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.