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.
