Last Updated on July 24, 2019
Whether your company is just starting out or already a global enterprise, one of the most important numbers you need to measure is the total available market (TAM). Having an accurate read on your TAM is crucial to setting growth goals as well as concretely showing investors and stakeholders that your company is worth their resources.
Traditionally, TAM is known as the overall revenue opportunity available or foreseen for a specific product or service—with a key component of estimating the future expansion or size.
One way to better leverage your TAM and add better insight into future growth is to evaluate your ecosystem. Business ecosystems are a key strategy for accelerated growth. The IDC 2019 State of Ecosystem report supports this—businesses with an ecosystem model grow 50% faster.
I’ve learned how to measure and leverage Ecosystem Value to successfully define markets, approve capital requests, and close million-dollar contracts.
Why TAM is only part of the story
When it comes to calculating TAM, there are elements of both art and science, but here are the three ways TAM is often calculated:
- Top-down: using industry research
- Bottom-up: using internal data from past market efforts
- User or market value: perceived market value from the consumer
As a former value engineer, I tend to lean toward a focus on user or market value, with a little flavor from the bottom-up approach. Even so, modern markets move quickly and having a more comprehensive, robust way to calculate your business’s value will take you from checking a box to expertly assessing your growth potential.
TAM’s boundaries are defined and have a narrow scope. This can be useful when trying to zero in on the best business opportunities. And, the boundaries of TAM aren’t set in stone and can adjust based on changing markets or even better internal data.
However, I’ve found that a TAM number can be enhanced with an added value, the Ecosystem Value. This opens the path for an organization to minimize the boundaries, equaling continued growth and added value for both the customer and the shareholder by allowing you to zoom out and quantify your entire ecosystem.
The Importance of Ecosystem Value
What is Ecosystem Value and why is it important?
The Ecosystem Value is the cumulative value of the network of organizations involved in the creation, delivery or execution of a product or service.
We know that no two companies operate a go-to-market motion alone. Each business decision and new go-to-market strategy affects each organization in the network.
Understanding this evolution and the rapid pace of change can spell success for business leaders ready to seize on the opportunities in their ecosystem.
What’s exciting about an Ecosystem Value is that it’s scalable and dynamic. As you work through creating yours, you’ll want to ask questions such as: How many partnerships do we want to build? What markets are we engaged with now, and are there new markets where a partnership would be useful? Do we want to continue down a path of transformation?
As you answer these questions within your own organization, you’ll begin to craft your own ecosystem journey, which will shape your Ecosystem Value.
How do we calculate Ecosystem Value? I zero in on these components to begin:
- What is the number of partners?
- How many nodes exist?
- What is the value placed on each partner and node?
This measurement can expand and scale as needed but provides an enormous opportunity for business leaders who want to find new markets and rapidly expand growth. In fact, a study from Accenture Strategy says that ecosystems could unlock $100 trillion of value for business and wider society globally over the next 10 years.
Accelerate business growth with Ecosystem Value
An accurate Ecosystem Value is crucial to making sure your TAM and growth expectations are accurate and useful. Miscalculations of these numbers can lead to overinflated goals or missed opportunities for market expansion.
WorkSpan is the engine that drives your Ecosystem Value. With it, you’ll have the data you need to know the value of your partnerships and accurately define your market penetration strategy. This pinpoint accuracy is key to closing bigger deals, accelerating your alliance programs, and moving quickly into emerging markets.
Every company and every market is under constant pressure to identify new paths of growth, minimize internal costs, leverage resources, and justify partnerships.
One of the top concerns of business leaders today is whether their existing business operations will meet performance expectations in the face of new, disruptive companies and strategies. Business ecosystems provide a mechanism to empower and accelerate these actions. Now is the time to define or renew your Ecosystem strategy so you can maximize your Ecosystem Value.