Author: Eben Johnson

Simplify your market size analysis

Much has been said about the size of your Total Addressable Market (TAM). However, it’s easy to get confused and overly complicated. For example, one might ask, “Is my TAM at launch, a few years after launch, once we’ve gone international, or added new products?”

I use a simple modification to TAM. I add, “At Launch”, or “+3 years”. It renders as “TAMAL” and “TAM+3”.  Thus, at launch, when we have one to a few new products, haven’t added features to win a larger market, haven’t gone over seas, etc., we can easily remember and say that our TAMAL, our Total Addressable Market at Launch, is X units and/or Y dollars.

Try it. It’s easy to present and easier to estimate.

Knowing your customer

Knowing your target market is critical to your business. It helps you develop your products, advertise well, and sell successfully. Known as developing your customer persona, you and your team should describe your target customer in such great detail that you can spot this person at a distance with nothing more than a glance.

Here’s a write-up shared by one of Eben’s former students:

“I attended our No Name Bar pizza night after the last class of EMEN5090 this semester. I was a distance student, so had never met anyone in class before (including Professor Eben Johnson). I remember him saying in class that he could guess the car that people drive. Having never met him before and being pretty confident that he could not guess the type of car I drive, I told him that I was hoping he would try to guess my car.

He started off by asking me a few questions: Where do I work and how long have I worked there, what is my job title there, what do I like to do for fun, do I have any kids or dogs or roommates, etc. I answered those questions and he quickly started to narrow it down. He knew right away it wasn’t an SUV, that it had a leather interior (no idea how), that it was not American-made, and then he even guessed my boyfriend’s car right away after talking about him for just a minute (even down to the detail of the Jeep having a winch on the front). He thought about a Prius but quickly moved away from that (without me saying a word). He asked a few more questions and then said, “It’s not a BMW 5 series. I’m thinking it’s a BMW 3 series . . .” So far all he knew was I like volleyball and taekwondo, I have worked at Lockheed Martin as a systems engineer for 7 years, I have a boyfriend with a Jeep, and I have no pets or kids. There were a few other people there trying to guess, and no one even came close. He continued to come up with details on the car, such as dark blue exterior, sedan, etc.

Before I left, he made his final guess of a “Dark blue BMW 3 series, black leather interior, and the dealership name around the back license plate.” I couldn’t believe it. Sure enough, I drive a dark blue BMW 3 series! I don’t think I seem like the kind of person to drive a BMW. In fact, the reasons I bought it aren’t for the name or the luxury or anything anyone normally thinks of. It’s all-wheel drive, the back seats lay down (harder to find than you would think), it can get up to speed on the highway quickly, gets good gas mileage, and it’s quiet. I was in shock. By this point, everyone was listening, and I admitted that he got it exactly right . . . except for the interior color. I thought my interior was tan, and I honestly didn’t know if my back license plate had the dealership’s name framed around it. I got back to my car (parked a few blocks away, so there was no cheating there), and the first thing I did was look at the back license plate. Sure enough, Ralph Schomp BMW is framed around it. I then got inside and immediately felt extremely stupid . . . My interior is black!!! It was the only detail I thought he had wrong, and he even knew better than I did! I had a rental car for a few days before that and the interior of that car was tan, so that’s my excuse for thinking it was tan (in addition to the fact that it was my final week of grad school!). I felt ridiculous, but it wouldn’t have been fair to let Eben keep thinking that he got the interior wrong, so I sent him an email that night letting him know that he nailed it, down to the detail (even details I didn’t remember).

It was really incredible! I still have no idea how he could’ve possibly guessed that with the information that he had and this being the first time I met him. I had to share this story to say just how impressed I was . . .  I didn’t believe it, but I do now. Try him out :)”

Three simple rules for inventory management

While one can easily devote a career to management of inventory, here are five simple rules that will help any operation:

    • Avoid intelligent part number systems – they get complicated quickly and hard to maintain; one exception is to let R&D have separate part numbers, often identified with an “X” prefix, where these development parts are kept separate from, and not required to meet the standards of, production parts
    • Label, stamp, or mark parts with part number and revision levels (in the case of processes involving bulks such as liquids, make sure the containers are similarly marked)
    • Prioritize and control direct material by levels of importance – an ABC system; “A” parts may be expensive and/or long lead-time parts; “B” parts are somewhere in the middle, and; “C” parts are cheap and plentiful, such as simple fasteners
    • Control your inventory counts, especially for “A” parts, likely for “B” parts, and less importantly for “C” parts
    • Never store indistinguishable parts near each other – if one can’t tell this part has been hardened and this one not, then store them at least 3m apart from each other

The key is to have a system that delights your customers in terms of price, quality, and delivery, that is flexible, and that people are willing to use consistently.