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Unlocking New Sources of Growth -

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Unlocking New Sources of Growth is a practical examination of strategic growth opportunities, and the best process for assessing and prioritizing them. It explores four broad areas of opportunities, then discusses how they interact and combine to affect business models and strategic thinking. Finally, it explains how a series of evaluative tools can be used to prioritize potential opportunities,

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Unlocking New Sources of Growth -

  1. 1. Unlocking new sources of growth How to find new value in new placesFuture Perspectives 1 Unlocking new sources of growth
  2. 2. Future Perspectives New sourcesare thought pieceswhich take a concise, of growthfuture-focused viewof important issuesto business and Growth and development are an overarching focusmarketing strategists.For more information please visit of business. This is true even for businesses thatwww.thefuturescompany.com are not looking to expand; products and services that have prospered in the past will always start to decline, and business divisions which once seemed perfectly attuned to their markets find that their markets have changed. Inevitably, then, it is a tougher proposition in businesses with ambitious growth targets, where the size of the new opportunities needs to outstrip the losses from the fading markets, and in larger businesses, where opportunities must have some scale to have an impact on the business. The climate for growth in the 21st century is also changing, as resource pressures push up costs, and businesses are more closely scrutinized amid changing expectations about their public and social responsibilities. © 2012 The Futures Company. Some rights reserved. 2
  3. 3. And, of course, growth is shifts in values. It encourages Unlocking new sources ofharder to find in difficult technological innovation. growth, therefore, explores theeconomic conditions, which Recession is also a coiled following sources of growth:in turn create difficult market spring, because recovery doesconditions. The result is often come, sometimes helped by ■■ New markets: people—a vicious circle: sales fall, and public investment or public mostly in emergingas a result, margins fall. To intervention. Businesses can markets—who haverestore margins, the company help by how they choose to reasonable amounts ofcuts its cost base, through innovate. One of the things disposable income forclosures and redundancies. we learn from the 1930s is the first time. This groupBut the intended effects of that business has the power includes the “emergingthese actions take time to to create new dynamics middle classes” in thesework through, and there are of economic, social and markets. Here, we gooften unintended effects technological change, to beyond the conventionalas well, such as the loss of reshape people’s views of the wisdom; the opportunitiescorporate knowledge, which present and of the future. in these markets are morereduces the resilience of the complex—and perhapsbusiness. In the meantime, A prolonged period of less immediate—than isof course, the share price is economic stagnation, the generally believed.likely to be under pressure and kind currently experiencedinvestors nervous, or hawkish. by the United States and ■■ Changing values: shiftingThe management’s freedom to much of Europe, is also a sign social values and behaviorsoperate becomes increasingly that the prevailing business create new market spaces.constrained, and its choices and economic models (and Changes in the way wenarrow. sometimes social models) are work have, for example, broken, and that new models led to a boom in the highHistory tells us that although will have to be built. New street (or main street) cafésuch responses seem models often run hand in hand and, combined with healthrational, it is better in hard with changes in values. concerns, created a multi-times actively to seek out billion-dollar market inopportunities for growth. The purpose of this Future pre-packaged salad.Recession is never uniform, Perspective, Unlocking newand it always creates the sources of growth, is to focus ■■ Shifting money: withinpotential for disruptive shifts on where such sources of richer markets, moneyin the structure of markets growth are likely to be found, moves between differentand the relative income of and how businesses can consumers, sometimesdifferent groups of consumers. identify them in a structured quite quickly. In the UnitedIt often accelerates existing and methodical manner. States, for example, the In hard times it is better to seek out opportunities for growth 3 Unlocking new sources of growth© 2011 The Futures Company. All rights reserved.
  4. 4. financial crisis has created In the following pages, we a new group of the “working will explore each of these old,” who are still earning in turn, together with some It is more and spending. of the tools needed to valuable to take identify them. If there is a■■ Emerging technologies: one message here, it is that a broader view new technologies have focusing on a single area of your operating long been identified as (betting, say, on technology a source of new growth. or emerging markets) is not environment Some foresee a boom often a successful strategy. and look for in technology-based Instead, the new sources opportunities in the coming of growth that are likely growth platforms years. But the trick is to prove most durable are supported by always in the timing, for those where multiple trends technology-led innovation combine. A change in values, several drivers can take decades to reach for example, aligns with a the market. There are change in economic structure, of change techniques to help to get perhaps, while a technology the timing right. platform has matured to create a new distribution■■ New business models: the platform or a different way of combination of changing servicing the market. Taken values and changing together, they create new technology platforms can synergies on which the alert create opportunities for business can build. new business models, which take value from This is to be welcomed, since existing players. Famously, such opportunities are more iTunes has captured value likely to be both substantial that used to belong to high and sustained. But it also street/main street music means that it is valuable, in retailers. Mobile and cell doing such work, to take a technology makes possible broader, more holistic view of the pay-per-use car market. your operating environment and to look deliberately for growth platforms that are supported by multiple dimensions of change.© 2012 The Futures Company. Some rights reserved. 4
  5. 5. New MarketsWherever you turn, you learn current consumption in the worry that the grouping ofthe conventional wisdom on United States.” Jim O’Neill’s disparate giants known asgrowth: that new markets— book, The Growth Map, is the BRIC nations—Brazil,the emerging markets of similarly one-dimensional. Russia, India and China—has,Asia and Latin America, and The message appears obvious: for some reason, lost muchbeyond that, Africa—are the Go East! of its previous momentum ...future source of growth. The In the past, many countriesnumbers presented to support Not so fast. We are in the engaged in catch-up growththis case are not small. And middle of a long shift back have suddenly slowed and hitwhen the economic trends are towards Asia, as we discussed plateaus, although economistscombined with demographics in our Future Perspectives do not have firmly establishedand urbanization, it is not report The World in 2020, theories as to when and whysurprising that the world is published last year. In 1800, this happened.”now looking to the south and Asia had a share of the worldsoutheast. But this is a more economy that matched its According to Michael Spencecomplicated story than it population share of 60%. It and Sandile Hlatshwayo,appears. still has a 60% share of world “The evidence we have from population, but its share of the postwar history suggestsBy 2030, it is predicted, Asia’s global income is now around that the majority of countrieseconomy could be larger half of that, because of the entering the middle-incomethan that of the US and the long shadow of 19th and 20th transition have slowedEuropean Union combined, century colonialism. significantly or even stalled.with the region’s share of Of the sustained high-growthworld GDP swelling from a But the short-term perspective cases in the postwar periodlittle under 30% to more than is less certain. As the (thirteen, soon to be fifteen,40%. Latin America, which, economist Tyler Cowen with the addition of Indialike Asia, had its financial crisis wrote in the New York Times, and Vietnam), only five haveearlier, is growing at speed as “There is a more general maintained high growth rateswell. In breathless style, theconsultancy McKinsey reports,“The rapidly growing ranks ofmiddle-class consumers spana dozen emerging nations,not just the fast-growing BRICcountries, and include almosttwo billion people, spending atotal of $6.9 trillion annually.Our research suggeststhat this figure will rise to$20 trillion during the nextdecade—about twice the 5 Unlocking new sources of growth
