Predicting or trying to understand what future products and services will be is the holy grail of any business. Knowing what’s coming next would give someone or a business a tremendous advantage for that marketplace. The good news is that you don’t have to be gifted or have a crystal ball to predict the future. So, what do you do? Collect dots. When asked by industry pundits how Steve Jobs had this uncanny understanding or instinct of what consumers needed next, he stated, “You can’t connect the dots looking forward; you can only connect them looking backwards. So, you have to trust that the dots will somehow connect in your future.” So, if you really want to understand where an industry or even a product is going, you have to collect the “dots” of information, that when collectively combined, give you a sense of where things are going.
Let me give you an example. In 2010, I met a serial entrepreneur who was doing research on several industries that he felt were going to go through some dynamic change. In particular, he was fascinated by the $26B dog food industry’s compound annual revenue growth of roughly 5% each year over 50 years, even through multiple recessions. He noticed the rise of pet kennels and hotels. Then he noticed how many more people were buying dogs. He studied these new dog owners and saw they were almost treating this dog like their “first child” in very human terms. He noticed these younger dog owners were into health, travel and eating well. Specifically, eating natural or organic foods. By organizing the “dots” he predicted the organic dog food “niche” would grow rapidly in the next ten years. It did, from humble beginnings of less than $90 million in 2010 to more than $8 billion in 2020. His organic dog food startup did very well.
So, if you really want to understand where a potential industry might go, start collecting dots. Collect past dots by looking at historical sales or product development. Then start examining current dots by looking at people, trends, marketplaces, etc. Here are some insights on what dots to collect and how to collect them.
Understand your current and potential customers. The good news about studying customers that already exist is there is a lot of data available about their demographics, psychographics and the trends they are driving. Once you have done your research and analysis, ask yourself these questions: What group of customers are missing from this large segment or the industry? Where are they now? Why are they not in this marketplace? What would they need to be customers? At some point, you will identify a small segment of customers, possibly influencers, who can be added to this marketplace with a modified, new or disruptive product or service.
Understand your industry. If you want to build a company in a certain industry, then really know that industry. Get all the analysts’ reports. Research the trends that are in the industry and those that might shift it. Study the top three companies that are the current leaders in the industry. Then examine the last three companies that have received a series A venture capital round and have entered the industry. What are they doing that is different?
Pay attention to trends. It’s funny how you can meet entrepreneurs and small business owners who are currently successful but when you ask them about potential trends that might disrupt their industry, they look at you with confusion in their eyes. This happens most often when their business is going really well and their focus is on maintaining the growth of their current products or services; they don’t even see the emerging trends or hear their customers “talking” about things that will absolutely disrupt their company. Think about companies that did not listen or pay attention to trends and shifts in their industries like Blockbuster, Kodak, Kmart, Pier One, Soup Plantation, Brooks Brothers, GNC, and so on.
Visit your competition. Your competitors can provide a plethora of information. Sign up for their newsletter, set up a Google Alerts for their brand and all key products, visit them if they have a physical presence. The goal is not to mimic them. The goal is to see what they are doing, listen to what they say they will be doing and then talking to their customers. What you’re looking for is a gap which is forming that may provide an opening for you to step in with a new product or service for their existing customer base.
Connect the dots. You read the example I gave earlier in the article about how anyone could have been connecting dots on purpose to see where the dog food industry might go. What industry do you care about? Analyze it by going back ten to fifteen years and laying out the product or service evolution. Overlay trends and customer shifts. Based on the collective dots, what are the three possible new products or services that are logically next? If you care about one of them, examine the opportunity deeper as it might be a potential company.