10 "Prompts" to reveal business opportunities that would otherwise be hidden by your "confirmatory bias"

After attending two board meetings during the last two weeks I felt that the widely used SWAT is a good tool of analysis but does not tell what to do with the information generated. To solve this problem, here is a list of 10 "prompts" which directs you to specific actions and questions which can find new opportunities for you. Hope you will find them useful and leave your valuable comments at the end of this post. 

What is confirmation bias ?

Let your business not be one of those businesses who wake up one day to find their business gone because, all along, you could not see the reality when it was happening! Your “confirmatory bias” came in the way and prevented you from seeing what was in front of your eyes. By the way “confirmatory bias” is something that makes you notice only those facts that confirm your existing belief and ignore those facts that challenge them. Don’t think it does not happen to you !

INDIAN EXAMPLES
In the 1950s there were 3 major radio companies : Philips, Bush and Murphy but all of them failed to make a transition to Black and White televisions in the early 70. Actally they should have been the first to make the transition because they already had the necessary machinery in their factories (component assembly lines ) and they already had the necessary distribution network relationships (the retailers who sold the Black and White TV sets were the same ones who sold their radios). All these companies were hoping, against all the visible facts, that the radio business will continue. Finally it was left to the new competitors like - ECTV, Dianora, Solidaire, Crown, Televista etc – to pioneer the new market.  The very same story got repeated in 1980s again in the same market when the Asian Games coincided with the launch of Color Televisions. None of the Black and White Television brands could wake up in time. This provided a window of  opportunity to a new set of brands : BPL, Onida and Videocon.

AMERCIAN EXAMPLESFrom 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 cruise business. They already had the necessary assets and people but the fact is that they did not “see” the business opportunity. They thought the old business will continue. Finally it was left to the start-ups to buy the ships and retrofit them and use them for the vacation business.

STRATEGY – HOW IT IS SUPPOSED TO WORK
AND HOW IT ACTUALLY WORKS

In text book,  the objectives influence the strategy which in turn influences asset and organization creation. In practice the opposite happens : executives are afraid of getting into new businesses when the existing business is doing well. They are afraid of changing their organizational structures, acquire new skills, developing new vendors, looking for new customers etc. Therefore they continue to seek confirmation (bias) that their existing business will continue. In fact, many of us do not know what our business is. You must read a landmark article "Marketing Myopia" by Ted Levitt who gives many examples like the American railroad executives who never saw the 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.

YOUR  FUTURE  COMPETITORS ARE AT YOUR PERIPHERY ALREADY

Look at what the small guys are doing. They are most probably servicing customers you do not want or you have not seen. It is one of these small guys who will rule your industry one day..

How to avoid confirmation bias ?

I am giving below systematic ways to identify opportunities and not get biased

1
GO OUT INTO THE MARKET AND TALK TO PEOPLE

FIGURE OUT WHAT PRODUCTS SHOULD EXIST BUT  DON'T 

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. No customer ever asked for Honda hatchback. It was the Honda engineers who were sent out by the company to observe the actual customer and their behavior. They observed the plight of an American housewife walking from the supermarket door to her car in the parking lot with a loaded cart and realized how they can make her life easier by repositioning the hinges on the boot.  

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.

2
SEEK AND CREATIVELY ANALYZE WHAT CUSTOMERS COMPLAIN

TO  SPOT ANNOYING / EXPENSIVE CUSTOMER EXPERIENCES

Creative analysis of actual complaints and hunting for imaginary complaints is a gold mine for new ideas. Here the focus of your probe will be what the customers are unhappy about with the products, packs, availability, information, process, ambiance, service and people they currently encounter in the market. 

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.

3
CONSIDER ALTERNATIVE USES OF YOUR RESOURCES

ARE YOU USING THEM FOR UNDERPAID APPLICATIONS ?

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.

4
DO NOT SEEK NEW PRODUCTS ALL THE TIME

LOOK FOR NEW PROBLEMS AND APPLICATIONS

FOR YOUR EXISTING PRODUCTS

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 and 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 new application.

5
SOMETIMES YOUR CUSTOMERS KNOW MORE WHY YOU ARE GOOD.

SOMETIMES NON-CUSTOMERS KNOW WHY YOU ARE NOT GOOD

ASK THEM AND DISCOVER NEW PRODUCT IDEAS

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.

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.

6
BE AWARE OF WHAT WORKS IN OTHER MARKETS

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

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.

7
SOME CUSTOMERS SEEM ILLOGICAL TILL

YOU WEAR THEIR GOGGLES AND DISCOVER THEIR WORLD
WHERE MANY OPPORTUNITIES  LURK  

Go deep into an apparently illogical behavior and you will discover a new set of customers with their new logic.

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.

8
USE THE IDEAS DEVELOPED BY GRANDMOTHERS, ROADSIDE MECHANICS, POOR PEOPLE, OLD WIVES' MEDICINES. USE THE COMMUNITY AS A 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. 

9
LOOK FOR THINGS THAT WORK ELSEWHERE

AND ASK WHY IT CANNOT WORK HERE

See what is succeeding elsewhere and consider importing it and testing here.

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.

10
THOSE WHO MAKE PROFIT DO NOT PUBLISH THIS FACT.
LOOK FOR PROFITABLE BUSINESSES HIDDEN FROM YOUR VIEW

     
Some of the most profitable businesses are deliberately 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.