How to Use White Space Analysis to Accelerate Revenue Growth
- Competing against successful competitors where they are successful is a fool's errand. Rather than challenge them in what they do well, a smarter approach is to exploit their inertia and compete differently.
- A white space analysis is part of growth strategy used by companies to shift from commoditized products to novel, innovative or distinctive solutions that fulfil unmet needs. This shift creates a high margin revenue growth stream and a defined market the company can own.
- This strategy is especially well suited to agile startups or growth companies seeking to innovate, disrupt and convert market share from successful but slow-moving incumbents.
A Business Growth Strategy to Exploit Incumbents
When companies fail to stand out as unique they limp along in commoditized markets. Their lack of distinction makes them a me-too contestant, deteriorates margins and severely limits growth.
The truth is that most companies follow successful competitors with a goal to somehow do better. That's usually a fool's errand that yields little more than the competitors table scraps.
A smarter approach is to not be better but be different.
To break through the status quo and competitor entrenchment, the better approach is to satisfy customer demand not being satisfied.
This growth strategy applies white space analysis, sometimes called white space mapping.
It's an alternative to following competitors in growing or mature markets. It's a decision to compete differently and an alternative to the zero-sum gain. And it is especially effective against competitors who do something well, but have grown too big, too comfortable and too slow to recognize or react to the unfulfilled needs of customers.
This business growth strategy is particularly well suited to agile startups or growth companies seeking to innovate, disrupt and convert market share from slow moving incumbents.
White Space Explained
The white space is where unmet and unarticulated customer needs are uncovered to create new sale opportunities and business growth.
This growth strategy searches for latent customer needs.
The exploration identifies gaps in customer needs, which may be solved with existing product improvements or new products.
Or it may identify underserved audiences, which may be pursued with market expansion or business model innovation.
The company's growth opportunity is the potential underserved markets not pursued, but which could be pursued with company or product adaptation or the creation of new products or solutions.
White space analysis is all about identifying unfilled customer needs that your company can satisfy to create a significant business growth opportunity.
When This Growth Strategy is Most Needed
In most industries, the rise of consumer technologies, such as social media and mobility, have made customers more connected, informed, empowered and demanding. This has changed the balance of power and customer behaviors.
White space analysis is well suited for industries incurring accelerated change. This growth strategy is a response for markets incurring shifting customer behaviors, new technologies and new non-traditional competitors. These types of markets are incurring a mandate for innovation, differentiation and unique value propositions.
If you are incurring market shifts, but the bulk of your revenues come from legacy customers and products, you are highly susceptible to competitor replacement and becoming irrelevant. A white space analysis can shift your strategy from survive to thrive.
Leverage a Repeatable Framework
Johnny Grow practitioners have been helping clients perform white space analysis for more than two decades. For example, we perform Design Thinking and ideation workshops to surface the best opportunities. We measure customer validation to ensure the highest priority concepts. We build prototypes to make concepts tangible and testable. Most importantly, we apply a repeatable framework to bring specificity, measurement, visibility and predictability to the process.
Below is a summary of our framework.
Solve for the Customer
This market opportunity is defined by your customers, not your company.
The biggest and most profitable opportunities will be born from satisfying your customers biggest problems. So, starting with Customer Intelligence is the fastest way to apply the right data to surface the best opportunities.
Many companies struggle with organizing customer intelligence. My experience has been they almost always have the customer data. However, many times they don't know it because the data resides in many places.
Most companies will want to consolidate their customer data into the Customer Relationship Management (CRM) system, which is the customer system of record. They can then parse the data into customer segments, customer insights, an Ideal Customer Profile and a 360-degree customer view. This up front investment will accelerate white space analysis and deliver many other downstream business benefits.
The above schema illustrates how customer intelligence can be centrally managed and categorized in the CRM system. This makes the data available for filtering and extraction for marketing, sales, innovation and other purposes.
White Space Mapping
The most profitable opportunities will be found at the intersection of customer problems, market opportunities and competitor solutions.
