BOOK REVIEW: HIDDEN IN PLAIN SIGHT: Erich Joachimsthaler

In the midst of extensive or frequent civil works, fluorescent high-visibility clothing contributes to the invisibility of the individual, and can serve as a superb disguise. Similarly, in the midst of extensive research and in-depth analyses, basic insights can go unnoticed.

Erich Joachimsthaler has plenty of examples in his book Hidden in Plain Sight to drive home the point that attention to stuff that is not so obvious to competition can lead to brilliant success such as Sony’s growth through innovative products (the WalkmanT, for one) that met unexpressed consumer needs. Conversely, an inability to spot this can bring even the leaders down, illustrated once again by Sony’s loss of leadership in mobile personal entertainment to Apple’s iPod.

The challenge for companies is to uncover the hidden opportunities by looking into their business from the outside rather than the usual inside-outwards view, and by accurately defining the ecosystem of demand. For most management professionals, this will be harder than it seems.

The exercise begins with the question, “Why didn’t we think of that?” This is intended to remind the reader of how the obvious escapes attention as we sink deeper and deeper into complex analysis and in developing ever more complicated scenarios. And Joachimsthaler sets out a framework that he believes can help larger companies to innovate in a structured way.

Of course, the reader may feel differently, and quote George Bernard Shaw who divided the world into two kinds of people, the reasonable and the unreasonable, and credited innovation to the latter. Or one may agree with Henry Ford who, apparently, felt that customers did not really know what they wanted. He is reported to have quipped: “If I had asked my customers what they wanted, they would have said, ‘A faster horse'”

Yes, at the cutting edge, innovation may seem to be more about the innovator’s creative desire to do something different, and less about “meeting customer needs”. Yet, it is the unmet and, more importantly, unexpressed customer needs, that offer the greatest source of competitive advantage.

This is why innovation seems to spring more from small companies, or companies that are started up around a specific idea that is unique or new. In such a small company or a start-up, typically the founder/innovator/inventor is drawn from the same pool as the target customer. Therefore, while they may be addressing a need they feel acutely, the innovators are unconsciously plugged into their customer’s unmet/unexpressed needs. There are seldom any silos; the whole team is generally focussed on the one problem to be solved.

However, as companies grow larger, functional specialisation emerges — division of labour based on skill-set is deemed to be a more efficient way of doing things. The design folk design based on “trends”, the marketing folk market as they know best, and the manufacturing folk produce to specification and the “demand” generated.

With this speciality of skills taking over, there is a growing disconnect between their efforts to dig for insight and the gold that is “hidden in plain sight”. While data is available in abundance, real knowledge is scarce, and insight just gets buried in well-structured processes and hand-offs between functional silos.

This trend has only accelerated in the past 15-20 years with pervasive information technology that enables the mundane operational process to the most strategic. Never before have management teams been so focussed on information and analyses. As businesses grow, data warehousing and data mining are defined as the competitive cutting edge, pushed along by interested parties (including IT solution providers, but that is another book!).

However, in reality, excessive information is increasingly passed off as knowledge. An inward focus on the management team”s own objectives is often disguised as insight gained on the customer or the market. Functional specialists analyse the market, the latent needs and the gaps in their own way, and if the company is lucky to have some generalists, some of those dots get joined to form a more complete picture.

It is in reminding management of this reality that Joachimsthaler’s book provides a tremendous service. It presents a well thought out model named, curiously enough, DIG – short for Demand-First Innovation and Growth. The three elements laid out sequentially begin with a framework for defining the demand landscape, identifying the opportunity space within it, and then creating a strategic blueprint for action.

Joachimsthaler’s process to define the demand landscape requires managers to put themselves in the customer’ shoes – a process demonstrated with examples from Proctor and Gamble and Pepsi”s Frito Lay. Using the customer’s goals, actions, priorities (there’s the “GAP”), needs and frustrations, demand clusters can be developed and filled out with additional research. The strategic fit between these demand clusters and the brand can then feed into the next steps of identifying the opportunity space.

The filters, or lenses, as the author calls them, are the “eye of the customer”, the “eye of the market”; and the “eye of the industry”. At every step, assumptions and presumptions need to be challenged. Using these lenses, the sweet spot or spots and the growth platforms can be identified, and extrapolated into the strategy. On the downside, the book is clearly about a framework, which may have been best detailed in an article, rather than being stretched over a book.

The author does stress at one point that it is not about “brainstorming”, but about structured thinking. However, he seems to do this in a tone that suggests brainstorming as something vaguely distasteful due to the lack of directional structure.

While examples from the companies studied keep the text alive, yet in places one struggles to correlate the examples with the framework. Indeed, there may well be too much structure to this book, and not enough examples of how inter-disciplinary thinking and functioning can actually produce sustained innovation.

Understanding the model itself can be a fairly involved process. The best way to tackle it may be to approach it as a project, and use the DIG framework as a how-to guide for a real problem. If you are a structured, methodical, sequential kind of manager and possibly work in a large company, the book could provide tools to put that thinking to work for innovation in a team. On the other hand, if you are more of a “people person”, you may want to leave this book alone. [For more, here’s the book on Amazon.]

The idea that the “younger generation” is from another planet is age-old, and no different from the notion that “Men are from Mars, women are from Venus.”

However, there is certainly a fundamental cultural shift that is taking place at work that is a product of the social, political and economic changes of the last 20 years or so.

