Most companies understand that growth in their business will come from one or more of the following basic approaches to product or service innovation:
- Growing core markets
- Capitalizing on adjacent market opportunities
- Discovering new markets
- Disrupting existing markets
Where many companies struggle though is with actually uncovering real customer needs that will drive any of these four approaches to profitable growth. Those companies that understand the evolving needs and problems of their best customers have been proven to grow faster and more sustainably, generate higher profits and become more innovative.
Is a term coined by Adrian Slywotzky and detailed in his book How to Grow When Markets Don’t (2003, Warner Books). It refers to a focus on incremental, customer-focused innovations as opposed to attempting to hit home runs with break through product-centered innovations. Slywotzky has written extensively on Demand Innovation, which at its heart focuses on discovering new forms of customer demand for growth.
In How to Grow When Markets Don’t, Slywotzky profiles Air Liquide and a number of other companies. Air Liquide discovered high-value services and solutions around the increasingly commoditized products they were producing. Having sold industrial gases for decades, Air Liquide got closer to its customers and became a provider of high-margin chemical and gas-management services. This opportunity was accomplished by using the techniques of Demand Innovation.
The problem according to Slywotzky is that many companies are stuck in the “No Growth Zone”. During the past decade, many companies have moved from a past of strong growth for their base businesses into a future of low or no growth. Very few have figured out how to move beyond this point.
Does this sound familiar with your company?
Step #1: Anticipating Next Generation Customer Needs
The first step companies need to take is to anticipate the next-generation needs of their best customers. At the same time, they must begin to identify and understand their company’s “hidden assets” or hidden opportunities for growth. For some companies, a hidden asset might be unique customer access; for other companies, it might be their technical know-how or their unique window on the market. By connecting the next-generation needs of your customers with your hidden assets, you have the foundation for a profitable growth plan .
This process starts by improving the way companies observe and respond to the needs of their best customers. The deeper the relationship with your best customers, the better you’ll be able to identify their unmet needs. Think about what you do differently with your best customers. Chances are you can replicate this with your other customers to expand your base of deep customer relationships.
Step #2: Shift to a Demand Driven Growth
Companies usually need a change in attitude and approach to begin this process. It is critical to stop viewing your business through a product lens and begin to study your customers through an economic lens.
It also helps to stop thinking about company size as a growth inhibitor and to begin to think of size as a multiplier of growth opportunities. Those companies that worry about cannibalizing their base business need to recognize that building new-growth initiatives can reinforce and strengthen their base.