Battle for SOM (Share of Market) Part 1 — Overview

Manu Pillai
19 min readMar 8, 2021

The battle for Share of Market — SOM — is the seminal battle for any company at all stages. You can either lose it all, barely make it, or make it through in your fight for market share. Business competition is often glamourized in military terms and there is a lot we can learn from military strategy.

Remains of a D Company Mark I Tank, on the Somme Battlefield, September 1917 ©Imperial War Museum, UK

But there is a huge difference — in one, the price is paid in lives, limbs, souls, time, blood, territory and treasure. And in the other, it is treasure, market share and some ego.

What they do have in common is that success depends on knowing what you stand for, picking a gap, and breaking through. If resources are thrown directly against each other, only attrition and losses result.

The Battle of the Somme [1] led to 1M+ direct losses, millions more injured, and even more deprived of livelihood across continents. Had the political elites of UK, France and Germany not had access to cheap blood from their colonies [2], [3], [4], and the ability to send their own poor and patriotic citizens to death from the comfort of their stately homes, they would have been forced to resolve the conflict much faster with much fewer losses.

A business analogue is to spend funds on t-shirts, team-building events, additional staff well ahead of product (let alone product-market fit), new logos, consultants to aid in growth planning and so on. When things do not work out, blame is passed around, outsourcing and PR go up, reputation is burned, the Board gets cranky and eventually shuts things down.

Dave Packard who co-founded the real HP, was clear about values. [5] Even now, the old HP logo evokes trust from me. (Thankfully, EBay exists.)

The key is to make sure the product works, find/confirm market gaps, identify the customer and her needs, identify the learning needed to win, and pull it all together. You could call this a basic “strategy”, though I’d like to call it commonsense :-) You can map this onto companies that need to scale via network effects for 2-sided market places, through consultative sales for enterprise software or skilled engineering services for high end military technology development.

This note is more about looking for gaps and relative advantage, taking into account your current company. It does not assume you are VC funded. It is probably more useful to SMB / Enterprise facing businesses, and should lay the foundation to take you past $20M/ year or more from start, during which you will need to make changes.

This note does assume you have already a product/service, and are starting to get traction on the way to potential product-market fit in a viable segment. See this note for additional thoughts on market entry.

At All Times, Seek Asymmetric Advantage.

Minimize your losses and maximize your benefit at all times. Do not engage in direct conflict with your competitors. Win by sidelining your competitor. Let them spend time and money thrashing. Focus on your customer.

To win, pick wisely you should (Yoda, © Disney)

As each generation ages, new opportunities open up. Older founders are well-advised to partner with younger co-founders. Plus, younger team members are likely to be more current in the latest methods and complement your “seasoning” if you’re older :-) And vice versa. Be diverse in skills and thinking.

First, What Type of Race are You In?

If you are VC funded, especially after 2020, the early stage expectation from Twitterati VC’s is ~ 100% MoM growth, with a focus on mass-adoption of an app for a marketplace, or game or other, whether there is minimal systems integration need or other. This is viable — for a short time — with product-market fit derived from listening to users and some iteration with a strong emphasis on simplicity. See my other note on early beachheads. This kind of sustained growth is more likely to happen when product-market fit is accomplished. (This lag will likely create stress with Twitterati VC’s, many of whom will neither be able to extend your runway or connect you with someone who can — plan your cash flow accordingly.)

If you have a real VC as investor, the expectation is for a company that will actually figure out product-market fit and go the distance. Some value is placed on sustained execution with industry-relevant metrics as a result.

As an enterprise company, and a first order of $50K+, sustained growth of 100% MoM may not be realistic, especially if systems integration is needed:-) Something closer to 10X YoY makes more sense in the early years, leveling off to 50% YoY then slower as you own more of the market. Systems integration does add stickiness, making enterprise-focused entities likely to generate an exit of interest.

Corporate and Family Office investors want growth, but are generally more conservative. They align well with bootstrap thinking, with added benefits of a connected Board, since they are unlikely to invest in unless they align with you on mission and values.

If you are bootstrapped, you should be growing in a defensive mode, protecting your cash and hiring from margin until your bank calls you and offers a line of credit for expansion :-) Based on experience and observation, you can grow about 20% ~ 30% per quarter in a skilled services business, before you start creating stress-fractures. This also needs clear cash collection and customer vetting methods.

