Recipes for Unearthing New Business Opportunities

 

Many businesses wake up too late and do not survive because their executives tend to notice only those facts that confirm their existing belief and ignore those facts that challenges them.

   

Indian Example : In the 1950s there were 3 major radio companies : Philips, Bush and Murphy but all of them failed to make a transition to BWTV business in the early 70s in spite of having the necessary competencies at the back end ( electronic component assembly lines ) and at the front end (the same dealer who sold radios sold BWTV too). A new set of companies came up altogether : ECTV, Dianora, Solidaire, Crown, Televista etc. The story got repeated in 1980s when the Asian Games coincided with the launch of CTV. None of the BWTV brands could wake up in time and a new set of brands came into the market : BPL, Onida and Videocon. What explains this "waking up late" phenomena?

It happens in the US too : Example : From 1900 till 1950s, transatlantic cruise lines transported millions between Europe and the US. In the 60s they were eclipsed by transatlantic flights and finally died. They did not see that they could have saved themselves by going into vacation cruises with most of the assets they already had – but they did not “see” the business. It was left to start-ups to buy the ships and retrofit them and use them for the vacation business.

In text book, business objectives drive strategy which, in turn  drives asset creation. In practice exactly the opposite happens : executives are afraid of junking assets prematurely and seek confirmation that these assets will continue to drive the strategy which will continue to work and create revenue and profits.

Many businesses do not know what their business is. ( From a landmark article "Marketing Myopia" by Ted Levitt) there are many examples of American railroad executives not seeing road trucks as their competition until it was too late. Or, the Hollywood producers thinking that they were in movie business and not seeing the TV industry as their competition.

The future of your business is in looking at periphery. Look at what the small guys are doing.  ( Christensen’s concept of disruptive innovation).  The small guys are servicing customers you do not want or have not seen. Some of these small guys will rule your industry with their business models.

How to avoid the confirmation bias ? I am giving below some points which will enable you to systematically identify opportunities and not get confused.

 

Look for products that should exist; but  don't

“Your Seniors Managers Should Travel More"

Customer survey forms and focus groups interactions can tell you about their customers which they are aware of - and can lead to evolutionary new products. They cannot tell you their needs which they themselves are not aware of which can lead to revolutionary new products! In such cases, direct observation or comparative analysis is useful. "Is there something that the customer wished was there?".  

Japanese do not do much market research through agencies but they do it through their engineers. The case of Honda hatchback.

In the early 1990s, Kate Brosnahan spotted a gap in the handbag market between functional bags that lacked style and expensive and impractical designer bags from Hermès or Gucci. She founded Kate Spade LLC  which produced fabric handbags combining functionality and fashion. They became a success.

Spot Annoying / expensive customer experiences
“Complaints is a gold mine and not a hassle”

Here the focus of your probe will be what are the customers unhappy about with the products, packs, availability, information, process, ambiance, service and people they currently encounter in the market.

Creative analysis of complaints and hunting for imaginary complaints is a gold mine for new ideas.

Netflix was founded  after receiving $40 late fee for a rented videocassette that had been misplaced.

Charles Schwab created low-cost brokerage house as he was fed up paying the commissions of conventional stockbrokers.

Scott Cook got the idea for Quicken after watching his wife grow frustrated tracking their finances by hand.

Re-deploy under-priced resources

“Can same asset / process give better profit?” 

You need to exercise your grey cells intensely where are the opportunities for arbitrage. You must always see everything in terms of "can I utilize this resource to get a better return if offered to a different customer"

Sometimes an asset is underpriced because only a few people recognize its potential.

When a low-cost airline announces its intention to fly to a new airport, real estate investors often leap to buy vacation property nearby as they expect a jump in real estate values.

Founders of Infosys were first to recognize that Indian engineers, working for very low salaries, could provide great value to multinational clients.

Discover new applications; not products

Discover new “problems” for your “solution”

For increasing your sales you need not always knock on the doors of the R&D. You can find out new audiences, applications, reasons, stories.  

Hira Thapliyal, discovered a process called coblation which uses radio frequency energy to dissolve damaged tissue with minimal effect on surrounding parts of the body.  He founded a company to offer it for cardiac surgery but the market turned out to be too small and competitive to support a new venture. Later he found an application in orthopedics where 2 million arthroscopic surgeries are done per year.

