In 1978, there was little-to-no evidence that people longed for a device to let them wander around playing cassette tapes through headphones. In 1997, there was little-to-no evidence that people were hankering for a company to send them DVDs by mail. And in the early aughties there was little-to-no evidence that people wanted an app that let them ask strangers to pick them up and drive them somewhere.
Yet each of these ideas led to experiences, products, and businesses that saw exponential growth, illustrating a phenomenon called latent demand, which Forrester defines as: Customer needs that are not acutely evident — or even known to the customer — until new products, services, or experiences reveal those needs.
Our latest research report – “You Don’t Know What You Want ‘Til It’s There: A Primer On Latent Demand” illustrates why latent demand is a rare but powerful driver of business results. And it isn’t just about B2C products or category creators or a small set of industries. Our research reveals a range of examples, including ones in B2B businesses and in an array of industries and geographies. In this research, we lay out how latent demand is:
Inherently difficult (even seemingly impossible) to detect until it’s revealed. By definition, latent demand is not easily detectable, and history is littered with business ideas that seemed like they could be meeting latent needs that turned out to be illusory. The pursuit of latent demand is only worthwhile because there is a potential for outsized returns (see next bullet).
Game changing for companies that are able to tap into it. Success meeting latent demand is rare but can come with colossal gains. The most immediate and direct benefit is new or expanded revenue streams: For example, Netflix trebled its annual revenue in the five years after it launched its streaming service. Beyond these gains, a business can benefit from growth multipliers and from its role as a category creator.
Useful for strategic thinking (even if your org never uncovers a brand-new need). It’s exciting to think of uncovering a previously unknown need and building something to reveal it (and monetize it). But while a few orgs will build novel digital products to meet a latent demand, most will not. Even if your efforts to find a latent need don’t yield something wholly new, exploring creates a kind of intellectual motion and momentum for your strategy as a whole.
What You Should Do: A Call To Arms For Strategists
Employees in various roles will look for latent demand opportunities in your markets, but strategists in particular should treat latent demand as both a potential focus area and explore new ideas by using divergent and convergent thinking. Forrester has collected a list of strategic exercises that teams can use in these efforts.
If you’re a Forrester client, I encourage you to read the full research report (it comes with a handy “strategist’s mini workbook” to get started exploring latent demand. You can also set up a guidance session to discuss how you can build your own strategy on a page. If you’re not a client, reach out to us!