Viability of Hitting SOM Goals

The single most important aspect for any company to be / remain in business, is for customers to pay for a product or service, at a rate and margin that pays the bills and generates a profit. Cash first. GAAP statements are nice, if you are still operational.

  • Cash Income = Units of Sale x Selling Price, collected on time.
  • Cash Profit = Cash Income — Cash Expenses.

If you are selling services, your units are billable hours. There is also the issue of perishability; unused hours cannot be used later, even by a day, and there is no scalability in the hours.

Only positive margins pay bills. This is critical if you are bootstrapped. (Cash collection is paramount.) Under no circumstances should a boot-strapped business take a cash-losing deal.

If you are VC funded, your R&D and other setup costs are “forgiven” with equity funding. You can also get into discussions about LTV, CAC, etc, avoiding the need to be profitable from the start, if you can make the numbers eventually work out. “Eventually” can be kicked down the road for a long time. (See Uber, WeWork, Doordash, Tesla for examples. ) Your target market must able to sustain the needed growth and exit expectations. Growth at scale brings interesting challenges.

If bootstrapped, a niche that you are targeting should not be an obvious target to a VC funded startup. That can usually be accomplished through service level requirements, or the need for a physical presence. Or just be discreet.

Knowing your growth expectations based on VC or not-VC funded as a basic cut, enables the next step — can your target markets generate the revenue ramp at either immediate positive margin and incremental growth, or LTV/delayed positive margin and non-incremental sales?

SOM Questions

You should have your own spreadsheet by now, so these are just some qualitative questions to ask yourself. I always prefer bottoms- up numbers, as it forces a “what value do we bring and how do we sell into that group?” conversation as you build the stack. The downside is you may end up with a smaller TAM and SAM than you wanted :-) But, better to know and then counter, than not know and crash.

Users vs Customers.

The number of users can often be conflated with customers. The latter pay you for something, and may not be users. Track both; develop persona’s and figure out their priorities and how to add value.

Example: Food Delivery.

One side of your market is filled with food makers/ suppliers. There is a hard limit on that — it takes time to get a city permit to open up a restaurant or anything to do with food. (And much longer anywhere in California.) On the other side of your market, you have the number of people who can both afford prepared meals, and the delivery fee, [6] and are located within some rational travel distance, say 30 minutes or so. That’s your TAM. (Whatever you do, don’t say “20% of the $60 B spent on restaurants” :-) )

Now narrow it down; for each cluster where you can sign up both providers and delivery, you have a SAM. Traffic and weather patterns could make this a dynamic number :-)

Now take it down further; how many on the buy-side can you convince to participate regularly? How do you find them? Is there a sub-group you can win over somehow? Could you take over deliveries from a Pizza Hut franchisee in an area and lock that in? That could become your SOM, if viable. (Over time, as your capabilities grow, your TAM and SAM also grow.)

Now can you make a profit? Your costs:

  • Salaries, taxes and fees
  • Cloud computing — databases, route planning, menu hosting, payment transaction management, etc.
  • Transaction fees — to the provider and to the delivery driver, and to the bank.
  • Advertising.
  • Anything else … ? (Rent? Legal?)

Do you end up with a positive margin? Is the margin worth the effort if you could scale up? (Scaling up on negative margins just increases the loss.)

Example: High End Engineering Services.

In high end engineering, the number of project starts defines the purchase of tools and skilled services. However, due to the duration of these projects — easily ranging from 1 ~ 15 years — it is easy to count the TAM as the number of active projects at any time. Your actual TAM is more likely driven by the number of starts, unless you supply stuff that is consumed through a project. (Cloud computing, AI training and labelling …)

Your market is further limited to those where you have significant cost or skill advantages. This advantage can also be manifested in already having an infrastucture in place, or saving the significant time needed to hire in skilled staff. The opportunities you can access define your realistic SAM. The deals you close are your SOM.

Example: Products for Road Construction Safety.

Many miles of road are fixed and built each year. People are being injured. You’ve come up with a brilliant idea that will save lives and reduce injuries.

But how do you estimate possible unit sales?

