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Got into a final round of a boutique tech consulting firm, and the case question was to estimate the TAM of AI in North America? I honestly got caught off guard by this question so just wondering how folks would estimate it?Thank you
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Estimating the Total Addressable Market (TAM) for AI in North America can be a challenging task, but with a structured approach, you can provide a thoughtful estimate. Here's a suggested framework to tackle this question:
Define the market: Start by defining the scope of the market. In this case, it would be AI technologies and solutions in North America.
Identify relevant segments: Break down the market into different segments based on industry verticals, such as healthcare, finance, retail, etc. This will help you capture the diversity of AI applications.
Gather data: Collect data from various sources, such as industry reports, market research, and expert opinions. Look for information on the adoption rate of AI in different sectors, the size of the industries, and any specific trends or drivers influencing AI adoption.
Calculate market size: Use the data collected to estimate the market size for each segment. This can be done by multiplying the number of potential customers in each segment by the average revenue per customer.
Consider future growth: Take into account the expected growth rate of AI adoption in North America. This can be influenced by factors like technological advancements, regulatory changes, and market trends.
Validate your estimate: Cross-check your estimate with industry benchmarks or other reliable sources to ensure its reasonableness.
Remember, the key is to demonstrate a structured and logical approach to estimating the TAM. It's also important to communicate your assumptions clearly and justify them based on the available information. Good luck with your final round!
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Hi there,
You'll learn a lot more from this by trying it out yourself first! Why don't you post your approach here and we can provide commentary?
Here are three that I've written with video solution. Make sure to check them out!
Market Sizing WITH SOLUTION - Coffee Shop Revenue | PrepLounge.com
Market Sizing WITH SOLUTION - Number of Taxis | PrepLounge.com
Market Sizing WITH SOLUTION - Number of Internet Users | PrepLounge.com
How to approach market sizing
It's very simple: Do the approach the is the easiest for you given the question.
Are they asking you to estimate something where you don't even know where to begin from the top (maybe you have 0 clue as to the market size of the industry, the GDP of that country, etc. etc.)? Then do bottom-up!
Alternatively, does it seem impossible to do a realistic from-the-ground-up estimation of something (perhaps it requires just far too many steps and assumptions)? Then do top-down!
Fundamentally, you need to take the approach that just makes the most sense in that circumstance. Quickly think about the key assumptions / numbers required and whether you 1) Know them or 2) Can reasonably estimate them. If you can, go ahead!
An Example
He's a Q&A for a great market sizing question here asking to estimate # of electric charging stations in a city in 10 years:
This one could be answered top-down (as I did) by estimating population of the city, # of drivers/ cars, etc. etc.
OR, it could be answered bottom-up by estimating # of stations you see per block (or # of gas/petrol tanks), % increase this might be over time (or # of EV stations that would be needed per gas tank given EV stations take 10 times as long), and # of blocks you'd estimate the city to have.
Take a look here for additional practice! https://www.preplounge.com/en/management-consulting-cases/brain-teaser/intermediate/taxis-in-manhattan-market-sizing-229
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Hi!
Please share your approach with us so we can provide feedback on it. Everybody is going to get more out the exercise this way, especially you.
Good luck!
Cristian
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Practicing for interviews? Check out my latest case based on a first-round MBB interview >>> CodeWave
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