Tesco, the UK’s biggest supermarket chain, is about to launch a “new and exciting concept in retail” in the US. When its Fresh & Easy stores open later this year, will they meet Erich Joachimsthaler’s criteria for innovative success, as laid out in his new book Hidden in Plain Sight?

The author, in considering “how to find and execute your company’s next big growth strategy”, has set out some basic principles for what he calls the Demand-First Innovation and Growth model (conveniently acronymised as DIG).

The book might well have been subtitled “innovation in the age of customer-centricity”, since its overall theory is that these days the secret of success is to look at things from the perspective of how customers really behave. Rather than focusing just on the product and how to improve it, or on what the competition is doing, ask instead what you can do to get a larger share of the 1,444 minutes that make up every customer’s day.

The paradigm for success, not surprisingly, is Apple’s iPod, which has attained a status close to that of the invention of the internal combustion engine among innovation folk. While Sony obsessed over a better horse-drawn cart, Apple looked at how people might interact with the digital revolution and came up with the iPod and the iTunes platform. It turned a computer company into an entertainment company and opened up a new world of growth.

The book includes some interesting case studies of how the effort to focus on customer behaviour has driven innovative changes at a wide range of companies and in a range of activities. For advertising and branding, he looks at MasterCard, BMW and Frito-Lay, and for corporate positioning strategy, he examines State Street’s decision to drop profitable but non-core banking activities in favour of a rigorous focus on providing financial information.

The dawning of customer-centricity, or demand-first growth, can perhaps be traced back to 2000, when AG Lafley and Jim Stengel took over at Procter & Gamble. They encouraged people to think of Crest as part of oral healthcare, rather than a single product, and stumbled on whitening strips.

Or the start could have been 2003, when GE’s Jeff Immelt resurrected the post of chief marketing officer by appointing Beth Comstock, who had worked on identifying the needs of customers in 10 years’ time.

Now the marketing folk, who – in theory at least – best know the customer, seem to be taking over.

Wal-Mart, for example, recently turned to a marketing man – Carter Cast, the former head of its website – when it created the position of head of strategy for its US stores.

The retailer has split its merchandising into five categories, aimed at building better knowledge of its customers. Nike, the iconic sportswear company, now has brand units aligned with activities such as running, and basketball, replacing old, product-based divisions.

Such developments fit in with the book’s theory that the marketing department “has democratised and is everywhere, inside and outside”. Rather than focusing inwardly on current successes, the author argues, companies need to establish systems that will let them look at themselves from the outside, with the perspective of the customer.

So how does Tesco’s US venture shape up? The first step towards “capturing the ecosystem of demand” is to create “a demand landscape”, through “an en­hanced understanding of how people behave and live their lives”. Tesco scores strongly here, having spent two years studying shopping habits in California, with US shoppers keeping diaries of their food purchases.

The Brits appear to have concluded that what Americans needed was something new that would address their frustration at having to drive for miles to trek across a 40,000 sq ft supermarket or even a 120,000 sq ft Wal-Mart in order to buy some rocket salad, a bottle of wine and a bit of chicken. That marks Joachimsthaler’s stage two: “identifying the opportunity space” by looking “through the eye of the customer, the market and the industry”.

Tesco drew up what the author would call “the strategic blueprint for action”. Rather than buy a traditional supermarket and go head to head with Wal-Mart, Tesco has focused on customer behaviour and is stepping around the opposition. Instead of targeting a demographic, it is targeting a “shopping mission”.

So, later this year, Tesco will start dotting the sprawling suburbs of Los Angeles, Phoenix, Las Vegas and San Diego with a new kind of store: the size of a conventional drugstore, bringing fresh and prepared foods to the traumatised would-be shopper who wants to “top up” on the weekly big trip to the market. It certainly sounds like Demand-First Innovation, maybe even followed by Growth.

But is “demand-first innovation” really so new? Be­fore the iPod, Apple de­sign­ed the first icon-based operating system because it had focused on how people be­have. Jeff Bezos of Amazon looked at “the ecosystem of demand” when he decided that online bookselling was the way forward, as did Howard Schultz at Starbucks.

Hidden in Plain Sight gives us a fascinating tour around the global block on innovation. But it is hard not to think that all this would have been more exciting to read, say, before Mr Lafley started tinkering with his toothpaste in 2000.

Perhaps Joachimsthaler, who heads the New York-based Vivaldi Partners consultancy, himself initially missed the unfolding ecosystem of demand some years back.

Hidden in Plain Sight

How to find and execute your company’s next big growth strategy

By Erich Joachimsthaler

Harvard Business School Press, $29.95

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