Why trend-spotting is crucial to staying ahead
In today’s business context, trend-spotting is everyone’s job.
In every field in the business world, trends in customer behavior and technological innovation are changing more rapidly than almost any organization can handle. If you asked any business leader today, she or he would most likely tell you that her or his company is struggling to anticipate these sea changes, not to mention tracking them and reacting to them efficiently, appropriately, and in a way that allows for future adaptability.
The future of an organization’s profitability and sustainability is determined by many factors – some of which are beyond the control of the organization.
Yet how senior management assesses macroeconomic adjustments, demographic shifts, technological advances and new levels of customer demands – based on behaviours and other social dynamics – will determine their organization’s long-term viability.
Thus, senior managers need to find more efficient ways of interpreting the world around them and prioritizing the application of resources to remain competitive. Here’s how…
Qualitative Trend Spotting
Listen to your customers: collect ideas
The least costly way to gain market intelligence is to create a dialogue with your customers. The goal is to discover customer preferences, needs and wants. Above all, try to quantify the frequency at which they engage with your company. Rising frequencies are strong indicators that leaders should give a trend greater attention. Equally, falling frequencies are also strongly indicative that more investigation is required.
Once preferences are identified they must be consolidated into similar and dissimilar properties (segmentation). These become the basis of new products or, at least, identify gaps in the existing product portfolio. Customers’ frequency of engagement with their supplier helps to determine the relevance of a trend to an organization’s value proposition. Customer trends can be placed in three broad categories:
- consumer lifestyle/lifestage (subtle shifts in behaviours and attitudes)
- consumer products (indicating a new preference)
- consumer engagement (frequency or intensity of the experience)
Take a good look at your competitors: collect solutions
In today’s internet world, companies are transparent in what they offer to customers. Reviewing the product portfolio of your competition can provide insight into gaps in their capabilities. This insight can be converted to opportunities. Spotting service gaps can also be a simple three-step process:
- Go to one outlet (or online) of your own company (unannounced) and simply open an account or get a new product
- Go to a competitor’s outlet (or online) and open an account
- Assess the difference in the two experiences – how long did it take, how did the process feel, how knowledgeable was the customer service representative (or how intuitive was it, if online)?
Look beyond your industry: develop your corporate radar
With greater frequency, trends starting in one industry migrate to other industries or across disciplines within the same industry. In many cases, trends start in industries with greater exposure to end consumers, and over time migrate directly or are adapted to other unrelated industries. It’s essential to identify and anticipate these trends to create and leverage opportunities. Equally, it’s essential to keep an eye on new technologies with transferable use to identify the best ways to leapfrog competitors by offering a unique new product and service.
Blank-sheet your product portfolio: reinvent the future
Ask yourself, ‘If I were starting my organization today, what would I do to put me out of business?’ The key is to momentarily forget about the current product portfolio, and focus on developing a value proposition for each customer segment. What do customers need, want, desire and aspire to? Next, factor into the process the trends, noting rate of customer adoption and other societal and technological factors. Once you have mapped customers’ requirements to a suite of products, then perform a gap analysis with your current product portfolio. The difference between the two marks your path to the future.
Get multiple perspectives: more eyes, more opportunities
Due to the nature of their compartmentalized design, organizations naturally develop a silo mentality. This occurs when business processes are clearly defined and management places key performance indicators that reflect the activities of the process that link it to the performance of the people performing the operations. Thus, the focus is not on collaboration across organizational hierarchies, but on the efficiency of the business unit. People within the business unit develop products which, over time, become less reflective of the organization’s ability to deliver value holistically. A good benchmark of product development is getting people from unrelated departments to participate in the design – they may know something that you don’t know.
Convert organizational energy: capitalize on opportunities quickly
Trendspotting needs to be everyone’s job. So how do people in the organization get the information to the right people. What is the process for internal dialogue? Insight to trends is not confined to the senior team. People throughout the organization can identify trends and new ways to add to the customer value proposition. The key to capitalizing on trends is to reduce the time to market – by establishing a process to quickly seize the opportunity to mitigate an organizational challenge.