Repair crews work fast in contained groups within a work area that is physically constrained and moves as the work is done. So your TAM is defined by the number of actual work teams on the road, not the number of miles of road being repaired.

Your SAM is now defined by the crews you can reach. In each state, road repairs are dominated by 2 ~5 contractors due to the financial bonds they need to place for public works project. So, your SAM is now re-defined in terms of the contractors you can access and the number of projects they are running. Note that while there is a constant addition and repair of road-surfaces, the US road-surface market is mature, so net growth is slower.

Your SOM is now defined by the number of active projects who bought your equipment. It can grow at the rate at which you win over contractors. That becomes a key metric. Your support costs will be significant — road work is by definition on roads, and often spread out. Your reliability has to be top-notch; any mistakes and bad things happen. This is a lot more serious than a soggy meal delivery.

Now, can you make the product, sell and support, and manage liabilities, profitably?

Simplicity Chasms

If you want to sell more, you need to invest time to simplify everything about the product.

Lucky for you, it is much harder to make a simple product, than it is to make a complex one, and larger companies always hire “seasoned” product managers whose first instinct is to add features so they can attack “larger” markets and appease multiple internal groups.

I call this “checkbox product management” — collect all the specs of everyone else, then edit into one file and demand engineering delivers. I’ve seen this happen so many painful times, dooming the resulting product to late delivery and grinding price wars.

Adding more features takes longer to ratify internally, design, spec, implement, unit test, integrate, systems test, deliver to customers - and support a wider set of usage models. No matter how hard they try, most large companies just add bloatware. (Be honest, if you are in the group that finds this note interesting, how much time do you spend with a new PC or Android phone just getting rid of bloatware so you can get to something performant and functional? )

Invest the time to remove every item that is not really needed. You will be in the zone when you can simply state “We are being paid repeatedly by increasing numbers of customers because we do “x” really well, so our customer gets “y” in value and we make “z” in profit”. Say ~ 50 words or so?

Your most dangerous competitor is one that is big, focused, funded and minimalist. The others do not matter. Even Techcrunch winners.

What matters is winning your customers business, and then keeping your customer’s business by meeting and exceeding their needs.

Basic Disruptive Functionality

Your product has to actually work, to the level of performance you have committed at that time. Ideally, it also generates a positive margin.

Note that the performance level you have today is not where you product will be in the future. But what you are asking your customers to invest time/money into, must work. A clear gap in pricing from established players is also a good idea; don’t price too close to incumbents — doing so creates an incentive for checklist-shopping and craters your growth.

  • Hardware costs $$ to lease/buy/make, so the temptation to price high is real. But a smart move could be to price at initial cost, with a software subscription that adds immediate and continued margin that keeps you in business. Plus, as your volumes go up, hardware prices will decline.
  • A low-end pricing limit is if you use distribution, or plan to use distribution for hardware sales. In that case, the price/ volume mix must enable your sales channel to make a profit. (But, if you followed the simplicity mantra, this can be bypassed.)
  • See if your bank will convert a purchase order with committed forward orders into cash now, enabling continued operations and reduced dependency on investor funds.

You know you have something disruptive when customers adopt and pay for a product that is not yet polished, but provides sufficient functionality, at an adoption rate that stresses you out. (At that point, you can also claim that initial product-market fit has happened.)

To quote Allan Quatermain “A sharp spear needs no polish.”

How your competitors should see you early on …

Examples of disruptive change include Solaris/SPARC to various flavours of Linux/IA-64, Blackberry to iPhone, misc booking sites to AirBnB, ARM to RISC-V (in progress) and so on. In all cases, the incumbent responds with more features, restructuring, FUD and more. But customers don’t care. Its their time and money.

… and what you should be.

Friction Removal At Scale

Making something to make lives easier for many is usually interesting. Food, shelter, water, emotional and physical security, transport, education, energy are all basics — and all are a state of continuous innovation. The key is to do so at a price point that makes adoption easy and with a sticky functional value.

Matchmaking has existed since the first aunt and grandmother sat down to talk about the kids, yet we continue to see innovation in this area.

Food and grocery delivery has existed all across Asia for decades if not centuries, yet Instacart, Doordash, Swiggy and Zomato exist. (Though how well they do post-pandemic is up for debate. I’m now seeing restaurants asking customers to NOT use apps due to the margin hit. My local pizza shop is back to their own driver now, with free delivery.)

