Using Demand Innovation to Find New Growth
by Charlie Alter
article courtesy of allbusiness.com

The No Growth Zone
Many companies have been stuck in a no growth zone for the last decade or more because their businesses have moved from a past characterized by strong growth into a future state of low or no growth. Very few companies have figured out how to break this cycle and move beyond this no growth zone.

One reason for this situation is that most companies have relied on traditional product-centered strategies for growth. This approach holds that you develop innovative products, expand the market for them as widely as possible, and possibly acquire competitors to gain market share and create efficiencies of scale. The problem is that today most markets are saturated with minimally differentiated products. (Think about how differentiated and distinctive your products really are compared to your competition.)

An alternate approach is to begin seeing your customers needs through an economic lens rather than through a product lens. In other words, how your company can provide new value to existing or new customers by solving their most difficult challenges.

Hidden Assets & Hidden Liabilities
Recognize that after years of running your business, you have accumulated a number of valuable hidden assets that you may never have used to generate revenue. Hidden assets are not intangible assets. They are simple and easy to understand and they can be leveraged to find new ways to add value for customers. According to Adrian Slywotzky, who has developed these ideas extensively, here are some of the hidden assets you may possess:
  Unique access to your customers
  Technical know-how
  Your installed base of equipment
  Insights on an existing or new market
  Your network of relationships
  Information that is a byproduct of doing business
  Your loyal customer base

However, in addition to hidden assets, you must also take a hard look at your business and acknowledge your hidden liabilities, the liabilities that historically have gotten in the way of growth initiatives. These are typically unrecognized aspects of your company's mindset and internal systems that hamper new-growth efforts. They include:
  Cultural liabilities: mindset, culture and history, leadership and commitment
  Structural liabilities: organizational structure, skills, incentives, budgeting process, IT
  External liabilities: brand/authority, customer readiness, investor resistance, channels

Together hidden assets and liabilities represent the hidden balance-sheet for your business, and it is critical to determine how to neutralize your hidden liabilities and leverage your hidden assets to make progress with any new growth initiative.

Where To Start
One place to start is with your best and most profitable customers, or your MVCs (Most Valuable Customers), as I call them. Start with the existing products and services they buy and find out the issues and hassles that surround your products / services with your MVCs. This is what demand innovation (Slywotzky's term) is all about.

Since GM is in the headlines at the moment, let's use GM's OnStar as an example. OnStar generates over $1 billion annually in high margin subscription revenue. It turns out that OnStar is one of the more valuable pieces of GM at the moment. It was developed as a platform for new growth in the 1990's that "surrounded" existing products, and served an unmet need of GM's most established customers. Many other companies have used demand innovation to find sustainable new growth in areas like installation, maintenance, financing, training or even outsourcing.

Take the First Steps
The first steps to take to explore how demand innovation can work for your company include the following:

1. Find out how to anticipate the changing next-generation demands of your MVCs. The best way to
    do this is to form a small cross-functional team and go visit them. Try to "swim upstream" as far as
    you can inside your customers' operations to find out issues, challenges or problems that surround
    the products or services they buy from you.

2. Think about your company's hidden assets or hidden opportunities for growth, and how you can
    use them to solve the nagging problems of these customers.

3. After your visit, debrief with the team. Then return and begin a new dialog about providing
    economic solutions rather than product solutions.