The prior step will identify customer problems that matter. Those unmet customer problems are crafted into use cases or agile user stories, prioritized, and extrapolated across precisely defined markets to measure the size of the problem.
This step will perform white space mapping to identify solutions to those problems. The mapping defines the company's market opportunity and forecasts the revenue potential from satisfying that demand.
At the highest level, the mapping delineates between internally and externally focused solutions.
Internally focused mapping looks inward to align your company's core competencies with proposed solutions that solve customer problems. It's important to also identify your company's limitations or barriers that would impede any new solutions. Failing to be candid about your company's constraints at this stage will only deliver disappointing results at a later stage.
Internal mapping shows the difference between what products or services your customer purchases and potential products and services that accommodate the customers unmet needs.
Internally focused mapping most often surfaces new or improved products that create upsell, cross-sell and client expansion opportunities. And because these new solutions are mostly sold to existing customers the risk and cost of sale are low while margins and profits are high. Increasing customer share also keeps your customers from looking to competitors to solve their problems.
Some companies perform this analysis on most or all key accounts as part of their Strategic Account Management program.
Externally focused mapping looks outward to identify the gap in a market. It may also surface the unserved or underserved markets that share a problem. Once market gaps are identified, the mapping can measure the unmet need and forecast the revenue impact from solving the problem.
Many times, the markets considered are ancillary to the company's existing markets. Sometimes they are outside existing boundaries. A market may be a niche or even a segment of a target audience. The upside is that even small or tightly defined market opportunities create significant market disruption and revenue growth opportunities.
Externally focused mapping generally results in existing or new products to new markets. It's a business growth strategy most often used to acquire net new customers.
There are other mapping techniques. Many strategy exercises simply look at new products and new markets. That's a start but unlikely to surface the most significant innovation opportunities. Below are a few of the many techniques we've created over the years that yield truly innovate opportunities.
- Create new products by evolving or expanding existing products. Sometimes changing the design, form or use case of an existing product can solve unmet needs or find new audiences. Consider how Apple created an iPod, that evolved into an iPhone, that evolved into a tablet.
- Find new use cases for your products. One way to do this is to survey or ask customers how they use your products. When doing this, we always learn of unintended uses. Even better, ask customers how they resolve shortcomings with your products. When products fall short, customers come up with very creative workarounds to compensate. These workarounds may identify an opportunity you didn't know existed or define your next product iteration.
- Another technique we have found to be very successful is to identify two outside industries that are relatable to your own and incurring some type of market disruption. The industries need not be related to each other. Then using Venn diagrams show the common big ideas among those industries. Finally, assess whether their innovation could be used to solve your customers unmet goals.
Each of these techniques should be assessed for its ability to find differentiation for your company and disruption to incumbent companies.
New market opportunities will have some level of competition, either direct or more likely on the fringes. A deep dive competitor analysis is needed to understand each primary competitor, their strengths and vulnerabilities.
A structured analysis is required to objectively measure and compare your company to each competitor. We typically build a scored matrix that considers the customers buy criteria for the proposed solution and vendor comparison points.
Some of the common comparison criteria include brand strength, brand values, market share position, market growth, unique value proposition, products or services mix, technology, price, value, customer satisfaction and customer loyalty.
The prior three steps will identify the business model or product that delivers the biggest revenue upside. Now that innovation must be realized and directed to a target audience.
At a high level, our process is to assemble a team using a Center of Excellence model. We apply customer intelligence to bring measurability to problems that matter. We then use Design Thinking to ideate innovative solutions. We can then apply a well-defined, fast paced, high-velocity prototyping process to evolve novel ideas into unique solutions. We can measure the results on a customer adoption acceptance scale. If results fall short (of enthusiastic customer adoption), we iterate again – until we achieve a breakthrough.
Once you have the solution needed to satisfy unmet customer demand, the final step is Go-to-Market execution. That normally begins with a tightly defined target audience that becomes your beachhead and is followed with a land and expand strategy.