Market Sizing Fallacies

Here’s a great post from Colin Raney at IDEO who nicely summarizes what he terms the “Large Market Fallacy”: http://colinraney.com/2009/08/the-large-market-fallacy/

I have seen this at multiple steps in my career. People get too excited about big numbers and fail to dig deep enough to understand key market drivers, assumptions etc. I have written on effective planning techniques to avoid this in past posts.

Here was my reaction:

Here’s my observation about why people do this. I think there are 2-3 big reasons (that have some overlap).

1) Not as many people as we want to have actual curiosity and drive to solve problems. Intellectual lazinesss/lack of time is a huge factor.

2) Many people in positions to be doing the plan either lack skin in the game (as you point out), or more commonly (in my experience) they lack actual experience to even understand the depth of their ignorance. It’s a “they don’t know what they don’t know” issue.

3) Corporate culture sets this up as well. Many execs WANT the exiting plan to look good and figure that they’ll “figure out the details later”

So I’m with Colin. Avoid being lazy or ignorant and falling into the Large Market Fallacy Trap.

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One Response to Market Sizing Fallacies

  1. Sijie says:

    Hi Phil,
    Thanks for sharing. I agree that great ideas without executing plans do not usually turn out great. This post in fact recalled the news I read a while ago on Best Buy purchased all the Five Star Appliance in China. There are concerns on how Best Buy is going to win over the majority Chinese consumers who usually pursue extreme low prices and fight with the sales reps over prices, because that is not how Best Buy is differentiated in the US. I guess we will see. =)

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