Hidden Opportunities for Growth and Innovation

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Most companies try and innovate from the ”inside out”–improve products, talk to customers and generally do more of the same. A better idea is to innovate from the ”outside in.” This means trying to look through the eyes of the customer and change how they live, work and play for the better.

Products and Customers
1. Develop better products
2. Understand
3. Find more

Traditionally, companies have approached innovation from an ”inside out” perspective–develop better products and you’ll automatically attract more customers and your business will thrive. Therefore, companies:

Try and differentiate their product offerings: which is fine, except everyone gets so busy making marginal improvements that nobody looks beyond current offerings for new growth opportunities.

Organize the marketplace into tidy segments: which is helpful, except when new segments arise that nobody has even dreamt of.

Attempt to grow by merger and acquisition: which is all right, except everyone focuses on making the marriage work rather than accessing new markets.

Extand their brands into adjacent markets: which is okay for incremental growth but no good for accessing dynamic and emerging new markets.

Listen to their customers: which again is fine, except customers only evaluate the future by what are already familiar with. They won’t demand what they don’t know is technically feasible.

All of these practices are valuable to a point, but they share a fundamental weakness: they are all using the organization’s point of view and perspective. They never go beneath the surface and examine what it is customers want. Lacking this big-picture perspective, it’s easy for companies to miss growth opportunities that are literally right before their eyes.

A much better way to innovate is to work from the ”outside in”: understand what it is customers are trying to achieve and then deliver on the custoner’s unexperssed desires, dreams, fantasies and so forth.

Products and Customers
1. What do people want?
2. What can’t they buy yet?
3. Why do they buy?

Put another way, to look from the outside in will require that you look at the marketplace from a broader vantage point altogether. This means going:

Beyond understanding your existing customers and looking instead at the underlying behavior of people.

Beyond existing brands and portfolios.

Beyond arbitrary classifications like categories or industries. These are blurring anyway.

Beyond organizing your company around functions and instead giving all you people a challenge to improve your value proposition.

Beyond the arbitrary boundaries and silos created by strategic business units.

Beyond the habitual domains most of your people are already familiar with so fresh ideas can be cross-pollinated and grafted in.

The logical end result of an inside out perspective is to achieve a competitive advantage in the marketplace. By contrast, the logical end result of the outside in perspective is to achieve a customer advantage that hopefully is unique.

When a company replaces the pursuit of competitive advantage with the pursuit of customer advantage as a guiding principle for the enterprise, the now focus does not mean that it must necessarily undergo a complete reorganization, either in its structure or in its practices. In fact, the new focus may not even require a company to scrap the strategies it has already been successfully using to promote and expand existing product lines. Instead, those activities are temporarily de-emphasized permit the elasticity required to see the opportunities in plain sight, to identify new opportunity spaces and to find and execute strategies and actions that create new growth and help to reinvent the core business model.

If I had asked customers what they wanted, they would have told me they wanted a faster horse.