unmet-needs-matrixIf you are doing little to find solutions to your customers’ unmet, and often unspoken needs, you will be unlikely to transform your business performance.

Transformational innovation occurs when a business finds a way to meet a need that customers didn’t know they had. Low-fare airlines, on-line banking and texting services are all solutions to problems that never really existed.

The chart identifies four types of opportunity, based on whether the need is being met and the scale of opportunity from further differentiation:

  1. Latent Opportunities: Not all unmet needs are equal. Some are likely to have less value attached than others, although this may change over time. For example, cars delivering high miles per gallon were of limited value in the US a couple of decades ago. That situation has dramatically changed as oil prices have escalated, and has been a contributing factor to the success of Japanese manufacturers there.
  2. Improvement Opportunities: These are focused on continuing to meet existing customer needs in better ways, but where the prize from innovation is likely to be lower. DVD’s, for example, were a big step forward from VHS, but, for most consumers, BluRay is currently seen as a smaller-scale improvement.
  3. Strategic Opportunities: Finding exciting new ways to better meet existing needs is likely to deliver significant benefits for your business. For example, FedEx’s operational excellence and efficiency in delivering parcels significantly raised the bar for all other mail carriers.
  4. Transformational Opportunities: Uncovering important but hidden customer needs can transform existing categories and create new ones. Sony established a way of life when it first introduced the Walkman, which is carried through to today’s MP3 players.

Where are your innovation efforts focused? Ideally, you should be spreading your efforts in driving new growth across the quadrants. Many companies, however, focus solely on ‘improvement opportunities’.

Here are five ways in which you can start to identify your customers’ unmet needs and create strategic and transformational opportunities for your business:

  1. Frustrations. What makes your customers most frustrated when they are trying to use your or similar products and services? McDonalds drive-thru service was a response to the frustrations of queuing experienced by its customers.
  2. Compromises. What compromises do your customers make in order to get the results they’re after, and how could you address them? Dyson’s blade hand-dryer, for instance, was a response to people partially drying their hands and then wiping them on their clothes to complete the process!
  3. If Only. What would transform your customers’ experience of your product, if only they had the means to make it happen? Disney elevated the traditional amusement park into a true holiday destination and experience, appealing to the whole family.
  4. Haves and Have-Nots. What can wealthy customers afford to do that those on tighter budgets can’t? How could you help these people turn a hazy dream into reality? Low-fare airlines, for instance, tapped into many people’s desire for international travel.
  5. Technology and Customer Convergence. What changes in technology are emerging, and how could you link them with your products and services to create and meet new customer needs? Egg, the on-line bank, delivered new levels of convenience for its customers.

© Stuart Cross 2010. All rights reserved.