  6. 6. through the middle-income transition itself would have In general, economists’ growthtransition and proceeded the effect of slowing growth models, usually based on thetoward advanced country as the economy adjusted. work of Robert Barro (see box)income levels of $20,000 per tend to look at each economycapita or above.” ■■ There are increasing in isolation, rather than as part internal barriers to of the overall internationalIn other words, the economics growth, as we related system, meaning they ignoredata might appear compelling, in the case of China in or underplay the effect ofbut they need to be read with our Future Perspective, global constraints on growth,care. It is even possible that China’s Challenges, earlier such as resource shortages orthe recent slowdown seen this year. These include energy prices being pushed upacross the BRIC countries is a environmental factors by competition for oil.sign of a trend, not just a blip. such as water and air pollution, poor logistics Overall then, while we expect■■ The economic projections and infrastructure, and growth to continue, it will of the future growth of inadequate institutional be at a lower rate than in emerging economies tend frameworks. Corruption is recent decades. Businesses to be over-reliant on past also a barrier to growth. looking for sources of growth economic performance as in emerging markets need to a guide to future economic ■■ The economic effect take a more granular look at outcomes. But arithmetic caused by the move from the opportunities. alone dictates that as rural to urban areas is all low-income countries but over. United Nations One of the most interesting become middle-income research suggests that assessments of the next countries, their growth future urban growth in growth opportunities in the inevitably slows down. As emerging economies will emerging markets has been noted above, some middle- come from migration done by the economists income countries never from other cities and Willem Buiter and Ebrahim make the transition to high- internal growth. Rahbari of Citigroup. They income, for reasons that are used a number of indicators still poorly understood. based on the economic■■ The high growth rates seen in China and India Barro models have been significantly dependent on buoyant Most economic projections for countries are based on global export markets—and the work of the macro-economist Robert Barro. Based on growth has slowed in the data from 1960 to 1985, this uses the starting level of GDP face of sluggish European per capita (since it is easier for poorer countries to grow and North American faster than it is for richer ones) and assumptions about economies. A shift to a demographic trends, the quality of human capital and more internally focused economic governance, to project a country’s likely rate of consumer-led economy economic growth over time. might remedy this, but the© 2012 The Futures Company. Some rights reserved. 6
  7. 7. Growth in emerging markets will What to do either be “green” and sustainable, ■■ Don’t assume that the next few years will be or it won’t happen at all like the last few years. ■■ Make sure that your economics analysis pays attention todevelopment literature to will still be the richest in uncertainties causedidentify the 11 countries that 2050. The gap with poorerwere likely to grow most countries should narrow, by non-economicquickly over the next 40 years. but it won’t close. “Even with factors such asChina and India are on the another 40 years of superior institutional andlist, and so are Indonesia and growth, China’s real per-capita environmentalVietnam, but there are also GDP in 2050 will barely be constraints.some surprises. They include 50% of that of the US.” Fortwo African countries—Nigeria new sources of growth, the ■■ Take a more granularand Egypt—along with Iraq challenge—for the next decade view of emergingand Bangladesh. Buiter and and for several to come—will markets and theRahbari believe that these be to find those sources ofeconomies can achieve growth in the slower growing opportunities withinsustained per-capita growth of richer markets. them—the emergingfive percent (at PPP exchange middle class in Sãorates) to 2050. Paulo is different from that in Senegal.But they also have threeimportant caveats. This growth ■■ Look beyond thewon’t be achieved without BRIC model. Investingimprovements in resource mainly in emergingefficiency; as they say, “thegrowth we are predicting markets in search ofwill either be “green” and growth is a one-horsesustainable, or it won’t happen bet which will leaveat all.” The second is that you stranded if thesustained growth depends horse falters.on finding ways to ensurefood supplies to the wholepopulation.Their third caveat is the mostimportant: that the richestcountries in 2010, per capita, 7 Unlocking new sources of growth
  8. 8. New Markets (continued) China’s tourism boom The Chinese tourism sector is a good example of how growth in specific sectors of the emerging economies can outstrip national averages. With government support, the number of trips made internally in China each year almost doubled between 2005 and 2010. The boom is bringing new income to some of China’s most beautiful areas—such as Shannan prefecture in Tibet, Jiuzaighou National Park in Sichuan province, and the coastal towns of Hainan Island. The tourism boom is also creating new industries. The China Ski Association expects the number of domestic skiers to reach 20 million by 2014, up fourfold from 2005. Internal tourist numbers will continue to increase as a result of substantial investment in transport infrastructure and rapid growth in the budget hotel sector. China Lodging Group, for example, launched its first Han Ting Hotel in 2005. By 2010, it had a network of 438 hotels in 65 cities. As disposable income and leisure time increase tourism is becoming a more desirable activity, while online bookings are also increasing quickly. Outbound tourism is also increasing rapidly, offering opportunities for companies willing to meet the service challenge. According to a 2010 survey carried out by the Boston Consulting Group, 95% of Chinese tourists claim they are “poorly served on both the domestic and the international front.” Any effort that is made to meet their needs when abroad is likely to exceed expectations. International hotel companies have started to address this gap. In April 2011, French- owned Accor launched its China Optimum Service Standards initiative in Australia, focusing on Mandarin-speaking staff, culture training and food. Starwood Hotels and Resorts’ “Personalized Travel” program made its debut in July 2011, offering Chinese tea, congee breakfast and Mandarin travel guides, while the Hilton Huanying (Hilton Welcome) was introduced in August 2011 in response to the growing number of Chinese tourists staying at Hilton hotels abroad. Participating hotels promise to provide a Mandarin speaker at the front desk, congee and Chinese utensils at breakfast, and room amenities such as Chinese tea and slippers and Mandarin TV channels. Retailers are following suit, recognizing that shopping is an integral part of the Chinese travel experience. Many brands are 25% to 30% cheaper in Europe and the US than at home. Selfridges department store in London recently started to accept Chinese UnionPay cards, while Burberry is employing more Mandarin speakers to cope with demand from Chinese tourists. The upmarket London store Harrods, meanwhile, introduced 75 Chinese UnionPay terminals in its London and British airport stores in 2010, and has 70 Mandarin-speaking staff. The store estimates that Chinese shoppers spent an average of US$5,700 on each visit to Harrods during the first quarter of 2011. More generally, the World Luxury Association estimates that Chinese consumers accounted for more than 60% of Europe’s luxury goods sales in 2011. Similar trends are now being seen in the US. There is an obvious point here: Chinese tourists abroad are typically high-end luxury consumers, which can help such businesses fill gaps created by declining spend by consumers from richer markets. (TR)© 2012 The Futures Company. Some rights reserved. 8
