Several years ago, I wrote a series on Growth that started with the generally accepted and mathematically supported idea that all businesses are complex systems which evolve towards specific future goals. The standard business term that captures these goals is “Total Addressable Market” (TAM), and businesses serially expand their TAM as they hit limits to their growth.
There are three different ways to measure and understand TAM. Each definition offers a lens to view the same underlying phenomenon—i.e., an organization nearing a TAM limit by any one definition will approach a TAM limit across all three simultaneously, and to the same extent.
- Categories: Relative capture of revenue within a defined set of direct and indirect competitors. This is the most standard way that TAM penetration is typically presented and evaluated.
- Audiences: Relative capture of targeted and segmented external stakeholder groups. Capturing all the available revenue in a particular space requires conversion of specific audiences to investors, customers, populations served, advocates, etc.
- Operational capacity: The ability of the current organization’s systems and resources to capture new revenue and audiences while remaining ROI-positive. This is an uncommon way to discuss TAM penetration, but it’s implied in the other two definitions.
Each of these definitions is valuable to a leader who wants to have a dashboard view of the health of their business and a map to its future.
This article is the first of a series with three specific audiences in mind:
- Organizations on the cusp of strategic planning or goal-setting efforts
- Organizations struggling with their revenue generation and optimization efforts and in need of diagnostic insights
Next up: “Whose goals?”