What is “Demand Innovation” and how can it help your business find sustainable new growth? One key to the puzzle of finding new pockets of profitable growth is to use best practices and tools that you might not be familiar with but that have helped other companies grow.
The challenge is to understand these best practices and tools and then filter them through the lenses of your business to find what works for you. This has been a main theme with this column for the last nine months and this week we focus on Demand Innovation.
Demand Innovation is a technique developed by Adrian Slywotzky and presented in How to Grow When Markets Don’t, published in 2003 by Warner Books, along with co-author Richard Wise. Slywotzky defines Demand Innovation as “an innovative strategy for driving significant, sustained new growth”.
The No Growth Zone
Slywotzky says many companies have been stuck in this zone for the last decade or more because their businesses have moved from a past of strong growth into a future state of low or no growth. Very few companies have figured out how to break this cycle and move beyond this No Growth Zone. Think about it for a minute and compare your company’s performance in terms of Sales and Profitability in the mid 1990’s and then where you are today. How long has your company been stuck in this cycle of low or no growth?
One reason for this is that most companies have relied on traditional “product-centered” strategies for growth. This approach holds that you develop innovative products, expand the market for them as widely as possible, acquire competitors to gain market share and create efficiencies of scale. The problem is that today most markets are saturated with minimally differentiated products. This is the case for companies of all sizes, not just large ones. Again, think about how differentiated and distinctive your products really are compared to your competition.
Where To Start
OK, if you buy that this current state applies to your business, a new strategy is clearly called for. But where do you start?
One place to start is with your best customers, or your MVC’s (Most Valuable Customers), as I call them. Start with your existing products, instead of incrementally improving products or finding new customers, find out the issues and hassles that surround your product with your MVCs. This is what Demand Innovation is all about.
Since GM is on our minds at the moment, let’s use GM’s OnStar as an example. OnStar generates over $1 billion annually in high margin subscription revenue. It turns out that OnStar is one of the more valuable pieces of GM at the moment. It was developed as a platform for new growth in the 1990’s that “surrounded” existing products and served an unmet need of GM’s most established customers. Many other companies have used Demand Innovation to find sustainable new growth in areas like installation, maintenance, financing, training or even outsourcing.