Quantitative Trend Commercialization
Before betting the organization’s future on a new value proposition, trends need to be placed in a comprehensive internal and external context. When does a trend become a trend worth investing in and capitalizing upon? The classic definition of a trend is “a general direction in which something is developing or changing”. In senior management vernacular this sounds like, “a vague direction in which unknown things are doing things we don’t understand and can’t comprehend”; this translates to “a risky risk”. And one thing that prevents organizations from quickly capitalizing on trends is that magic word ‘risk’. As senior managers are typically risk-averse, this is a tricky scenario, which is why in many cases product innovation often comes from outside the organization.
To get smarter, senior management teams need to take risks wisely when it comes to product innovation. One key element that determines a trend is how many times something occurs (frequency). Another factor is, does the product or service add direct or indirect value to customers? If customers find it valuable, they will do it more often. In addition, if the product or service provides direct value the next question is “how much would they be willing to pay?” If the answer is “not much”, then the next question is “why?” There are two reasons for this: 1) the feature, function or service is already being provided on the market and has been commoditized by competitors, 2) customers do not see it as a necessity.
To course-correct this, senior managers need to create a matrix where the rows represent customer segments and the columns represent product features/functions. At the intersection points a series of questions needs to be explored. “What is the volume of transactions, now – in future?”, “can incentives be created to increase volume?”, “at what volume do we achieve our profit objectives?”, and “can we develop a migration strategy to move customers to this point?”
Commercialization and Capitalizing on Opportunities
Not all products will achieve high profitability, which is the nature of retail/product transaction processing. What is valuable today will be commoditized tomorrow and devalued over time. For example, merchants do not like to pay credit card merchant fees even though accepting credit cards is infinitely lower cost to them than handling and transporting cash. Over time, they forgot how much manual effort, time and cost the old way was and how efficient the new way has become. The same is true with customers. Therefore, products need be placed in the context of their lifecycle (volume/time). The key to commercialization is to manage dynamically the value proposition/product line as a portfolio of value. The ability to capitalize on trends is proportional to how an organization manages the overall value delivery to customers.
The final step is to ask if the organization has the capability to deliver what customers need – once we know what it is they need. Within the organization, we often insulate ourselves from other parts of the organization simply because our time is constrained (silo mentality). For example, in the fast-paced world of technology, customers become smarter than customer service representatives simply because they are using the products with greater frequency. Thus, intra-organizational learning is key.
To err is human; to derail innovation takes an organization. Have you ever been in a meeting to look at a trend to hear “that will never work in our organization” or “our customers won’t like that”, only to find out soon after that the competition is doing those things? Few financial institutions are trendsetters or early adopters that capitalize on customer or social trends. This is due to two primary reasons: 1) ownership and responsibility and 2) resources versus results. To capitalize on most trends today requires cross-organizational collaboration, which is often counter to budget accountability for departmental costs. As a result, ownership of the process of commercializing a trend often rests with justifying who is going to pay for the investment, which in the vast majority of cases is not the group initiating the change.
Developing a global view is simply the first step in the process of identifying trends. Once you have identified those trends, you must discover their relative value to your customers and your organization, and set in motion a process of commercialization which results in capitalizing on the opportunities they present.
The Action Agenda
- Create a process so everyone in the organization is the eyes and ears to spotting trends
- Develop a process of evaluating the relative value of a trend to customers’ needs, wants or desires
- Assess gaps in the current product portfolio (volume / profit / pricing)
- Evaluate the organization’s ability (skills, management and infrastructure) to deliver new products
- Enable cross-organizational collaboration in the design, evaluation and implementation
- Establish who owns the process (operations enabler) and who owns the product (portfolio manager)
— Joe DiVanna is a member of the Duke Corporate Education global educator network, a Møller By-Fellow of Churchill College, University of Cambridge, and author of Strategic Thinking in Tactical Times.
An adapted version of this article appeared on the Dialogue Review website.