Irrigation has been around for a least a few millenia. Yet we innovated in this area, by looking at how farmers actually operate, and fusing cutting edge IoT technology into the product line.

Some of the best examples of friction-removal are Apple and Uber.

Apple removed the friction in acquiring and managing digital music, leaving Creative Design’s MP3 players in the dust. Their DRM methods opened up the music companies arms, and their iPod opened up the rest with focus on accurate sync and ease of use even on Windows. They did this without adding complexity at an affordable price and laid the foundation for much more.

Uber removed the friction in app-based ride hailing at scale. Again, they were not the first — Lyft started first. (Technically, ride-hailing has been around since at least the first domesticated donkey; but app-based + at-scale gets interesting.) But, Uber had experience with limo bookings prior to that gave them insights into how to fight entrenched interests and scale out. They focused on just app-based ride hailing to get ramped up and raised funds aggressively against a singular goal. Uber got you rides in more places, faster and affordably.

Friction removal at scale is often conflated with the gig-economy. While the gig-economy may help in execution, it does not matter if the friction remains or the margins stay negative.


There is considerable seasonality in many markets. For consumer products, there is Black Friday in the US, Singles Day in China, Tet in Vietnam, Diwali and Onam in India, bonus season in Japan, and so on. Farming is obviously seasonal.

If you have a seasonal product, you need to generate as much interest as possible off season at the top of your sales funnel, to close as much business as possible in season. Be like a bear and always be getting ready for winter.

Always get ready for winter.

Product functionality, simplicity and reliability is absolutely essential for this to be viable. You have to make adoption and use of your product/service as simple as possible, always focused on the user/ customer.

Analyse Your Data

Map out the processes you that matter to your customer based on your customer discovery and ongoing learning. Look at each touch-point to understand where the decisions are made, where the margin stack leaks and who really adds irreplaceable value and needs to get paid.

Streamline things, especially in a way that takes some level of intellect so your competitors are not just one round of funding away from you. Identify what can be automated, and what would trigger growth.

Keep things simple, and focused on the customer. Use data to decide what to automate, always focused on making adoption AND use easier for your customer. One is a distribution/on-boarding problem, the other a product-usage value problem. These must be solved simultaneously.

Types of Customers Impact Adoption Rates

The classic Chasm book breaks up the world into early adopters and so on. It is worth reading multiple times, spread over time. This note is intended to augment and not replace it.

I always wondered how to spot the differences between potential customers and identify early adopters early on — they are key to getting the SOM engine running. I needed a lightweight framework. I hope this helps you.

Growing, With a Viable Strategy.

Some customers are determined to grow faster and take market share in their industry. A subgroup will actually have a strategy. “We have a growth strategy” is not actually a strategy — its more an aspiration:-) Focus on the ones with a clear strategy, and an aggressive timeline :-)

Many large company business development folks are too polite to dig in as long as their target customer is “on the list”. They are not bad or silly. That’s just the way it is.

However, your agility, focus and concentrated competence gives you an advantage.

  • Do not give BigCo the business. It is yours for the earning.
  • Audit for a clear plan from your target customer. It is not disrespectful.

Your survival depends on sales, and the wrong customer in your pipeline reduces the time you have to invest with the right customer — which impacts your survival.

Wanting to grow faster, or do something better than the industry means your customer has to look for and exploit new ways of doing things. At the very least, you will learn a lot and also grow your business.

I have used this approach several times for both product planning and deal closure, in product and service areas, across some of the largest tech companies in the world, from software to systems to silicon to agtech. Its not “just sales”. It is about listening to customers and understanding how to wield what you have to solve their problems.

Odds are your internal champion will be a manager with a desire to get things done. Be aware that they will need support from their other team members to get things done, so make sure you take time out to find out how you can help. Listen, understand and respond.

Not all needs can be met immediately; be clear about what cannot be done, what you can help get done, and what you can get done yourself at this stage, and later stages. Most customers will give you the time to deliver if you can explain how things line up with clear milestones.

This category of customer is my personal favourite for getting launched.

Labour Cost vs Automation.

