Spotting Opportunities for New Products and Services

by Robert Sherlock and Chris Broxon
Reprinted from ACG Network Newsletter, October 2004

Does your company (or a portfolio company) need to develop new products or services to generate growth, but you aren’t sure how to go about doing it? We recommend a couple of proven methods. Market Back starts with taking a comprehensive look at target customers or groups of customers, probing for problems that they need solved, or other ways that they can be made better off. This is followed by organizing a creative effort to come up with ways that your company can make those customers’ businesses or daily lives better.

Innovation Forward begins with invention or creative ideas, followed by a search for applications where such an idea can be useful to various customers.

Both approaches have merit, and can yield growth.

Market Back

Going after new customers, or coming out with radically new products, can produce big successes. However, offering improved products and services to your current types of customers is the first place to look for growth.

Growth is likely to follow when you come up with improvements that customers recognize will add value for them. Customers can sometimes tell you – with little prompting – what some of those improvements are. More often, you need to set up the right kinds of discussions with customers and prospects, and ask the right questions, to gain insights into what they need and want.

Whether your customers are businesses or consumers, those insights can emerge from casual conversations, individual interviews, or focus group discussions on the category of products or services you’re interested in. In all cases, lead your customers or prospects through an open ended discussion in which:

  • They describe how they use the product, noting a good experience and an unsatisfactory experience with the product
  • You ask what they wish could be different in their experience with buying and using the product
  • You ask what challenges they’re facing in their business/life
  • You solicit their advice about how to improve.

Next, compile the findings and prioritize the improvement opportunities in terms of how significant the growth opportunity might be if you can make the improvement. Gather a group of people – including individuals within the company who are involved in product/service development, engineering, marketing or sales; other company employees who aren’t normally involved; and some creative individuals from outside the company. Meet in an undistracted offsite setting, and talk about different ways your company might address the needs and improvement opportunities raised by the customers. Engage a facilitator skilled at eliciting ideas and helping the group capture and shape them.

Later, have a team charged with developing new products and services go through the ideas from the creative session and select one or more ideas that seem promising in terms of customer appeal and filling a gap in the marketplace. These can proceed into the first stage of development and feasibility testing. It is helpful to outline for each idea the type of customer it’s meant to appeal to; what problem it solves for the customer; and why it might be a superior value for the customer compared to competitive products or alternatives.

Teamwork adds to New Product Creation

An old line, middle market manufacturing company used this method to innovate. Penco Products, Inc., a manufacturer of metal shelving and lockers, held probing conversations with its customers and found areas of dissatisfaction with conventional lockers. Schools, health clubs, and employers all mentioned hassles, maintenance expenses, and theft – to a degree that surprised Penco.

The company subsequently partnered with an access control company to develop a computer-controlled locker system that offers customers information management, productivity, and control. Inquiries and orders for Penco’s SmartLocker� system have significantly exceeded expectations, at margins well above the company’s norm.

Innovation Forward

Innovation need not involve new technology right out of an R&D lab. Sometimes all the necessary technology and production know-how is already in the company’s hands, waiting for the insight that permits packaging up an appealing solution to customer needs and wants.

Resurgence of Monochrome TV

Not long ago, when the flat screen televisions we buy today were just at the prototype stage, the television market was dominated by color TVs using cathode ray tube technology. Color televisions had taken over all but a small fraction of the market from the monochrome (black & white) TVs that had preceded them. Monochrome was mostly ignored, carried by some retailers as a low-margin, bottom-of-the-line item.

Then marketers at one consumer electronics manufacturer started looking for growth in an unlikely place – in monochrome TV. Their creative insight was to flip history on its head – to ask: “What if color TV had come along first, and monochrome came along later as the new technology? For certain customers, or certain applications, could monochrome beat out color?”

Monochrome did have potential advantages over color – including lighter weight, lower power consumption, higher resolution, and lower cost. It turned out that there were applications where monochrome’s advantages were quite marketable. Once packaged into niche products – such as a small AC/DC portable radio/TV for use on camping and fishing trips – and supported with marketing communications, the company generated millions in sales at attractive margins.

What capabilities, know-how, or technology are sitting underutilized at your company, just waiting to be seen in a new light?

You can uncover some surprising possibilities! Putting together a dynamic and diverse team, unencumbered by traditional thinking, to re-think your capabilities and product offerings can lead to growth. Have some freeform, fanciful discussions about what else your strengths and capabilities could be used for. As with the market-back session, it’s beneficial to engage a facilitator skilled at eliciting ideas and helping the group capture and shape them.

Later, get a team charged with developing new products and services to go through the ideas from the creative session and select one or more ideas that seem promising. These can proceed into the first stage of development, financial screening, and feasibility testing.


While clear communication of the benefits of the new products and crisp launch execution are also crucial to success, growth often begins with an innovative idea that meets a need no one else was paying attention to. Those innovative ideas tend to come to companies that make a point of periodically finding those needs and improvement opportunities, and acting on them.

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