  9. 9. Changing ValuesDeep social change takes consumption” have been were about quality andtime. We can sketch such evident in the data for several authenticity. Tropicana, inchanges out over decades years. In the UK, for example, response, created an offerand generations; the rise most indices of physical that emphasized the rawof individualism with the consumption have been materials. The InnocentBoomer generation and their declining since 2002. In the brand later played offEuropean equivalents, the US, meat consumption has concerns about health,soixante-huitards; the rise of fallen six percent since 2007, and leveraged the effectiveworking women, not just in and car mileage started to public health campaignrich markets but increasingly plateau in 2004 and has about “five [pieces of fruit orin the majority of countries; been lower since 2007. In vegetables] a day” to launchslow changes in behaviors Australia, peak car use was its own premium-plus juiceprompted by environmental in 2004. The financial crisis, brand. Without getting into aconcern, such as recycling. however, has accelerated discussion here of whether these trends and made them this is just the expansion of aSuch changes can set the more visible. niche within a category, thesecontext for the more rapid changes created a growthchanges that open up If we take the UK juice market opportunity by changinginnovation opportunities. in the 1990s, for example, consumer perceptions of theTypically, these more rapid the category was dominated benefits and the value of thechanges occur as a result by assumptions about value category.of the slower, longer change and convenience that hadmeeting a trend that is created a series of “me too”traveling more quickly, such offers, based on driving priceas an economic change, a shift down, often at the expense ofin technology, or sometimes, quality. This was heading ina sustained campaign by an exactly the opposite directionNGO or by a government. The of many food trends, whichsharp changes in social valueswhich lead to new sources ofgrowth can also be accelerated “A Good Man”by regulation or public policy.These “fast changes” make In our work researching an innovation opportunity in thethe longer change visible, but Russian market, we identified a huge change in people’swhen we look back at the data, values towards integrity, honesty and how success is beingthe direction of travel has defined. Perhaps this was not a surprise, given the presenttypically been visible already to political context, but it was notable how far this had extendedthose who chose to look. into people’s everyday attitudes. As a result, we developed a brand philosophy for a new product—since launched—underSo, for example, many of the the theme of “codes of a good man,” capturing the zeitgeist oftrends that sit behind the the Russian emerging middle class. (YK)post-crisis idea of “considered 9 Unlocking new sources of growth
  10. 10. to own CDs.” Millennials, of Many of the trends that contribute course, don’t care much for compact discs, but from the to the post-crisis idea of “considerate auto company perspective, consumption” have been visible in it should be more alarming that Millennials also seem less the data for years interested in cars. There are emerging signs that Millennials are the first generation in 50 years for whom cars do not afford social status, which forThe extent to which Innocent ■■ The consumer perception— their generation comes morehad to disrupt industry post-recession—of a from ownership of technologyexpectations to deliver its “luxury” experience at a devices.proposition was later recalled relatively affordable priceby one of its founders, Again, as we relate in ourRichard Reed: ■■ A stronger preoccupation Future Perspectives report on with nail art and How to Sustain Sustainability?,“If I was a manufacturer, customization, inspired a combination of shifting socialI would have done it by fashion shows and values and pressure fromdifferently, I would have used promoted by celebrities NGOs created a decisive shiftfruit concentrate, not just such as Rihanna and Adele away from the bottled watersqueezed fruit; I would have category in richer markets inadded sugar; if I worked in ■■ New formats and the early 2000s.logistics, I would have done it formulations, suchdifferently; I would have added gel-textured formulas, One of the lessons frompreservatives; if it was done and innovations such as monitoring social values is howanother way, it wouldn’t be the magnetic polish and nail often NGOs articulate changessame thing.” polish strips. in these, through political or awareness campaigns. TheySometimes second-order Understanding how values are represent an important signchanges are more dramatic. shaping categories can also of an intensification of a setComing to the present, in help to get an early warning of values within a particularthe United States the beauty of how consumers may be group of consumers.category has shown dramatic moving against a category.growth since the financial In our Sustainability report,crisis, particularly in the nail One example we use with we describe how thecategory. This is sometimes clients to show the dangers chocolate category wasdescribed as the “lipstick of bringing your own disrupted by Cadbury’seffect,” but Euromonitor’s assumptions to a market decision to source all of itsIrina Barbalova identified a is from an auto company cocoa through Fair Trademore complex interaction executive: “In all our research channels. The strategicbetween trends: with Millennials, we find decision was based on its that they still really want long association with Green &© 2012 The Futures Company. Some rights reserved. 10
  11. 11. Black’s, where it had movedfrom being a minority investor What to doto full ownership over anumber of years. But the signs ■■ When values change, the rules of the categoryof the social change had been often change as well, as seen in the way Cadbury’sseen already in the growth of disrupted the chocolate category through FairFair Trade and the Rainforest Trade sourcing. This can be game-changing.Alliance, in the increasing There are risks as well as opportunities whenvisibility of Fair Trade products values change.in stores with an ethicalprofile and in the impact ■■ Make sure that you have a clear view of the long-of activist campaigns such term underlying changes in values in your marketsas Jubilee 2000 and MakePoverty History. (they vary from market to market). Consumer data on attitudes and values help, such as those in our Global MONITOR service. ■■ Identify potential tipping points by asking how shifts in values might interact with the other sources of growth, such as technology or economic change. ■■ Test the values assumptions that lie beneath your views of your sector (and those of your competitors). There are often positioning and innovation opportunities here. ■■ When you see a potential opportunity, but are unsure of its likely scale, speed of change, or impact, take an “option” in it by investing in a smaller entrepreneurial player to build learning, capability and positioning. 11 Unlocking new sources of growth
