Ram Charan What Every Company Should Know

What you've observed (and maybe even done yourself) represents a major change in how people consume media. Instead of concentrating on one thing at a time -- first reading a magazine, then calling a friend -- we're now involved with two, three, or even four forms of media at a time. We're moving at the speed of mind.

Moreover, by noticing this change, you've demonstrated a crucial skill of growth leaders: being a keen observer of human behavior. You're on your way to becoming a business anthropologist.

Helping Customers Know What They Want

Don't be intimidated by the term. Anthropologists study the origin, behavior, development, and interactions of people. They gain insight through observation in various physical, social, and cultural contexts. If you apply this skill of unstructured observation in your daily life, you can detect unmet or unarticulated needs in the marketplace, which can be converted into fuel for topline growth.

How people use media, and, more important, how they feel about their experience in using it, are clues for new products and services. What gives people satisfaction? What are their frustrations? What needs do they have that they aren't even aware of?

For example, the observation of people downloading songs from the Internet prompted the development of Apple's iPod and iTunes. Steve Jobs saw that consumers were using technology to illegally download songs from the Internet to create their own mix of music.

This drove him to find a way to legalize music downloading and meet record companies' need to get paid for the use of their songs. Needless to say, Apple's innovation has transformed the music industry.

Media isn't the only market in which consumer behavior has changed. Seven out of 10 people who buy a car today have done at least some research online before they ever step into a showroom. That's why car companies now put their web addresses in both print and television advertisements. Who was the first to notice this shift in buying behavior, and what other opportunities does it present?

Concentrate on what the customer wants even if he can't express it, not on what you have to sell. As the late Ted Levitt, my colleague at Harvard Business School, was fond of saying, "People don't want a quarter-inch drill. They want a quarter-inch hole."

Spotting an Opportunity

To spot holes in the market, develop a keen eye to observe how consumers behave and what they are experiencing wherever you go. What do they like? What do they hate? You'll see it in their facial expressions and body language, not just their actions and words. What excites them and gets them to reach for their wallets? What situations are met with indifference?

For instance, one Sunday afternoon I was working in Boston with a well-known CEO who runs a consumer products company. At 3 p.m. we decided to take a break, and went to a Starbucks near his office.

I placed my order and walked over to the window. When I looked back, the CEO was motioning for me to join him at the counter.

"What do you see," he asked, not giving me any hint.

"I don't see anything."

"Look at the display case," he said.

The food was not presented very well. It was messy, there were lots of empty spaces, and some of it looked stale. I said so.

"You're right," he said. "The quality of the presentation doesn't match the image they're trying to create."

He had noticed that people were pausing to look at the food, then passing it by. Wondering why, he studied the display case and came to the same conclusion I had. I could tell that this CEO made such observations all the time, and coaxed the people around him -- including me that day -- to do the same.

Turning Observation into Action

What could you do with such an observation if you worked for Starbucks? First, you could double-check to see that the goods were being presented in the best possible way, and that their presentation matched the brand. You could visit multiple outlets to see if the problem was specific to one location, or was more widespread.

Second, you could step up the frequency of visits to your competitors, checking for potential gaps in their offerings and also to learn firsthand what products they'd introduced that were resonating with consumers.

In doing this, you would be walking in the footsteps of business giants such as Sam Walton (Wal-Mart) and Charles Revson (Revlon), both of whom spent considerable time watching consumers in action. They were business anthropologists par excellence.

Other Success Stories

Microsoft hired genuine anthropologists to help improve its small-business software. Understanding how customers actually operate, the Microsoft researchers determined, was vital in being able to meet their needs.

Procter & Gamble sends teams of researchers into the homes of its customers -- and the people it would like to be its customers -- to observe and listen to them as they go about their household chores. Such firsthand, in-depth research is responsible for such innovations as the Swiffer line of cleaning products.

Companies including General Motors, Best Western, and Moen videotape customers (with their permission) and study the tapes to look for different uses of existing products, as well as consumer problems that can be addressed with new products. Invariably, a customer's body language and tone of voice reveals things the person can't articulate.

Frustrations are often very visible -- just watch someone setting up a new computer at home, for example. As you practice your observational skills, you'll be able to pick up more subtle clues to people's emotions and overall experience. And if you do it often enough, you'll begin to detect patterns.

The Advantages of Business Anthropology

Studying consumers is a skill you can both learn and teach, and the more you do it, the better your insights. When you get others around you to do it and share their observations, the insights get even richer (see my earlier column "How to Inspire Growth Obsession in Your Staff").

There are three primary advantages to being a business anthropologist:

1. You experience personal growth and acquire a skill that can be applied to any business. Today, when organic growth is hard to come by, organizations appreciate those who can spot new opportunities based on unique insights.
   
   
2. Your experience inspires others. You show your direct reports the benefits of observation, enriching their collective insights and multiplying the likelihood that they'll spot growth opportunities.
   
   
3. You potentially create breakthroughs in value propositions for your company. Your observations and ideas might lead to new products or whole new trajectories for growth. They might even inspire a breakthrough product that changes an entire industry, like the iPod.

You don't need formal training to be a practicing business anthropologist. Simply go out and observe customers in action every day. You'll be amazed at what you learn.