In a declining or slow-growth market, labour productivity often becomes a issue about a month before the quarterly Board meeting :-) Automation then becomes interesting. In some cases it is about quality and production rates. Sometimes it is about safety.

This is another gap you can help large companies with — they would normally end up paying massive fees to consulting companies that will deliver more Powerpoint and canned strategy than useful code and actionable strategy before the next quarterly meeting. You can do better.

In general, if you are product/tech company, it is best to target opportunities where quality and turnaround time matter. Quality is always in fashion, and no large company will generate a proposal in the time you can deliver a prototype. Leverage your speed, focus and competency in way that cannot be countered. Your BigCo competitor will need to drop their margins, actually work across silos, actually listen to customers, and actually put customers first. The odds are in your favour.

I like these customers especially after the product offering has started to anneal. Rapid scaling is possible.

If it is only about labour cost, there is always a friend who has a company somewhere in India, or Macedonia or Vietnam or Detroit or Fresno or Santiago … wherever labour costs are low enough to arbitrage.

However, if you are services company, labour cost issues could be the exact opportunity you are looking for. Pull in a subset of the “excess” staff along with a book of business, integrate into your proesses, and pull in a moderate margin. (But be aware of the fox’s fur trick. [7]) This is a classic outsourcing growth play.

This is a hard type of business; not recommended unless you have figured a way to be the low-cost provider, allowing you wield pricing as a weapon, as opposed to being on the receiving end.

Family-run Enterprises.

Their #1 goal is to maintain and leave a legacy based on sound economics. They want to protect assets and grow carefully with the highest levels of certainty.

These firms are majority of family farms, and a number of hotels, restaurants, construction, chemical and manufacturing companies, and applies across the world. These are good customers and good people.

These family firms do adopt technology and new vendors — just not at scale right away. They will have a small budget to try new things out, and provide you with incredible insight into how things really work, that you could not buy. When your product is proven will they scale up. Integrity matters.

These customers will take 2 ~ 3 trial stages to scale up — same as enterprise. Their quantities will be lower, but you will have a reduced competitive intensity and therefore more wins with less office politics, the opportunity to learn far more, and the opportunity to build long lasting business relationships.

Include these firms in your portfolio if you can; but don’t try to force the pace; it will happen at their pace, not yours.

I hope this note has been helpful. More in the SOM series are planned.

I always welcome inputs for new notes. (This note was based on a request from a reader like you.) I’m easy to find :-)

References and Interesting Reading.

[1] Battle of the Somme

“The Battle of the Somme, also known as the Somme Offensive, was a battle of the First World War fought by the armies of the British Empire and French Third Republic against the German Empire. It took place between 1 July and 18 November 1916 on both sides of the upper reaches of the River Somme in France. The battle was intended to hasten a victory for the Allies. More than three million men fought in the battle and one million men were wounded or killed, making it one of the deadliest battles in human history.”

“At the end of the battle, British and French forces had penetrated 6 mi (10 km) into German-occupied territory along the majority of the front …”

[2] Indian Army during WW1

“The Indian Army during World War I contributed a large number of divisions and independent brigades to the European, Mediterranean, Middle East and African theatres of war in World War I. Over one million Indian troops served overseas, of whom 62,000 died and another 67,000 were wounded. In total at least 74,187 Indian soldiers died during the war.

In World War I the Indian Army fought against the German Empire on the Western Front. At the First Battle of Ypres, Khudadad Khan became the first Indian to be awarded a Victoria Cross. Indian divisions were also sent to Egypt, Gallipoli, German East Africa and nearly 700,000 served in Mesopotamia against the Ottoman Empire.”

“Field-Marshal Sir Claude Auchinleck, Commander-in-Chief of the Indian Army from 1942 asserted that the British “couldn’t have come through both wars [World War I and II] if they hadn’t had the Indian Army.”

[3] Experiences of Colonial Troops in WW1

[4] Pre- WW1 German Colonies Providing Export Markets and Raw Materials

[5]Speech by Dave Packard (the real HP)

[6] US Income by County (useful for understanding US consumer spend capability vs location)

[7] Fox Deals with Fleas Creatively



Manu Pillai

Interests: IoT, Climate. Skills: Startups, AgTech, Edge, NPI, Systems, Mfg @manurpillai