When Arm & Hammer baking soda sales were declining, they did not change the product - they found a new application for the same product. Baking soda has the property to absorb food odours. They sold it as a refrigerator deodorizer and met with great success.

Lipton failed in noodles but Maggi succeeded by finding a new customer and application.

See applications your customers have found
“Always learn from customers & non-customers”

This thought is an extension. Very few marketers go out beyond their immediate buyers to observe how the end users use it. Many surprises and lessons await those who do it.

Model of 3 concentric circles : Case of  LG TV in India.

Chinese appliance maker Haier Group discovered that some rural customers were using their  washing machines to clean vegetables. They used wider drain pipes and coarser filters so as not to clog these with and  added pictures of local produce and instructions on how to wash vegetables safely.

This innovation later led to  “washing machine” for making goat milk into cheese. They penetrated rural areas avoiding cutthroat pricing of appliances in cities.

Your industry knows not what works elsewhere
“Keep your eyes peeled for everything"

Be in the market and see what works in other geographies, other audiences and other markets.

Western Union vs Seagate HDD example.

Voltas launched Rasna soft drink concentrate in 1982, the product concept was being sold on the streets of Ahmedabad for several years before ! It is the greatness of Voltas to spot the opportunity that existed in standardizing the concept and then making and selling it on a mass scale !

In 1954, restaurant equipment salesman Ray Kroc convinced McDonald brothers’ hamburger stand in southern California to franchise their assembly-line approach to flipping burgers.

In 1982, coffee machine manufacturing executive Howard Schultz visited a coffee bean producer called Starbucks in Seattle. He tried convincing them to start European style “coffee bars” but when he could not, he started his own coffeehouse chain which was later bought back by Starbucks and became their core business.

Logic of the "illogical Customers"
“Wear their googles to see the real truth”

Stop wearing your own goggles and see the market. In fact look for apparently illogical behaviour and go deep and discover the new logic – which may lead you to a new market.

In Eureka Forbes, when we went international, we saw a great opportunity for selling water purifiers in Indonesia because that is what we were doing successfully in India; but the product did not do well. When an Indonesian came to our office he saw our vacuum cleaners and said the product will sell well in his own country and sure enough it did!

My surmise is that Kellogg in India would have done better if they had entered India with Granola Bar - a product which they already have internationally - rather then entering with breakfast cereals.

Honda entered  U.S. motorcycle market in 50s to sell large motorcycles to leather-clad bikers but without success. Then a mechanical failure made the company recall these models and sell  smaller 50cc motorbike - the Cub. The cub turned out to be better than the father! The company discovered an untapped segment looking for two-wheel motorized transportation.

Source ideas from customers and communities
“Use the community as the developer” 

Crowd sourcing has become popular in the last decade and P&G is following it well. Why not use the community as R&D?

Centuries of social trial and error in India which has produced Ayurvedic and Unani & herbal remedies, a system of classifying foods, grandma's prescriptions, recipes etc ... it is a treasure trove that needs to be explored.

Joint Juice, an easy-to-digest glucosamine liquid, was founded by Kevin Stone, a prominent San Francisco orthopedic surgeon. He learned about the nutrient from some of his patients, who took it for joint pain instead of the ibuprofen he had prescribed. Many doctors might have ignored this or even scolded their patients for falling prey to fads, but Stone recognized he might be missing something. He looked up the clinical research on glucosamine in Europe, where it was the leading nutritional supplement. Veterinarians, he discovered, swore by it, as their patients fell for neither fads nor placebos. He built a business around it.  

Look for products that thrive elsewhere

“Travel the streets of India and the World”

Import successful models from elsewhere

In early 90s, swedish student Carl Svensen-Ameln wanted to store his belongings in Sweden when he went to college in Seattle – to find that  local facilities were full. He studied the storage industry in the USA and discovered it had high rents, low turnover, and negligible operating costs. Yet this industry did not exist in continental Europe. He set up a partnership with an established U.S. company called Shurgard and formed European Mini-Storage. It met with great success.

Search for profitable businesses hidden from the view
“People making big money are hiding from you”

Some of the most profitable businesses are hidden from your view

Goldman Sachs avoided investment management believing it generated lower fees than trading and investment banking. When Donaldson, Lufkin & Jenrette  published its financial performance as part of a 1970 stock offering, Goldman Sachs were startled to learn that fees and brokerage commissions on frequent trades added up to a highly profitable business. Seeing this they expanded into managing corporate pension funds, and aggressively built its business.