  12. 12. Shifting MoneyThe growth category of such opportunities are under- In the Future of the eurozone,Shifting Money is different analyzed by businesses. we wrote about how, in thefrom New Markets in that it Slow-growth economies and medium term, the economicrefers to consumer change recessions can often create shifts needed to stabilizewithin markets rather than disruptions within national the eurozone and resolvebetween them, and typically economies, as we related in the euro crisis could createin richer markets rather than our recent Future Perspectives significant changes in earningsemerging ones. Recessions reports The Future of the between different groups ofare spiky (see panel); there is eurozone and Quickening workers and non-workers, anddynamism even in slow-growth the pace. between different categories.markets. Yet in our experience, In Quickening the pace, we discussed how in the US older people are working for Spiky business longer, some out of choice, some out of necessity. Either Recessions are spiky. Downturns hurt a lot of people, but not everybody, because down economies are not all down. way, the losers are younger Instead, they are peaks and valleys—more valleys than peaks, people who are unable to of course, but not a flatland of stagnation. Finding the peaks enter the workforce as a result, to climb is the way to thrive, rather than just survive, during and the outcome is a shift in a recession. consumption patterns. The world is not flat. Discontinuities characterize everything, It is worth unraveling the and it is in inefficiencies and breaks in the general pattern dynamics of such situations to where exceptions can always be found. Recessions are understand why they represent notoriously selective in the industries they punish. Not every new sources of growth. The market is hard-hit in a recession; not all consumers lose jobs or full story on Italy is told in the income. Additionally, some sectors recover faster than others. Future Perspective on the eurozone, but it is worth a During the global recession that began in 2008, Apple, little development here, partly Facebook, Restoration Hardware, Hyundai and McDonald’s, because conventional views of just to mention a few, racked up record performances, the Italian economy currently notwithstanding the fact that discretionary consumer project forward the declines of spending in the US dropped a record 6.9%, the fastest the past few years, rather than decline since the 1930s. The well-worn list of innovative new considering the prospects of companies that were launched successfully during downturns disruptive change. is proof aplenty that real breakthroughs always find a market no matter what. Whether times are good or bad, the challenge for business strategists is exactly the same—find peaks to climb. (JWS)© 2012 The Futures Company. Some rights reserved. 12
  13. 13. The story, in brief, runs like those economies in the the economic shift, it isthis: aftermath of the crisis. relatively straightforward The case for this in to understand and respond■■ As the euro crisis is explained in the eurozone to changing demand resolved, whether by Future Perspective. patterns, although first debt reduction or by movers are still likely to see restructuring of the Such consumers will have an advantage. economy, it will re-balance different spending patterns, Europe’s economies. in clothes, in household ■■ The sums of money (specifically kitchen) items, involved can be substantial.■■ If the Italian economy is in personal care products, Calculations by The to be more competitive and in the type of foodstuffs Futures Company’s market (as it needs to be for the they buy. There are some analysis and investment euro crisis to be resolved) significant points here: team on the size of it needs to be more the Italian opportunity productive. ■■ Because these consumers suggest—on conservative are in developed assumptions—that it is■■ One of the few ways to economies, production worth around €45 billion do this is to increase facilities and distribution per year, or more than participation rates by channels are already in 2.5% of Italian GDP women in the workforce, place. The companies (see panel). which are very low by best placed to benefit are European standards. typically already present in As well as specific category these markets. opportunities, there are■■ As a result, non-working also category patterns that women will get drawn into ■■ These are familiar tend to repeat. Some of that the workforce due to the products and familiar €45 billion will be spent on likely rate of expansion of services: once you identify convenience products and Valuing the feminization of the Italian labor force Only 46% of Italian women work, which makes them significantly under-represented in their labor market in comparison to other European countries. Given the possible changes outlined in our report on the future of the euro and the eurozone, the need for more Italian women to work will increase. Using similar markets across Europe for guidance, we can mature the Italian market to 59%, or the same level as France. This increase means almost two and a half million women entering the labor force. That is of course only half the story; the question is about the economic impact of this. Currently the mean female working income in Italy is €30,000, but most of these new jobs will skew to the lower end of the income range. From published analysis, we took 60% of this, or €18,000, to be a reasonable estimate for average income level of the new entrants.  The resulting increase to the spending power of Italian woman is just under €45bn, or circa 2.8% of current GDP. (DT) 13 Unlocking new sources of growth
  14. 14. services, some on premium,and some on treating and What to dorewarding. There are likely tobe new opportunities in the ■■ Growth opportunities like this unfold in twoleisure sector as well. stages—there are first-order and second- order effects, as with the nail beauty exampleThis type of scale is not above. Often the second-order effects are moreunusual. In their analysis of the interesting, certainly at a category level.so-called “silver economy”—older consumers and ■■ Understand how economic trends are interactingworkers—Accenture/Oxford with social trends, since this can be a key sourceEconomics calculated that thiscould create five million jobs of uncertainty, and therefore of new market spacesand raise 2020 US GDP levels and new opportunities.above current trajectories ■■ Assess the total opportunity represented by theby 2.2%. size of the change, to work out the scale of the potential. The box analyzing the potential size of the impact on the Italian economy of more women entering the labor market, developed by The Futures Company’s market analysis and investment team, is an example. ■■ Identify the impact of the change on existing categories—and whether it will create new ones. ■■ Don’t invent a new portfolio and strategy. Build from your existing portfolio and strategy, adapting what’s required to capture the new source of growth with your current strengths and assets.© 2012 The Futures Company. Some rights reserved. 14
  15. 15. New TechnologiesNew technologies are a familiar of S-curve analysis, Theodore market, but later versions,and well-researched source Modus, describes these as whether laptops and portablesof growth; indeed, some “Spring, Summer, Fall and or tablets, took advantageeconomists have argued that Winter,” which is a useful way to of the patterns of use andthey are the only sources remember S-curve evolution. behavior that had already beenof growth. This is a tougher The speed at which it does this is established by the PC, andquestion, however, from the largely a function of two things; merely extended this. Again,perspective of a business, uptake of these devices was farbecause the timescales on i. The extent to which the new faster. Analysis by The Futureswhich new technologies move technology is already sitting Company suggests that eveninto the mainstream are on an existing technology the very fastest “pioneer”unpredictable and often slow. platform, and technologies will reach onlyTechnology evolution can take seven percent penetration indecades rather than the few ii. The extent to which it fits their first five years, whereasyears of a typical corporate within existing social and “follower” technologies, whichinnovation cycle. economic practice. sit on the platform created by the “pioneers,” can reachA second problem is that So, to take an example, the 50% penetration in the samemethods such as Technology initial development of the timeframe.Road Mapping, which internet was slow (it took morebusinesses use to seek to than a quarter of a century In other words, if you areaddress this issue, tend to to get to 10% penetration looking at technology-basedbe determinist, portraying in leading markets), but the opportunities for growthtechnology as creating World Wide Web—which piggy- over a timescale of lessapplications which consumers backed existing internet use— than a decade, it will comethen adopt, rather than seeing took off much more rapidly. only through “follower”the emergence of new products Similarly, personal computers technologies which areand applications as an interplay were slow to diffuse into the already being deployed by leadbetween social and consumertrends and technologies.In practice, all technologies Short-term opportunities forfollow an S-curved pattern ofdiffusion, first developing slowly growth based on technologies comewith small numbers of users, only from “follower” technologiesthen accelerating as they reachthe early majority, continuing which are already in the hands ofan upwards trajectory as they lead users.work through the late majority,then slowing again as they reachpeak penetration. The doyen 15 Unlocking new sources of growth
