Trends provide immense profit opportunities to those who read them and can leverage their power. Niall FitzGerald, of Unilever and Reuters fame, talked about trends being analogous to the ocean waves and companies as surfers, saying, “You can be the best surfer in the world. But if you sit with your surfboard on a flat ocean, you won’t go very far.”2 If the ocean had no waves, there would be no surfing. If the world were not dynamic, there would be no new opportunities to propel corporate growth. The companies that recognize the trends can be borne along on their energy.
As a first reaction to the idea of “trend reading,” many people assume that the task is to foretell the future. But the real task is to understand the present and the dynamics in the present tense and to use that to anticipate future successes. This approach is called “anticipatory design,” and it is used by cutting-edge, consistently innovative companies. In many cases, extrapolation to the future is straightforward after one understands the present. For instance, a well-known trend is the aging of the baby boomer generation. Once recognized in the present tense, some future implications are crystal clear, such as the increasing need for medical devices and health-care products.
As an aid to identifying and understanding trends, we use a framework of three broad areas: social, economic, and technological. The idea is that these three main categories are a dynamic window into what the market has and what it wants. In other words, it helps you see where there are gaps between what products are on the market and where there are opportunities to introduce new products. we call these product opportunity gaps.
The social factor looks at a market’s cultural, lifestyle, and political aspects. The economic factor focuses on a market’s buying power and buying focus. The technological factor summarizes advances in new uses for technology within a niche area. The social, economic, and technological (SET) factors summarize a given, often narrow, market segment or focus. They are dynamic and can be driven by or lagged by any one of the factors. The goal is for any company to constantly read these factors and look for opportunities to create new products. The power behind the factors is that they are constantly changing. The best companies read these factors in the present tense and react to changes as they occur.
2 The Wall Street Journal. “On Buy-and-Purge Strategy, Need to Keep Changing.” May 24, 2004.
Not all changes can be easily accommodated. Not all present wonderful opportunities that can be leveraged by all. Consider the catastrophe of 9/11, which adversely affected international travel but boosted local travel industries in the United states such as snowmo – biling. or consider Ford and Firestone after the Explorer tire explosions, an adverse trend for them. Ford was one of the prime auto companies to be followed by all the rest of the industry until this tragedy. The system could not react quickly enough to the tire problem, and Ford’s position in the market declined. This was only part of the problem. The economy had burst, and Ford had invested many resources in the purchase of companies under former CEO Jac Nassar. But clearly, the bad press and concern for safety in a vehicle that was supposed to be safer than the rest led to mistrust of the company and a decline in Explorer sales. The good news for the Ford system is that the impact was temporary. The system had enough robustness to slowly recover and regain market share.
But even the recognition that not all trends are helpful to all industries does not belie the argument that companies succeed by a keen understanding of their competitive marketplace. Exceptionally innovative companies are helped or hurt by good luck or bad luck, but at the same time, they provide consistent insights that provide a constant stream of revenues during good and bad economic times.
Companies such as Apple that can consistently introduce great products have learned to read those trends and are leaders of industry. Often, the products of tomorrow emerge from trends; at times, they create the trends.