In India’s case, I call this Generation-C (C for Choice). The 20+ year olds or younger who are entering the workforce in India are ones who were born after the introduction of color television in India (1982), who have grown up with the explosion of media options, who have always seen multiple models of colorful cars running around on the roads. They’ve savored the fruits of liberalization during their childhood. Similar shifts were happening in China, having started a couple of years earlier — and Eastern Europe — and South Africa — and, of course, the US and Western Europe.

There is absolutely no doubt that these changes mean something to the attitude that this generation brings through the door, when they walk into work. Expectations of the young are always high; this generation’s seem even steeper.

Secondly – it sounds trite – technology has definitely had a significant impact in how truly fragmented we can be as an organization and yet be functional. Rigid attendance rules need apply no longer. Telecommuting is a reality, if not the norm.

However, however…these changes couldn’t happen without the previous generation@work loosening their shirt-collars and work-habits somewhat. That generation – the baby boomers and Gen-X in the case of the US, other labels in other countries – have challenged earlier norms, started the changes rolling, and Gen-Y is building on them.

“Plus c’est la meme chose, plus ça change.”

Two separate incidents recently reinforced to me the need to know and understand the customer intimately, and to have the ability to respond to that knowledge with the appropriate product or service.

One was the experience an acquaintance had with the tea-vendor at a Mumbai railway station, who had segmented his tea-concoctions by the train (and its passengers), customizing to their regional tastes.

The second was a music concert sponsored by a well-known motorbike brand. The audience was largely off-target and the event was clearly not successful for the bike brand, though the audience and the band itself had a great time. As the creator of the department store and the American inventor of the price ticket, John Wanamaker’s once said: “I know half of my advertising money is wasted, I just don’t know which half.”

It’s funny, how gut instincts and home-grown wisdom may quote often seem more successful than planning through facts and figures.

This is partly a function of India’s complexity as a country and a market.

Traditional marketing discipline calls for categorizing customers into segments that are similar within themselves, and distinct from each other. It assumes that there are large or at least measurable numbers of distinct groups of customers Within each group, the customers are assumed to behave and buy in similar ways, which are quite distinct from the other groups in the market.

The reality of life, of course, is that in any market, segments are almost always an artificial construct. In fact, it is becoming more difficult to find large segments that are cleanly demarcated – what’s more, in markets worldwide, customer segments have been blurring into each other.

The Indian market takes this complexity to another plane, and savvy marketers know this from personal experience. India as a market is anything but continuous or homogenous. This diversity is brought out by a media-group’s advertisements series on its radio-channel that make the point about India being a country with 145 festivals in a calendar of 365 days. Or as I’ve often heard Kishore Biyani and others say, in India the mix of language, food and culture changes every 80-100 kilometers.

Let’s face it, most mass products that are marketed in the same way across the country, are handled that way due to manufacturing or distribution economics. Some may even be handled uniformly due to the lack of marketing imagination. It is certainly not due to customers across the country being identical.

How well we can understand the dimensions and the differences can mean the difference between success or even survival and abject failure.

Here is an article that describes the benefits and pitfalls of consumer analyses in India. (Slicing The Market)

[Note: With a 6 MB filesize , the download may take a while if you have a slow connection!]

In my view, India and China are two countries that can change companies.

Most analyses of “consumer India” are led by affluent analysts primarily based in the biggest cities. These incomplete analyses are followed avidly also by international companies to draw up their India strategy. Most do not even scratch the surface of the diversity of the country, let alone customize the approach.

There are reasonably large and distinct consumer segments in India–many are alien to most companies based in the developed markets, because they have been extinct there for several decades.

The companies that seem to be succeeding are the ones who don’t come in expecting a billion-plus market (or even a “percentage” of that) hungering for their brand/product just as it is sold in the US or Europe. They are the ones who take the time, and show the patience, to understand the specifics that their target segment in India is looking for.

They are the ones who are prepared to to the extra mile in tailoring their offering to India. Some may even launch new products in India and then take them elsewhere.

If you’re prepared to discard the filter of the history of developed markets when looking at India, then opportunities abound.

Fresh out of a meeting with a large international retailer this morning, I would like to share something that I mentioned to them: that the Indian market is not as large as it seemed to most people 2-3-5 years ago (whatever base figures they may be using to calculate potential market size); neither is it as small as it seems today to brands that entered the market 10-15 years ago.

There are significantly different dynamics at play, which make the Indian market totally different from the growth curve you might have been accustomed to in the history of the US, Europe, or even more recently, China.

However, some fundamental realities remain common on the consumer side:

• Given choices, consumers will choose

• Given better environments, consumers generally will migrate to them

• Given lower prices for comparable products, consumers will compare, and choose not to spend beyond what is necessary

• A better merchandise mix will win out over a narrow / poor mix

The realities of real-estate costs are the same for everyone–whether the retailer is domestic or international. Domestic retailers may have an advantage in being able to move quicker on closing deals but foreign retailers may have deeper pockets to play with.

Politics remain the same as well–China opened its markets to investment by foreign retailers after allowing its domestic retailers to grow in scale; Eastern European countries may raise the occasional stink about the lack of competition when two foreign retailers decide to swap assets; even in their home markets, Wal-Mart and Tesco face determined opposition. In India we’re seeing just another version being played out.

All this, while everyone is mostly fighting for the top-tier consumer. There is a wider market out there, my friends, a very different one that needs to be understood well, together with its implications for your business model.