  16. 16. users. This means that these consumer-facing factors: ■■ Observability (the degreeopportunities can be identified to which the results ofthrough appropriate future- ■■ Relative advantage an innovation, or thefacing research techniques. (compared with what the innovation itself, are visible user already does) to others).There are also some classictools to help businesses ■■ Compatibility (consistency Although the researchanalyze the likely speed of with values, experience that sits behind thisuptake of an innovation. and current practice of work has stood the testEverett Rogers is known users) of time, insights such asmostly for his work on the these are under-utilized indiffusion curve and the ■■ Simplicity (levels of helping develop new brandtwo-step flow, but within his perception of ease propositions. But evidentlyresearch are some important of use) this checklist can be usedinsights. In particular, both to assess the likely ratemost of the success of an ■■ Trialability (the degree to of uptake of an innovation—innovation can be ascribed to which an innovation can and therefore how fast it willits performance against five be tried out) move along the S-curve—and Anticipating technologies Large flatscreen displays Early majority: Tablet devices IMPLEMENT Touchscreen interfaces Electronic paper display Early adopters: PILOT Augmented reality 3D TV Technologies Innovators: Ultra high pixel density displays RESEARCH OLED displays Flexible screens Pre-market: Holographic imaging MONITOR Visual retinal displays Touchable holographs Sample S-curve to analyze emerging screen technologies. Source: The Futures Company© 2012 The Futures Company. Some rights reserved. 16
  17. 17. as a tool to improve the technology, to understand of products and services inchances of success. more clearly the contexts the social media space. The of use and the factors that Well–the world’s first onlineSpotting the moment may slow or accelerate its community—was launchedThe classic problem for continuing growth. in San Francisco in 1985 (andbusinesses is identifying still survives). Usenet providedthe right moment at which As it continues on its trajectory a whole range of communityto invest. S-curve analysis up the S-curve, the technology and shared-interest groups onis valuable here. In short, by starts to touch the mainstream the internet before the Webcloser monitoring and analysis market, although levels of developed, while communitiesof the “Spring and Summer” take-up are still modest, and such as Geocities, Tripod, andphases of the S-curve, it is its protagonists and promoters Theglobe.com emerged in thepossible to track technologies are likely to be small- or 1990s, but battled with thethrough a number of phases, medium-sized businesses poor online tools and interfacesuntil they arrive at the moment with modest sales. At this then available.when they are about to point, the right response is areach market readiness. The feasibility study, to understandS-curve analysis means that the potential and impact ofbusinesses are not taken by implementation.surprise. The classic This means that by the time theAs technologies move up technology or application starts problem forthe curve, tracking enables to reach the early majority— businesses isthe business to respond by typically at around 8 to 10%changing its behavior. At the penetration—the business is knowing whenearliest stages of the “Spring” well placed to act. By way of to invest inphase, it is clearly a long way a reminder, significant newfrom market, and monitoring technologies can take decades a technologywill be enough. Technologies to reach this threshold. In the opportunity.can get stuck here for years; United States and the Unitedsome never escape from it. Kingdom, both lead markets, S-curve analysisOver-commitment is unwise. it took more than 25 years for means that domestic Internet access toAs and when it moves into the reach this level. business issecond half of the “Spring‘ not taken bycurve, it is moving to the There are some exceptions:point where it will start to be people routinely point to the surprisea candidate for future change, speed at which Facebook hasbut is not yet at the point emerged as a dominant socialwhere it will have a business media platform. But the use ofimpact within the next tools to analyze the take-up ofinnovation cycle. At this point, technologies would also havethe correct response is a identified that there would be“deep dive” into the far more rapid development 17 Unlocking new sources of growth
  18. 18. What to do Future■■ Don’t follow the crowd. There is more groupthink in Industries the technology space than anywhere else.■■ Make sure that you understand the S-curve for Spotting the next big thing your sector, in terms of the different technologies is a tricky art. Organizational that you will be using and those that your ecologists—who study the conditions under which consumers will be using. organizations emerge, grow■■ Scan regularly for changes in the position of and die—have a term for the way in which organizations technologies on the S-curve, to make sure you risk a growing mismatch with know how quickly it could affect your business. their external environment. Some technologies will move up the S-curve faster They call it “the liability of than others. Some will fall off the curve completely. obsolescence.” Conversely, organizations that anticipate■■ Test your assumptions about technology change actively in their change against your social assumptions—about external environment are social attitudes, economic change, the rate of more likely both to adapt institutional change and so on. effectively and to identify new potential sources of■■ Analyze emerging technologies against current growth. consumer behaviors to see how strongly future technologies perform on Everett Rogers’ five The management theorist Peter Drucker first identified success factors. You can also use this framework to seven areas of change in improve the design of your innovations. the external environment that could be systematically monitored for innovation opportunities. He devised them in the 1980s, and they remain a useful guide. You will certainly recognize in them many of the ways in which organizations (and consultancies) structure their processes to identify new sources of growth. The unexpected: The “brilliant accidents” based on chance events, such as the discovery of penicillin© 2012 The Futures Company. Some rights reserved. 18
