"There's an old Wayne Gretzky quote that I love," Steve Jobs said in 2007. "I skate to where the puck is going to be, not where it has been.' And we've always tried to do that at Apple. Since the very very beginning. And we always will."
Figuring out where that puck is headed -- in other words, what customers will want in the future -- may seem like wishful thinking to some manufacturers. After all, it can be difficult enough to determine what current demands are. But Rick Kash says understanding what your customers want today is not enough. He argues that the pursuit of latent and emerging demand -- spotting trends early and predicting where demand will go -- represents a new business model that is essential to success in a global economy with shorter product cycles fueled by instantaneous information.
Kash, the chairman and founder of the Cambridge Group and co-author of "How Companies Win" with Nielsen. CEO David Calhoun, says the relationship between supply and demand has fundamentally changed. Long-term, chronic oversupply is the new norm, says Kash, and may be exacerbated as China and India continue to build manufacturing capacity. An excess of supply means flat or even declining demand where companies lack pricing leverage in many cases. The way to overcome that, he believes, is to go beyond simply understanding current customer needs.
"Customer need is a necessary but wholly insufficient level of consumer or customer understanding in order to compete," says Kash. "What one needs is to understand not just current demand but latent and emerging demand. If you wait to ask your customer what they need, you are already too late because they are telling your competitor the same thing they told you. You're at parity."
| Rick Kash:|
"Customer need is a necessary but wholly insufficient level of consumer or customer understanding in order to compete."
As an example, Kash cites work the Cambridge Group did for Anheuser-Busch. Cambridge's analysis of the demand for beer included a look at related product categories. There, the firm identified the fast rise of sweeter alcohol products such as flavored vodka. It then developed a demand profit pool that segmented beer drinkers, such as those who enjoy craft beers. The analysis also examined "need states," which means that consumers will purchase different products in different circumstances. The research showed that there was a latent demand by people who drank beer outdoors for a sweeter beer.
Anheuser-Busch had developed a light beer flavored with lime. Extensive testing ensued and, convinced that this beer met the latent demand for a sweeter beer, Bud Light Lime was launched in May 2008. It was Anheuser-Busch's most successful product launch in years, and has earned the company $250 million in profit to date.
Innovation Made Difficult
Kash says companies make innovation "too damn hard" because they treat it as a creative exercise. They create a supply of a new or revised product and seek demand in the market, resulting in a high rate of failure. Kash says companies should instead see innovation as an exercise in finding unsatisfied profitable demand. Once they have identified it, they can then work to fulfill the demand.
That happened when one of Kash's partners worked with Mastercard. At a meeting of their top executives, she asked them, "Who are your competitors?" They listed several major credit card companies. She replied, "Wrong. Your biggest competitor is cash and checks." In fact, credit cards only accounted at the time for 9% of total purchases by consumers. "Within three days, the debit card was conceived," Kash says.
| How to Predict Where Demand Will Emerge Next|
In "How Companies Win," Rick Kash and David Calhoun argue that key business advantage comes from understanding the future of demand while it is still forming. Ways that companies can do this include:
Social media is an important tool for understanding and fulfilling demand, Kash contends. "The real implication of social media is that it is going to change how demand is formed individually and then aggregated across huge groups of people," he says. Social media provides companies with insights into rapidly changing customer attitudes and needs. That helps them understand demand before their competitors and that, Kash contends, is how companies will win in the future.