Most products take anywhere from three to ten years to develop from idea to commercialization. But many companies rely on their understanding of consumers today to make decisions for these future products.
This is a risky strategy, because consumers are constantly evolving. Today’s consumers may not exist, or their needs may have shifted drastically by the time a product is ready.
Think about it in terms of a simple equation. If X equals the number of years it takes you to bring a product to market; and Y is the number of years your product is expected to be on the market, will your customers’ behavior remain the same in Z years as it is today?
By developing consumer foresight, we can minimize the uncertainties associated with customers in the future, and we can begin to think about innovation for the longer term.
Reducing Risk with Consumer Foresight
You’ve probably heard statistics like 11 out of 12 startups don’t make it and as many as 19 out of 20 product innovations fail. It’s no secret that innovation is complex and risky, yet it is also essential.
In one global innovation survey conducted by McKinsey, 84% percent of executives agreed that innovation is important for their growth — but only six percent were satisfied with innovation performance. One way to improve performance and reduce risk is to understand that customers are always changing.
One way to improve performance and reduce risk is to understand that customers are always changing.
Think about how much has changed in the last decade. We’ve seen major shifts in public opinion, including complete reversals on issues like legalizing marijuana and same sex marriage. There have also been major shifts in technology. In 2010, only two of the seven largest companies were in the tech industry. Today, all seven of the largest companies are tech companies.
Looking forward to 2030, how many of today’s emerging technologies will be widely adopted in ten years? We tend to overestimate the effect of a technology in the short run and underestimate it in the long run. (Amara’s Law explains this phenomenon.) Consumer foresight helps us understand the range of plausible futures and potential surprises so that we can develop a responsive innovation strategy.
It’s a way of understanding current and future consumers, thinking about the drivers that influence their behavior, and choosing a predictive and proactive approach.
Four Steps to Data-Driven Customer Foresight
So how do we get there? Working with our partners at Optimal Strategix Group (OSG), we combined our areas of expertise — consumer trend forecasting and product innovation, with cognitive and behavior analytics, respectively — to develop a four-step approach that combines extensive data with rigorous analysis to develop evidence-based foresight.
The first step is about understanding key consumer drivers and identifying critical uncertainties.
To do this, we identify macro factors that influence consumer behavior — things like culture, technology, and environment. We conduct statistical analysis on existing data to spot relevant consumer megatrends like radical personalization, convenience, empowerment, connection, and ethical living. And we use key opinion leader (KOL) interviews to fill in the gaps.
We want to come to the table with a robust fact base to inform our future predictions. That way, we’re not starting with an empty whiteboard, and we’re not making assumptions.
We use the info gathered in the first step, and forecasting and backcasting techniques, to create scenarios of the future based on critical uncertainties and trend variables. This helps us understand how different scenarios might impact consumers, industries, and companies.
For instance, if we’re envisioning healthcare scenarios, we might create a two-by-two matrix, like the one below, where we consider factors like resource scarcity versus abundance and incumbents holding their ground, versus startups claiming more of the market.
Consideration of these factors leads to four very different scenarios that are based on our thorough analysis from step one. By taking time to envision these, we can improve our understanding of key nuances.
3. Test & Refine
In the third step, we test the assumptions we made and take a deeper look at how future scenarios might impact customers. We want to understand where the customer is moving and where they may end up in the future.
We use qualitative and quantitative research grounded in real customer thinking to understand what’s driving their decision making. At times, we stratify customers to test how different motivators might be more critical in some scenarios than in others.
Finally, we translate foresight into strategic and tactical moves. We develop a strategy that is robust enough to respond to different futures.
We create innovation roadmaps and include sign posts, or events that might indicate a shift toward one of the potential futures. For instance, increasing healthcare costs, economic depression, or a loss of consumer trust could all point to transformation in the healthcare landscape.
The goal is to develop an innovation strategy that responds to different futures — not four different strategies for four different futures. As you move forward in your innovation journey, you can recognize sign posts and adapt accordingly.
This allows us to plan for the future, without knowing exactly what it will look like.
Case Study: Envisioning the Future of Mobility in 2030
How might this be useful? Consider mobility. We know that the way people and products move around is changing, so how can companies get ahead of the curve?
For a client in the automotive industry, we looked at future cities, how society will evolve, and how that will change mobility needs. We envisioned five city models based on different rates of economic growth and varying societal values.
For a client in the automotive industry, we envisioned five city models based on different rates of economic growth and varying societal values.
For example, City C might be focused on ethical living and social responsibility. Meanwhile, City B might have a planned economy with a lot of potential for infrastructure innovation. Each city’s growth model is different, and that gave our client a lot of insight into future opportunities, as well as a strategy to respond to the scenarios.
Case Study: Future-Proofing Healthcare
In another instance, we worked with OSG to help a medical equipment manufacturer future-proof a hospital management system. The client was looking to update their hospital management system and wanted to make sure that the equipment would be long-lasting in a changing environment.
A medical equipment manufacturer wanted to make sure their hospital management system would be long-lasting in a changing environment.
Using the four-step approach, we were able to understand how needs and opportunities will evolve. Our innovation roadmap compared different innovations based on the level of effort and time needed. This allowed the client to make a more informed decision about what innovation to invest in (and when) in order to meet customers’ needs now and in the future.
How to Take Action Now to Innovate for 2030
Here are three important questions to ask yourself about the resilience of your own strategy:
- Do you have the foresight to make informed decisions about the future? Have you adopted an evidence-based research methodology that provides you with a range of plausible futures and incorporates potential surprises?
- How are you able to apply the foresight? Do you have an innovation strategy that responds to different futures? Do you review your foresight and strategy annually?
- Have you developed your ideal vision of the future? Have you thought through the tactical moves that will nudge the consumer and industry closer to that vision?
Your answers to these questions will help you identify the gaps in your innovation strategy. Are you reacting as customers’ needs change? Are you anticipating by developing strategies proactively? Are you going even farther by leading — by disrupting and redefining the market?
What COVID-19 Has Exposed
A final note: Though the approach described in this post was developed well before COVID-19 changed all our lives, a global pandemic is nothing if not effective in laying bare many truths — including the need for a robust strategy that will flex with the inevitable ups and downs, no matter what’s causing them.
A global pandemic is nothing if not effective in laying bare many truths — including the need for a robust strategy that will flex with the inevitable ups and downs.
For companies that invested in developing data-driven customer foresight prior to COVID-19, this crisis acts as a signal to move toward one of their envisioned futures. What if Zoom had developed an innovation strategy that responds to different futures? How would the past few months have looked different for them? How about Slack?
How about your strategy? How did you respond to the three questions above about its resilience? If you’re curious about how to begin or how to strengthen your innovation strategy, we want to help. Let’s talk.
This post was adapted from the webinar, “Innovating for 2030: Four Steps to Data-Driven Customer Foresight.”