What is “demand innovation” and how can it help your business find sustainable new growth?

What is “demand innovation” and how can it help your business find sustainable new growth? One key to the puzzle of finding new pockets of profitable growth is to use best practices and tools that you might not be familiar with, but which have helped other companies to grow. The challenge is to understand these best practices and tools and then filter them through the lenses of your business to find what works for you.

Demand innovation is a technique developed by Adrian Slywotzky and presented in How to Grow When Markets Don’t, published in 2003 by Warner Books, along with co-author Richard Wise. Slywotzky defines demand innovation as “an innovative strategy for driving significant, sustained new growth.”

The no growth zone

Slywotzky says many companies have been stuck in a “no growth zone” for the last decade or more because their businesses have moved from a past of strong growth into a future state of low or no growth. Very few companies have figured out how to break this cycle and move beyond this zone.

Think about it for a minute and compare your company’s performance in terms of sales and profitability in the mid 1990’s and then where you are today. How long has your company been stuck in this cycle of low or no growth?

One reason for this condition is that most companies have relied on traditional product-centered strategies for growth. This approach holds that you develop innovative products, expand the market for them as widely as possible, acquire competitors to gain market share and create efficiencies of scale. The problem is that today most markets are saturated with minimally differentiated products. This is the case for companies of all sizes, not just large ones. Again, think about how differentiated and distinctive your products really are compared to your competition.

Where to start

OK, if you agree that your company is currently stuck in this state, then a new strategy is clearly called for. But where do you start? One place to start is with your best customers, or your MVC’s (Most Valuable Customers), as I call them. Start with your existing products, instead of incrementally improving products or finding new customers, find out the issues and hassles that surround your product with your MVCs. This is what demand innovation is all about.

Since GM is on our mind at the moment, let’s use GM’s OnStar as an example. OnStar generates over $1 billion annually in high-margin subscription revenue. It turns out that OnStar is one of the more valuable pieces of GM at the moment. It was developed as a platform for new growth in the 1990s that “surrounded” existing products and served an unmet need of GM’s most established customers.

Many other companies have used demand innovation to find sustainable new growth in areas like installation, maintenance, financing, training or even outsourcing.

Take the first steps

The first steps to take to explore how demand innovation can work for your company include the following:

Find out how to anticipate the changing wants and needs of your best customers. The best way to do this is to form a small cross-functional team and go visit them. Try to “swim upstream” as far as you can inside your customers operations to find out issues, challenges or problems that “surround” the products they buy from you.

Of equal importance is to identify your company’s “hidden assets” or hidden opportunities for growth. These are typically things that have value but you have never generated revenue from in a concerted way in the past. Examples are: customer access, customer and market knowledge, and technical know-how.

Your assignment

Your assignment is to take these steps during the next week in a limited way. Next week’s column will go into more depth on how to use demand innovation to find sustainable areas of new growth.