I am puzzled by businesses who use their innovation investments to head straight to the moonshot new business ideas, completely missing the middle sources of growth that lie closer to home. Because these middle innovations build on current operational and people capabilities, the business has a natural competitive advantage; if not a blue ocean, a head start on everyone else. Yet if the idea doesn’t look like something completely different from their core business, the business often doesn’t consider it breakthrough, disruptive or innovative. They are missing a huge opportunity to build adjacent business growth for their business with much lower uncertainty and higher value.
What is Adjacent Business Growth – The Missing Middle?
Business growth often focuses on either improving the core business – e.g. digitizing internal business processes, improving the customer experience, creating a more efficient supply chain – or discovering new disruptive innovation – e.g. new products or services for markets or applications that don’t exist. Instead innovation should be a continuum that includes the space between these two options, growth that can emerge by leveraging current business capabilities to address new markets, build complementary solutions, revolutionize business processes, or create new business models – frequently a combination of these.
As an example, consider Elon Musk’s announcement about the opportunity for Tesla owners to participate in the car sharing market. The innovation spectrum is clear, from investment in the current Tesla infrastructure to the development of autonomous trucks. In between these two is an adjacent business play, the design of their cars to enable participation by Tesla owners in the sharing market. Musk is building on their current autonomous vehicle capabilities to create more value for Tesla owners, creating a fleet participation model that will be hard for any other car manufacturer to compete with due to their head start with a brand that really resonates with this customer, and the technology that enables autonomous driving. Note they are not creating another Uber, which would be far outside their current business model but instead enabling this market with their own capabilities. I’ll bet Musk has envisioned a way to add additional revenue from Tesla owners who participate in the fleet model, providing growth without a huge investment, the ideal adjacent business play.
Customers Can Help You Discover Your Missing Middle
One of the best sources for adjacent business growth can be found in unmet needs from your existing customers. Your customers have an outsider’s view of your business, providing an objective perspective of the value you deliver. In 2011 Christensen introduced the “Jobs To Be Done” approach to customer discovery. By observing and documenting the tasks your customer is attempting to accomplish when they ‘hire’ your product, you can both discover the stumbling blocks – the pain points – and the gaps where they must supplement your solution with their own DIY ideas or other products.
Once you have a good idea of the other problems you can solve for your customer, assess your operational strengths. What capabilities have you developed that are key in delivering value to your customer? How can you invest in those capabilities to help your customer better complete their job-to-be-done? This is the sweet spot for your business, the missing middle that provides adjacent business growth opportunities that are unique to you.
Help for the Missing Middle
This kind of strategic approach can be difficult, especially for busy executives immersed in running the business. We at ICG have developed a 1-day Missing Middle workshop that will engage your leadership team in developing a plan for discovering your path to adjacent business growth. Contact us for a quick call to discuss whether this approach will work for your business.