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Avoiding the “Hazards” of Operational Excellence

The tendency of teans to see markets from the perspective of their own products rather than the eyes of their own customers can lead to a myopia that can lead even well performing companies astray. Here’s how to correct that.

“Can someone please tell me how we missed this opportunity? We own the world’s largest battery brand and maker of toothbrushes. But nobody here put them together like Spinbrush?”

A once-great company lost its edge. Missing the opportunity to introduce Spinbrush was one symptom of a larger issue: Gillette’s innovation pipeline had dried up. Sales stagnated. Margins declined.

How did they get there?

The team suffered from what we call “Leader’s Myopia” — the tendency of managers to see markets from the perspective of their own products rather than through the eyes of their customers. It’s a pervasive issue we’ve observed over the past 35-years: companies become so focused on their customers that they fail to see major shifts in the market overall.

Symptoms of Leader’s Myopia

Serving your best customers is critical but beware of the associated hazard: zealous attachment to a presently profitable few can lead an organization away from the mainstream market and isolate it from emerging opportunities.

Traditional retail formats increase the risk by organizing stores according to products of similar physical attributes — cereal on one aisle, yogurt in dairy, bananas in produce, bagels in bakery, and waffles in frozen food – regardless that these options and others all compete for consumers’ breakfast dollar. Yes, your toughest competitor may inhabit a different “category”.

Consequently, when companies focus on narrow definitions of “category” and “market share,” they fail to identify all competitors and miss opportunities. This is the core of Leader’s Myopia. It’s also one of the primary reasons that upstarts topple established giants: they lack blinders imposed by current customers, competitors, and “categories.”

How do established companies avoid this focus?

To identify growth opportunities and avoid the myopia, we think about three types of customer demand.

Here and Now

Current demand is observable and easy to identify. The signs pointing to new ways to serve this demand often exist in some other category serving as an example.

Take Bud Light – since its introduction in 1982, Anheuser- Busch (AB) rode a wave of growth generated by U.S. consumers’ switching to low calorie beers. By the 2000s, though, Bud Light’s growth softened. Analyzing alcohol consumption across all categories, AB identified a shift towards sweeter, lighter options, particularly among younger consumers.

Keying on the success of flavored vodkas, the AB team hypothesized that a new, sweeter beer might well break through to 21 – 34 year olds. Reinforcing this thinking was the habit of adding a slice of lime to give beer a sweeter taste. Breaking an established beer should be “pleasantly bitter” orthodoxy, on Cinco de Mayo 2008, Bud Light cured it’s “Leader’s Myopia” with Bud Light Lime. Consumers grabbed it off the shelves so quickly that AB had trouble keeping it stocked.

On The Horizon

Emerging demand is incipient desire for a new solution or set of benefits. Focused research can often reveal the early signals of big opportunities to come.

For years, Braun competed in the men’s electric razors market in a three-way race. When growth rates began to slow, it realized they needed to look at their market in a new way. By exploring how young men’s grooming priorities were changing, Braun realized that their consumers were no longer just shaving facial hair. Increasingly, they wanted the same smooth, clean-shaven chest popularized by movie stars and pro athletes. Armed with this insight, Braun identified an opportunity to leverage its unique product strengths to address this emerging desire. The company shifted its marketing to the “Precision. Control. Perfection” positioning. Braun promoted its highest-end razor as the ideal razor for achieving the total body look that men wanted.

Untapped Potential

Henry Ford quipped, “If I had asked people what they wanted, they would have said ‘a faster horse.’” It’s the epitome of latent demand – giving consumers a new product or solution that they didn’t know they wanted until they experience it. The most difficult to identify, latent demand can also lead to the greatest rewards.

Apple in the 1990s was at a crossroads. With Steve Jobs recently rehired, Apple recognized the music industry was imploding. File sharing and peer-to-peer websites were enabling users to give music away for free leaving music executives distraught as their industry’s commercial viability was being eroded.

Jobs quickly determined that existing MP3 players fell into two categories: “big and clunky” or “small and useless.” He realized Apple could come up with better solutions for finding, acquiring and managing music as well as providing sleek, intuitive devices to play music. By early 2001, Apple launched the iPod, followed by iTunes and the rest is iHistory

What did we learn?

These examples showcase a set of untraditional yet powerful techniques for identifying growth opportunities. By challenging accepted truths, exploring the consumer challenges, investigating consumer priorities, and identifying recurring experiences, pockets of demand can be discovered and addressed.

There are no silver bullets or quick fixes. Innovation – and defeating the myopia– is extremely demanding work requiring managers to push beyond the expressed wishes of current best customers and probe the less-defined realms of emerging and latent demand. Persevere: opportunity is there for those who seize it.

Jason Green is principal at The Cambridge Group and leads Nielsen’s global Growth and Demand Strategy practice. Taddy Hall is senior vice president global practices and consulting services at Nielsen and a project director at The Cambridge Group.

About Jason Green and Taddy Hall

Jason Green is the CEO of The Cambridge Group, as well as the leader of Nielsen’s global Growth and Demand Strategy practice. His work focuses on developing customer-driven strategies, new product development, positioning, and consumer segmentation for consumer goods, retail and services industries. Taddy Hall is a Principal and Leader of Strategic Innovation at The Cambridge Group, as well as a Jobs Theory pioneer and recognized authority in the fields of Marketing, Innovation, Branding, and Competitive Strategy. For more than 20 years, Taddy has collaborated with Harvard Business School Professor and innovation authority, Clayton M. Christensen, on the publication of The Innovator’s Solution, Marketing Malpractice (HBR), and most recently a book on Jobs Theory and the science of innovation titled Competing Against Luck (HarperCollins) scheduled for release in October, 2016.