Decoding demand opportunities

All angleworms in a bottle, trying to derive knowledge and nourishment from their own contact and from the bottle. Sometimes the bottle is shaped art, sometimes economics, sometimes economic-religion. But once they are in the bottle they stay there.

Ernest Hemingway from Green Hills of Africa

When Hemingway referred to “angleworms,” he was referring to writers in New York. But, to us, his words also aptly describe so many people we have met in the business world, people working tirelessly to come up with the best innovations – the marketplace winners that companies so desperately need to compete (or even survive) in today’s economic climate. Their efforts can’t be denied, but they have unwittingly developed blind spots that often prevent them from doing effectively what they need to do in order to succeed. Like Hemingway’s angleworms, they’re “in the bottle” and the bottle’s walls are preventing them from seeing the next great innovation their company could offer.

Consider: most companies have put “understanding customers” on the top of most executives’ agendas. And, as a result, many companies have used sophisticated methods to gather detailed information about those customers. Today, we don’t just ask consumers what they think, and we don’t just listen to them – we also observe them. Nearly every company touts some form of anthropologically inspired observational technique and swears to the importance of having everyone in the organization (including the CEO) spend time hanging around consumers’ homes or wherever they habituate.

Customer-centric?

The problem is that, over the years, as companies have become “customer-focused” and have adopted these sorts of learning tools, three things have happened. First, their execution has become sloppy. The act of using the tools has become increasingly familiar, and, as a result, researchers are noticing less than they should. Insights that used to “pop” no longer do so. Instead, baseline data is supplemented and complemented by additional information – often about the same set of customers – and researchers emerge with few truly fresh insights. Put simply, many companies have been doing the right sorts of things research-wise for so long, they’re now doing them wrong.

Second, over time, companies have begun to equate studying consumers with understanding them. In the interests of launching a new product or researching the way a product is used, companies tend to set achievable deadlines and deliverables, then focus their efforts accordingly (on how a customer uses a product or what attributes they value). Companies learn a great deal about these isolated factors, but they miss the big picture because they never consider the full complexity of the nature of consumer demand.

Third, companies have become too quick to take up a consumer insight as an indication of strong demand. Companies have taken the innovation hype in overdrive in search of a big idea, a disruptive innovation, a game-changing new product or a new design – and, voila! – have quickly prototyped a solution. In the end, while there have been a few examples of commercial success via such reflex actions, most efforts appear akin to the corporate version of chasing romantic dreams or trying to catch rainbows. Disruption and gamechanging innovations simply don’t come around with great frequency in an industry, and too many executives who brag that they’re expanding the envelope or some such turn out to be, well, braggarts without much to brag about. If anyone is being fooled by all this, it’s not the customer. From a consumers’ perspective, the results (in terms of true innovation yield) are disappointing.

As a recent Yankelovich Monitor survey attests, nearly three out of four consumers agree with the statement: “Businesses care more about selling me products and services that already exist rather than coming up with something that really fits my lifestyle.” And the problem is getting worse. Notwithstanding the recent hype about consumer-led innovation, these survey results show an increase from the 2006 survey in which only 62 per cent agreed with the same statement. New perspective What’s needed is an entirely new perspective on identifying, learning about and interpreting demand opportunities.

Companies need to be less focused on products and consumers and more open to revelations about the situations, rituals and routines of people’s daily lives – what we call the economic or commercial “ecosystem”. Some companies have begun to take this perspective. Tesco is one such company, as evidenced by the way its leaders and researchers have prepared to launch new stores in the American market. Another is Apple; the iPod is one of the more publicized examples of the result of just this sort of ecosystem awareness. Over the past eight years, we have worked with business leaders in developing a clear, replicable framework that many different companies can use to foster relevant innovation. We call this approach “Capturing the Ecosystem of Demand”; and it has been used by more than 50 companies, including Allianz, American Express, PepsiCo, Philips, Telefónica, KCI and Wrigley.

The results speak to the value of the process: breakthrough products and services, new business models and new going-tomarket strategies in areas ranging from insurance and soft drinks to digital consumer services and even new technologies for wound care for severely injured burn victims.

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