  19. 19. that led to the developmentof antibiotics. They cannot be Growth opportunities come fromforecast, and they are difficultto engineer or mass-produce many places and it is poor strategy(although brainstorming wasinvented to try to do this). to place your business bets too narrowlyIncongruities: The gapsbetween what your customerswant and what you thinkthey want. These are closeto the classic notion of the created opportunities for qualitative research.“unmet consumer need,” and entrepreneurial airlines withthey are the domain of much innovative business models New knowledge: Advancestraditional observational such as Ryanair. in science and technologyresearch. For example, can open up the opportunity“People always Demographics: This is an for innovation, such as thetrip over their shoelaces. obvious one. Changes in basic research into algorithmsThat means they need the overall demographic for ranking the importanceshorter shoelaces.” make-up of the population of Web pages that led to create opportunities for new the development of Google.Process needs: products and services, such We can track and forecastImprovements in internal as cosmetics with “anti-aging” this, and gain a good senseprocesses that allow a job benefits to target an increasing of what’s coming next, asto be done more efficiently population of older consumers. described earlier in thisor with better outcomes, Future Perspective.for example the invention of Changes in perception:just-in-time logistics, or the Changes in assumptions, It is clear from this list thatAgile (iterative, collaborative) attitudes and beliefs, such growth opportunities comesoftware development as the changing perceptions from many places, and it ismovement. of nutrition as part of health therefore poor strategy to bet that created opportunity for on only one of these areas ofIndustry and market the development of “vitamin change. This is why any futureschange: New industries waters” towards the end of project we do starts with aand new markets created the 1990s. These are hard to thorough process of scanningby exogenous changes in track (people don’t tell you for the drivers of change in thethe market structure, often reliably how their attitudes wider environment, includingdriven by changes in the and beliefs are changing), the operating environment.regulatory environment. For but can be identified Most innovations, whetherexample, the deregulation through a combination of vitamin water or internetof the European airline longitudinal quantitative search engines, emergeindustry in the late 1980s tracking and observational in response to multiple 19 Unlocking new sources of growth
  20. 20. changes across these interactions, connections and accumulating possessions,different areas. synergies between trends and new forms of lighting that market changes—rather than facilitate rich sensorialThe most valuable futures narrowly pursuing the same interactions with everydaywork seeks to consider the opportunities as everyone else. objects—be it a t-shirt, ainteraction between trends Thinking more expansively domestic interior or a cerealand their combined impact. about the interaction between pack—will become moreYet lists about “the next big social values, technologies, highly valued.thing” or “industries of the institutional changes andnext decade” often seem economics throws up some Change drivers:to be devised by looking more unusual opportunities. New knowledge: Developmentat Drucker’s sources of of OLEDs and plasticinnovation separately. As a 1.  Lighting everywhere electronicsresult, the growth spaces thatturn up repeatedly on such Suddenly, low-energy lighting, Industry and market change:lists—a growing retirement based on organic LEDs Investment and regulationand pension planning industry that are lower-cost, more to encourage smart energyfor an older population, efficient, and can be printed usageor growth in a brand area on or wrapped around largesuch as nanotechnology or surfaces are likely to change Changes in perception:sustainability—are credible the category, and others. Shifting desire for experiencesbut usually too broad to enable Lighting can be integrated over material possessionsthe opportunity space to be into clothing, furniture anddefined sufficiently. even packaging. 2.  Urban miningBy way of an example, While the technology, or “new More than half of humanityhere are three industries knowledge” is important, one now lives in cities. The world’swe think offer long-term of the reasons why this will population will grow by aroundgrowth potential that can be grow as an opportunity will 600 million by the end of theidentified only by looking at be the “industry or market decade: most of those will livea combinations of factors. change” of pressure to remove in cities, mostly in Asia. RatherThese particular examples existing higher-energy lighting than being a constraint,are taken from workshops from the market through a urbanization could help solvewhere we were exploring combination of regulation and many pressing problems. Onepossible long-term sources institutionally encouraged of these is the need to findof economic growth for a behavior change. new sources of materials,particular set of industries, such as rare metals used inbut the process is repeatable Finally, as part of a long-term electronics.for any industry. A recurring trend in which developedthread throughout this report economies have shown As resource scarcity becomeshas been the importance a greater preference sharper, so incentivesof thinking about new for spending money on will grow for developingsources of growth in terms of experiences rather than technologies and business© 2012 The Futures Company. Some rights reserved. 20
  21. 21. models for the recovery, Changes in perception: technologies that can helpreuse, repair and recycling Growing awareness of need to reduce healthcare costsof these materials from reuse and recycle materials while providing less labor-urban waste streams. intensive ways to care forAlready, Japan’s urban 3.  In-home patient care the elderly. One example: themines exceed 10% of world substitution of traditionalreserves of many metals, Over the past century inpatient care models with aincluding gold (16%), silver we have seen what hybrid model that combines(22%), indium (61%) and demographers have called health visits with remotetin (11%). There is already the “rectangularization of monitoring and aftercare. Inevidence that consumer the survival curve”: as more this context, domestic robotsvalues are changing towards people in developed countries could act both as in-homegreater reuse and recycling live longer, a larger proportion helpers and monitors.of materials: by 2020 it survive into their 70s,may be the case that you 80s and 90s, pushing the Change drivers:are regarded as socially conventional “survival curve” Demographics: Agingresponsible only if your phone outwards. populationor tablet is made from 50%recycled materials. We have also witnessed a Industry and market change: steady rise in the cost of Long-term squeeze onChange drivers: healthcare over the past 30 healthcare budgetsDemographics: Urbanization years, something which willand the development of be felt acutely in the coming New knowledge: Advancesmegacities years by governments in robotics and remote juggling with tax revenues monitoring systemsProcess needs: Development and public expenditure.of processes and Pressure to reduce healthcaretechnologies for reuse and expenditures will create largerecycling of raw materials incentives to implement 21 Unlocking new sources of growth
  22. 22. New Business ModelsBusiness models describe the ■■ A technology that has ■■ Business models thatways in which materials and matured to the point advantage suppliersinformation are transformed where it has achieved significantly compared tointo value, for companies reasonable levels their customersand for their customers. of penetration in an Who benefits most from theThey are sometimes hard interested consumer current business model?to discern, even by experts. segmentIn commoditized markets, What are the relevant If most or all of these factorscompetitors tend to be technologies? (This isn’t can be seen in the sector,competing around the same always obvious.) What are then it suggests it is almostbusiness model. It can take their penetration levels certainly primed for businessa new business model to among likely customers model change. It is worthreach new sources of value (actual and potential)? spelling out why this is. Takenand new sources of growth. together, they identify theSeeing through the existing ■■ Signs of “new practices” following issues:assumptions about the market in related sectors or atto make this leap can be hard. the edge of the existing ■■ Is there a deep shift goingBut when a company does sector on in the underlyingchange the business model What are leading-edge conditions which shape thein a category, it seems very users, communities of sector or category?obvious with hindsight. Think: interest, and entrepreneursWalmart in the US retail sector, doing that is different from ■■ Is the sector or categoryIKEA in furniture retailing; or the mainstream? already being primed forDell selling PCs or Apple and change by entrepreneursthe music business. ■■ Evidence of pain points in and users? the practice of leading-And it is possible to identify edge users ■■ Do users have sufficientthe characteristics of sectors What do leading-edge users motivation to change habitsor categories that are ripe find costly, difficult, or time- and practices? The costfor business model shift consuming about these of “unlearning” existingbefore the moment. Typically new practices? behavior is often one of thethey combine a number of biggest barriers to change.recognizable factors: ■■ A set of existing institutions, regulations, Taken together, in a■■ A shift in underlying or business models that systematic way, they make consumer attitudes, are under strain you look at your markets values and behaviors Do industry critics, or and categories through the How are consumers’ experts or analysts, see eyes of others, asking new attitudes, values and problems with the way questions about them, rather behaviors changing? the sector works than bringing your current And why? at present? assumptions to bear.© 2012 The Futures Company. Some rights reserved. 22
