It's a truism that any company has to understand their customer's need(s) well enough to cause value to be created.
Many development plans proceed from fulfilling customer requirements in a forward-looking way. The obvious way this is often done is by examining the customer's business process and anticipating where improvements based on the company's product (or service) would create additional value at less than the cost required to produce and market it.
But, how can the entrepreneur get ahead of others trying to improve the same process for the same customer universe?
1. Be really good at crunching the numbers. Where does improvement pay off the most for the customer? Start by looking at these opportunities. (Don't forget to look past your customer to his customer for opportunites as well.)
We had a customer analysis algorithm that, when applied to our customer's data about his customer, yielded tremendous results. We worked hard at developing this because our initial analysis suggested that we could generate profits that lowered our months to break even to less than three. (That is, we helped the custoemr earn enough extra revenue that our total solution was paid for initially in less than three months. "Raise the price," the board often said.")
2. Anticipate the behavior of your customer's customer. Are there opportunities there that will help leapfrog your product?
3. Concretely define "the monster." What would be most threatening to your business prosperity? What would a new entrant to your market do if not burdened with your cost structure? What changes in your customer's behavior (aside from buying from someone else, I suppose) would cause you the most grief?
4. Look way outside your industry. One of our portfolio companies is developing a medical device that came from the automobile industry! Apparently scientists working on the same general problem from two different points of view discovered substantial synergies. It has huge market potential and leapffrogs the competition.
5. Know your place on the Chasm curve and know what the next group will want. Are you currently selling to early adopters? What will the early majority want?