus Hessabi at Shore Capital Partners for his insights.