  23. 23. To demonstrate this, in the downloads from the industry as Gnutella had attractedtable on the following pages majors is well-known, but is significant numbers of users,we have evaluated a number usually told as a strategy case even though set-up wasof innovations against these study. The music industry sometimes quite complex andsix criteria—The Futures itself, rightly, is portrayed the whole thing was shroudedCompany’s Pressure Gauge as being stuck in a failing by the veil of piracy. Thetool for gauging the likelihood business model that it was industry itself treated this asof disruption in a category or reluctant to abandon. But a legal issue rather than as aa sector. there is more to the story. clue for innovation. The clues that this was anThe way in which iTunes emerging model had been By 2002, enough consumersreshaped the music market clear enough. Napster and were online to make theby capturing the market in other download sites such category viable, and the music Waiting for the Next Big Thing In his book Good Strategy Bad Strategy, Richard Rumelt describes interviewing Steve Jobs in 1998, shortly after Jobs had returned to Apple as interim CEO. When he returned, Apple was in a desperate state, only months from bankruptcy. Jobs had since simplified product lines and distribution ruthlessly, to bring costs into line with revenues. But, as Rumelt writes, “His survival strategy for Apple, for all its skill and drama, was not going to propel Apple into the future. At that moment in time, Apple had less than 4 percent of the personal computer market. ... There seemed no way for Apple to do more than just hang on to a tiny niche.” When Rumelt met Jobs in the summer of 1998, he rehearsed the industry view of Apple’s predicament: that it was locked out of the dominant computing standard of the time, the “Wintel” system that connected the Microsoft operating system and Intel’s chips. Jobs listened. “He did not attack my argument,” recalls Rumelt in the book. “He didn’t agree with it, either. He just smiled and said, “I am going to wait for the next big thing”.” Although this is a story from the technology sector, it is not unique to it. Windows of opportunity emerge in all sectors. The trick is in spotting such changes early enough to act on them, and acting on them late enough that they have real market value. As it happened, Rumelt had just come off an assignment in which he had interviewed the leaders of Europe’s electronics and telecoms companies on their market strategies. Generally, his interviewees were able to describe the successful strategy of their leading competitor. “The standard story was that ... a “window of opportunity” had opened—and the current leader had been the first one to leap through that window and take advantage of it.” But when they turned to their own strategies, identifying such windows of opportunity was invariably missing from the stories they told him. 23 Unlocking new sources of growth
  24. 24. The Futures Company’s Pressure GaugeSMThe six questions which identifywhether your category is set for disruption Attitudes and Technology: What New practices: What are behaviors: How are are the relevant leading-edge users doing? values, attitudes and technologies? behaviors changing? iTunes Downloading content PC penetration reaches Rise of online downloading becoming widespread 20 to 25% in leading start-ups (e.g., Napster, among particular groups. markets. Gnutella.) More sharing and remixing Emergence of broadband. Rise of branded file- of content. sharing businesses. A shift in interest from the album to the song. Innocent Authenticity, well-being, Cost-effective production Juice bars established in desire for healthier technology. New York. options in non-alcoholic Rise of the organic food drinks markets, growth in movement, farmers’ premium food categories. markets. Nespresso Rise of coffee house Falling cost of equipment Professionalization culture. used in professional of the (affluent) home. Connoisseurship. catering. Zipcar Past the point of “peak Increasing internet acess. Development of small car,” driving in decline, High levels of mobile/cell non-profit car-sharing especially among young phone access. schemes across Europe people in cities. Development of remote and parts of the US. Attitudes to cars and car access technology. Bicycle-sharing schemes ownership are changing. such as Velib in Paris. Shift towards access rather than ownership. Increase in pro- environmental attitudes. When exploring this with a client, much of the necessary expertise is already within the business, but in different departments or divisions. But it is also useful to get an external perspective to ensure that the business is not missing things that are clearer to outsiders than to insiders.© 2012 The Futures Company. Some rights reserved. 24
  25. 25. Pain points: What do Institutions under strain: Do Business models: Wholeading-edge consumers people see problems with the benefits from the currentfind difficult? way the sector works? business model?Some technical expertise Record companies suing CDs an expensive “bulkrequired. customers. packaged” product.Complexity (fragmented Aging customer base.marketplace).Threat of prosecution, even forlegitimate users.Costly and time-consuming Decline in differentiation, Concentrates designed toto produce home-made declining margins in sector. maximize for the suppliers thesmoothies. benefits of their supply chains and logistics.A complex and fragmented Declining market for High margins on take-awayconsumer experience. “traditional” in-home instant coffee.Either high-cost equipment, or coffee.“ordinary” filter coffee.Underlying desire for personal Increasing costs of car Finance lock-in to car purchase.transport. ownership, especially “ancillary”But borrowing cars restricted costs such as fuel, parking,by circles of friends and taxation and insurance.relatives, rigidities of insurancemarket, etc. Source: The Futures Company 25 Unlocking new sources of growth
