Companies seeking new markets need to focus on what customers want.
Competing for customers has never been more challenging, intensely focused or costly than it is now. Instead of relying on plunging prices or continually adding product-line extensions, manufacturers must get back to what made many of them successful to begin with: rooting out the unmet needs of customers and responding to them with innovative products and solutions better than any competitor.
While the catalysts that launched many manufacturers were innovative products and services that in many cases created entire markets, the predominant mindset today seems to be following cost reduction as a strategy to the exclusion of creating new markets. But the ability of manufacturers to re-assess the unmet needs of their customers and create entirely new products and solutions that match customers' changing preferences is critical.
In their book 'Blue Ocean Strategy: How to create uncontested market space and make competition irrelevant', W Chan Kim and Renee Mauborgne contrast this 'blue ocean' approach of creating new markets with the 'red oceans', which are markets characterised by high levels of price cutting and margin aimed at driving up demand quickly to compensate for declining sales.
Manufacturers most often create blue oceans from their core businesses: Chrysler's redefining of the family vehicle market with the development of the minivan, IBM's humble beginnings as the choice for tabulation machines, Compaq's defining the blue ocean of low-end, fully configured servers with the launch of its ProSignia line - these are all examples of how blue oceans have been defined by incumbent manufacturers.
Consider the fact that most of the blue oceans that manufacturers are benefiting from today are based on existing technology, and it's clear that just spending heavily on research and development to create entirely new markets doesn't work. The technology behind the Apple iPod was well known; it was the development of the iTunes store and strong demand for personal music players that revolutionised this specific market.
There are many qualitative approaches that manufacturers rely on to gain insights from their customers, and, while these are all valuable as part of a broader voice-of-the-customer (VoC) programme, the culture of any firm must also change to capitalise on the lessons learned. VoC programmes must force manufacturers out of their comfort zones
Advisory councils are one of the most effective approaches to gaining insights from customers, but there has been wide variation in results achieved using councils to gain insights into new markets and unmet needs of customers. The cardinal sin so many manufacturers commit here is either thinking they already know what their customers' future plans are or, worse, viewing this as a negative experience just because customers will complain about problems they may have had for years.
The best-run advisory councils need to gain insights into the direction customers are pursuing. They are hardly sales events; they are more often events where C-level executives gather to share peer-level insights into what is working and for solving major strategic challenges.
Next, start tracking bloggers in your industry. There is an exponential growth of content being generated by bloggers and many of them are hinting at the next blue oceans in key markets. Many manufacturers have set up blogs and even defined blogging policies for their employees. Using blogs as a means of connecting with customers needs to be done with transparency, honesty and directness.
Focus groups can be used as a VoC programme, as can sales feedback forms and post-sale customer satisfaction bounce-back cards. Such forms often end up in stack after stack of moving boxes on marketing directors' shelves. Because the data is unstructured and difficult to interpret, it gets ignored for years. But there is a range of software that can interpret unstructured data and create linguistic models based on the results. This is incredibly powerful for finding blue oceans.
If you're a manufacturer and you're not doing a thorough analysis of why the major deals didn't get won, then it's time to start doing it. Likewise, finding out why a customer chose your products and solutions nearly always points to greater clarification of the unique value proposition manufacturers rely on for positioning and identity.
Clearly, embracing the challenge of finding blue oceans through concerted VoC programmes needs to be a strategic priority - and a passion to change and become a stronger global competitor in the process.