5 Steps to Quickly Analyze a Market

Sizing up a market is less about data and much more about behavior. As a result, you don't need mountains of data--you just need a few key data points. Here are five quick steps you can use to quickly understand a market.

1. Who are the buyers and sellers?
First, describe the buyers and sellers. Who are they? (Not literally all of them, but in general.) If it's shampoo, you have large CPG's like Proctor and Gamble and Unilever who are the sellers and the consumer who are the buyers. You also have channel players such as Target, Walmart, and Krogers.

2. Identify the successful activity of buyers and sellers
In this step you want to find out if the buyers are happy with the existing products, prices, and distribution--or if they are seeking a new, better solution. Questions you want to answer include: Who is winning and why? What are they winning? Is a product winning? Is a channel player winning? Or are the buyers stable. The answers are readily available in a Google search.

3. Identify the struggles, problems and failures of buyers and sellers
Once you know who is winning, you need to examine the flip side of the coin and look at who is losing and why. Problems are like canaries in a mine. When they appear, they are indicators of change--they are especially good early warning signs of change.

4. Choose the meaningful data points
You want to pay attention to data that define the behavioral truths of business--power and money. When a company acts, they do it to gain or avoid losing power or they do it to make or avoid losing money. Don't get distracted by rheotoric. Intellectual motivations are PR spin. In the immortal words of Deep Throat: "Follow the money." Meaningful data defines how a player is winning money or power, how their money or power is threatened, or how they are losing money or power. Anything else is just noise.

5. Assess the data like a cop
A cop never believes what they're being told. They're always looking behind what's being said. Once you've got your meaningful data assembled, examine it like a cop. Don't believe a word of it. Look behind it. What's not being said? What are they protecting? How are they really trying to win more money or power?

What makes analysis difficult, is too many of us use the wrong metrics. Business is not about making things better. That's a by-product. Business is about making money. Read the quote below from the movie You've Got Mail. Tom Hanks character "Joe Fox" reveals the true nature of business.

"The Godfather is the I Ching. The Godfather is the sum of all wisdom. The Godfather is the answer to any question. And the answer to your question is 'Go to the mattresses.' You're at war. 'It's not personal, it's business. It's not personal it's business.' Recite that to yourself every time you feel you're losing your nerve. I know you worry about being brave, this is your chance. Fight. Fight to the death."