  26. 26. industry’s legal fights with Express put it in 2000, “Do be filtered through existingconsumers had ensured you really care if Sony gets views. Simply put, the majorthat—for some—there their cut? Thought not.” players in the music industrywas a stigma, if not actual thought consumers wereliability, to downloading At the same time, though, lying. Only Apple saw it asmusic without paying for it. there was evidence that an indicator of a marketThis battle had alienated consumers would be willing opportunity, partly becausethe music industry from its to pay, although this was it was looking at the musiccustomers. As the editor disputed: evidence of a industry from the outside.of the British New Musical willingness to pay tended to There were some deeper If you need to look further below the surface to get a deeper shifts too. The LP had been a analysis of potential market change, there are recurring technology innovation before patterns of business model change that can be explored it was a cultural innovation, through deep dives. and the industry had enjoyed ■■ Prior emergence of model in B2B sector: Does the new fat margins as consumers model already exist in the professional or business-to- moved from LPs to CDs. business sector? The Zipcar notion of renting or leasing a service was already well-established in the business- But even at the time, those to-business sector. Ryder transformed the US logistics margins disguised an aging sector in this way. customer base and a deeper ■■ Evidence of experimentation: Have entrepreneurs tried cultural shift. In 1999, in (and failed) to launch such models? Failure is often seen a short column about the as a reason not to test a new business model. But the Rio MP3 player, the music detailed story usually shows the entrepreneur has got entrepreneur and founder most of the proposition right—and a successful of Factory Records, Tony innovator will be able to correct their mistakes or improve Wilson, had written that “for on their timing. the music industry, the future ■■ Technological change: Has a core technology seen is upon us and one juicy and a rapid decline in price or a significant increase in radical part of it is taking us performance? The former Intel boss Andy Grove had straight back to the past.” a rule of thumb that every time costs or performance The past he referred to was a changed by an order of magnitude (i.e., a factor of 10), world before the invention of disruptive change would follow in the market. In other the “record album” when the sectors, it may take a smaller fall in costs. Solar Photo popular music business was Voltaic is going through this type of transition at present. driven by the song (by the 45, ■■ Parallel patterns of change: Is the sector following a the 78, the cylinder, and the familiar pattern of change? Researchers using the TRIZ song-sheet, going backwards model, based on analysis of hundreds of thousands in time). of patents, suggest—simplifying a complex approach hugely—that products (and services) tend to move over time from rigid to modular to programmable to autonomous.© 2012 The Futures Company. Some rights reserved. 26
  27. 27. Bringing It All Together New sources of growth end-to-end process Where is the opportunity in How can you tell change is coming What can you do about it? your category or industry? in your category or industry? Defining and exploring New sources of growth New business models the opportunity New markets Pressure New money Gauge Innovation tool to opportunities assess New technologies disruption New values Supporting analysis Primary qualitative and deepens insight into quantitative research “Seven sources links between values, and modelling to explore of innovation” technology and business and assess size and as checklist models in your category speed of opportunity Source: The Futures CompanyIf there has been a theme tothis report, it is that looking To find new sources of growth,for new sources of growthis a structured process that you need to be systematic–andrequires you to look beyond to look beyond the boundaries ofthe boundaries of yourexisting business to your your businesswider operating environment,to make the connectionsbetween what you find,and then to understand theopportunities this creates At one end of the funnel, a particularly, helps tofor you. The diagram gives a structured scan of issues identify the wrinkles insense of how this works helps build a picture of the landscape wherein practice. the landscape, and more opportunities might lie. 27 Unlocking new sources of growth
  28. 28. The second phase looks at Finally, this connects with a It is also possible to use thethose opportunities through more typical phase in which Pressure Gauge tool to wind-a lens that allows you to you define and explore the tunnel innovation ideas thatassess how large they are, opportunity, using primary are already in your pipeline.and how imminent they might research and modeling tobe, using the Pressure Gauge assess softer and hardermodel and other tools. aspects of the opportunity.Source: Jake Goretzki – www.grtzk.com© 2012 The Futures Company. Some rights reserved. 28
  29. 29. What to do■■ Develop a 360-degree view of your business environment, scanning it and monitoring it for change in a holistic way—rather than compartmentalizing change in silos (such as consumer, economics, supply chain, risk analysis, etc.).■■ Take a future-facing view of how social values, technologies, applications, along with systems, infrastructure and regulation are likely to change as your category develops, and how these are likely to interact. There are a number of well-known futures methods designed for this purpose.■■ Identify and talk to your consumers who are most open to change, and understand how their attitudes, behaviors and motivations are changing. As we discovered in our Cultural Frequencies analysis, these are not just your younger consumers.■■ Identify the pain points in your consumers’ product or service journeys— not just to point-of-sale but in their “whole life” journey, including use, maintenance, management and replacement of the product or service.■■ Understand the changes in your supply chain and cost base—are competitors likely to borrow innovations from other sectors and disrupt yours?■■ Locate the next “window of opportunity” in your sector. Make sure that you are able to identify your opportunity spaces before your competitors do. 29 Unlocking new sources of growth
  30. 30. ConclusionThe co-founder and former factors in different parts of we each left this businessChief Executive of Intel, Andy your business landscape today, and started a new oneGrove, tells a story about change at the same time. tomorrow, what would it bewalking into the office of his doing?” As they went roundchairman, Gordon Moore To take advantage of growth the table, it became clear(of Moore’s Law fame), and opportunities, though, you that one business unit ofasking him, “If we got kicked do need to think like an their company, their servicesout and the board brought outsider, to step outside unit, was an unpolishedin a new CEO, what do you of the received wisdom gem, doing valuable workthink he would do?” It wasn’t of your colleagues and that people were paying aan idle question. Intel was your competitors and premium for in a part of thelosing money at the time look differently at your category that was growingbecause prices on its main marketplace. As this Future rapidly in size and complexity.product had been undercut Perspective shows, that can The heritage of the mainby its Japanese competitors. mean looking at it through business had obscured this.Moore spelled out the likely the eyes of consumersstrategy of a successor. After (and not just your existing There are always new sourcesa while, Grove recalls, he said customers), or of lead users, of growth out there. They canto Moore, “Why shouldn’t who may be reinventing your be identified in a systematicyou and I walk out the door products and how they are and organized manner. And—and come back and do it used without your being fully almost always—you canourselves?” aware of it, or of a start-up, or approach them successfully of a new entrant from another as long as you approachIt’s a famous story, and it is sector. The trick is to spot the them carefully. Commitnot coincidence that Grove’s waves and swells that look enough resources to createautobiography, where he as if they are going to build a platform. Learn about therelates this, is called Only enough to take you all the capabilities required. Thenthe Paranoid Survive. Grove way to the beach. assess the full potential.and Moore killed their own Unlike Andy Grove, youproduct—indeed, their We were once working with won’t need to bet the wholebiggest product—before it a board to help them apply business. But you will gainkilled them. the outcomes of a scenarios a fresh perspective on what project to the future of their you do and, along the way,Most new sources of growth business. The company had where your business can findrequire less courage than just lost a large long-term new sources of growth.this; they don’t require you contract from their biggestto kill your main product. customer, and the moodBut they do require you to was somber. After we hadbe alert to shifts in sources looked at the scenarios,of value, shifts which often the chairman turned to hiscome about when several colleagues and asked, “If© 2012 The Futures Company. Some rights reserved. 30

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