How Do Innovators Spot Market Opportunities?

Executives need the ability to quickly spot both new opportunities and hidden risks. Asking the right questions can broaden perspective and shake up existing assumptions.

MIT Sloan Management Review Reading Time: 2 min 

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Elon Musk, founder of Tesla Motors, SpaceX and SolarCity, has a noted ability to spot unmet market needs.

Image of Musk courtesy of Flickr user Maurizio Pesce.

How well do you understand the implications of broad market trends and less visible undercurrents for your business? How much have you thought about how those trends impact your own strategic choices?

Those are questions posed by Paul J.H. Schoemaker (Wharton School) and Steven Krupp (DSI) in their article “The Power of Asking Pivotal Questions,” in the Winter 2015 issue of MIT Sloan Management Review . The article builds on the authors’ book Winning the Long Game: How Strategic Leaders Shape the Future (PublicAffairs, 2014).

The authors provide three tips for companies whose goal is to stay at the front of their industries:

1. Learn from startups.

Innovators pay attention to what new companies are doing — and why. They ask: What do those companies see that I don’t? Schoemaker and Krupp recommend examining startups’ moves to detect market shifts and emerging opportunities from the outside in.

2. Go to conferences outside your function or industry.

“In its ‘Connect + Develop’ innovation program, Procter & Gamble Co. reaches out to companies outside the consumer products industry to share lessons and explore joint challenges,” write Schoemaker and Krupp. “Follow events in other regions and sectors, even if they seem unrelated to your business at first.”

3. Leverage current networks and join new ones.

How might you engage your existing networks more systematically to stay on top of new developments? Schoemaker and Krupp suggest joining interest groups in adjacent businesses or areas to expand your worldview and examine questions you don’t typically consider.

“The best entrepreneurs excel at peeking around the corner and seeing the future sooner,” the authors write. “We’ve found that leaders can learn to anticipate better by simply being more curious, looking for superior information, conducting smarter analyses and developing broader touch points with those in the know.”

Schoemaker and Krupp highlight the entrepreneur Elon Musk of Tesla Motors, SpaceX and SolarCity as a model for his ability to spot unmet market needs.

Musk has said that his forward-thinking style, exemplified in his vision of commercializing electric vehicles for the mass market, comes from “just trying really hard — the first order of business is to try. You must try until your brain hurts.

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Comments (2)
Alessandro Daliana
These three approaches assume others are doing what your company should be doing and then doing it yourself. Although this may be valid in many cases, it will not be in all for a few very simple reasons:

1. All businesses exist because they own and/or control an asset that is used in the products and services they sell their clients. The clients acquire these products and services because they derive a competitive advantage from using them to achieve a specific task.

By emulating a competitor, actual or potential, your company may not be maximizing its return on its existing asset-base but in reality investing a completely different business, a new business. This action may penalize existing shareholders - and stakeholders - who have a vested interested in the existing asset-base.

2. Innovation is often regarded as "disruptive" because it does break with the company's existing asset-base. However, more often than not, what is viewed as an innovation is in reality only an incremental improvement on a part of the value creating process making it more important for the company to adopt the new process than to throw the baby out with the bath water. It can significantly improve the return on the existing asset-base.

3. Most of the innovation I have witnessed responds to a very simple question: What market uncertainty can I address with amy existing asset-base? I like to use the example of food production for this: farms grow food we consume to survive but organic farmers address their client's uncertainty about the quality of the food reaching their table. The asset-base is the same but the processes are slightly different because the uncertainty is not the same.
Andrea Learned
One thing that is missing in this piece - using social media (and especially Twitter - in my opinion) for monitoring and spotting conversations, people and organizations doing interesting work that may apply (or inspire).  Both the #2 and #3 points are enhanced and amplified if a leader is engaging authentically (not having his/her communications team manage) on social media.  You NEVER know what sort of insights and inspiration might bubble up when you are following key hashtags or key influencers (and YOU decide what/who those are, depending on the innovation you are mulling/developing). I'd love to see more coverage here and elsewhere of how business leaders are really engaging/using social media as key to their business development.