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.
