Managers value predictability; it gives them a sense of control over external events. In my experience, results that do not match initial expectations are not normally welcomed, and actions are quickly put in place to restore performance to expected levels.

Even results that are way above original forecasts are treated with suspicion and scepticism. Once, when I was leading a trial of a new retail format that was delivering 25% sales growth, several executives bent over backwards to find reasons why the results weren’t credible and should be ignored!

Unusual events are often, however, the catalyst for innovation. They represent an opportunity that should be exploited, not a random variation that should be quashed.

Spotting such opportunities requires an open, experimental organisation that is dedicated to delivering new growth, rather than simply protecting the status quo. Here are five sources of unexpected opportunities – which of them could help accelerate growth for your business?

1. Unforeseen successes. No7, the skincare brand of UK drugstore retailer, Boots the Chemists, enjoyed a dramatic sales increases when one of the products in the range, Protect and Perfect, was shown on a TV documentary to actually reduce wrinkles. Boots massively ramped up production to meet the queues forming outside its stores, and has since leveraged this success with further brand and range developments to drive further growth.
2. Unexpected failures. Despite favourable market research, sales of Coke declined when Coca-Cola introduced ‘New Coke’ in 1985. The company, however, re-introduced the old recipe, telling customers it had listened to them, re-emphasising the qualities of the original product and delivering significant sales uplifts
3. Small victories within bigger defeats. When Lou Gerstener joined IBM in the mid-1990s, he led a company that was making record corporate losses. Within the core computer hardware business, however, he realised that the sales’ technical support teams were highly valued by IBM’s customers. Gerstener used his consulting background to turn this cost centre into a new business unit, and by 2005 IBM Global Services delivered 35% of the group’s profits.
4. Unexpected side-effects.3M, perhaps the avatar innovative company, only became successful when it moved into abrasives in the early twentieth century. This move was driven by a desperate desire to do something with the minerals and grit the company had on its hands from its failed mining business (3M’s name comes from its original title – Minnesota Mining and Minerals Company).
5. Unforeseen external events. Economic shocks, technology breakthroughs, political changes and shifts in customer tastes can all dramatically affect product and service markets. Instead of bemoaning your fate, your focus should be in identifying what opportunity these changes create. Waitrose, the high-end UK grocer, for example, responded to the 2008 economic crisis by creating and launching its lower-priced Waitrose Essentials range which accounted for 15% of its total sales within a year, attracted new customers to its stores, and increased the number of items purchased by shoppers on each visit.

© Stuart Cross 2010. All rights reserved.

If 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.

Most companies build their strategy by focussing on the latest market changes and dynamics and extrapolating their impact into the future.

But this approach has a big problem.

The pace and scale of change in the business and financial environment continues to accelerate and is increasingly non-linear. Technological advances and the connectedness of the global economy mean that new developments can quickly overwhelm the less agile competitors - just ask HMV in music retailing or Northern Rock in banking!

Some companies take a different approach. Amazon’s leadership team, for example, have agreed the key themes that will not change in the midst of all the noise and turmoil of today’s business environment. For Amazon’s consumer business, they have identified three areas: range selection, low prices and fast delivery.

Perhaps this doesn’t sound like rocket science, but the power of the Amazon approach is the focus and relentlessness with which they can pursue their agreed themes.

1. It creates organisation-wide focus for innovation. Amazon’s three themes are simple to understand for all in the organisation, and enables clarity of focus for radical innovation.
2. It enables true leadership and avoids defensiveness. The Amazon team is prepared to take ongoing leadership decisions within these three areas. In this way they are continuing to stay ahead of their competitors and maintain a leadership position.

So what’s the catch? Why don’t all companies follow this approach? There are three major consequences of this approach that executives and organisations need to come to terms with:

1. Accept cannibalisation. Constant innovation on these themes is likely to damage current business in some form or other.
2. Accept the chaos. Innovation is a messy, disordered process. Ongoing prototyping, testing, improvement and implementation activities require an entrepreneurial mindset across the business. Not everything will work, especially to start with, and most projects require several iterations to get it right.
3. Be right. Perhaps the most important issue for Amazon is make sure that they have picked the right themes to focus on. Only time will tell if the Amazon team are right, but, critically, they have made a clear choice and are willing to live (or die) by it.

You can begin today to identify and discuss with your team the key themes that will not change for your business and start to back-up your ideas with research and analysis. The next stage is to develop possible new business improvements around these themes.

If the consequences of these innovations appear daunting you’re probably on the right track!

© Stuart Cross 2010. All rights reserved.

The skill is to make it into something better or different. As TS Elliot once wrote:

“Immature poets imitate; mature poets steal; bad poets deface what they take, and good poets make it into something better, or at least something different.”

There is nothing new under the sun. Even Sir Isaac Newton commented that his groundbreaking laws of motion and gravity could only have happened because he had been “standing on the shoulders of giants.”

Innovation is no different. It generally involves taking something that already exists, changing it in some way, and creating something new.

Here are 7 ways in which you can steal, improve and innovate:

1. Find new applications for existing technologies. Sir James Dyson’s bag-less vacuum cleaner technology was inspired by the way a local sawmill used a giant cyclone to lift and remove sawdust from the air.
2. Combine disparate technologies. Apple’s iPod and iTunes, brought together the digital downloading technology pioneered by Napster, Creative’s MP3 player technology, and Apple’s existing software capabilities, to create an integrated, intuitive music system.
3. Take existing innovations into new markets. Ryanair transformed itself from a struggling, full-service carrier into Europe’s leading airline by applying Southwest Airline’s business model.
4. Dramatically improve the performance of existing products and services. Gillette has created a stranglehold on the razor market as a result of its ongoing improvements to the “simple” technology of a blade attached to a handle.
5. Radically reduce the cost and accessibility of existing products, services and technologies. George at Asda has become the UK’s #1 clothing brand based on the grocer’s ability to exploit its low-cost retail space, operating model and supply chain and offer its customers a significant price discount on everyday fashion.
6. Make existing products and technologies far easier to use. The detergent brand, Ariel, created a lead in its category by replacing washing powder with tablets, which are far easier for customers to handle.
7. Translate successful business models from one industry to another. UK train company, Chiltern Railways, has adopted the low-fare airline model to offer its passengers a low-price, low-service (there are no first class carriages, for instance) rail service between London and the Midlands.

Which of these approaches could you adopt in your business to dramatically accelerate growth?

© Stuart Cross 2010. All rights reserved.