Who Are the Next Groundbreakers?

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"When Jobs took his original Macintosh team on its first retreat, one member asked whether they should do some market research to see what customers wanted. 'No,' Jobs replied, 'because customers don't know what they want until we've shown them.' He invoked Henry Ford's line 'If I'd asked customers what they wanted, they would have told me, "A faster horse!"'"
--Walter Isaacson, biographer of Steve Jobs, in the Harvard Business Review.

Remember when the iPad was announced? Critics called it a big iPod Touch and hated the inability to play Flash or get any real work done without a keyboard. Why would consumers buy another product that seemingly didn't have as much utility as a laptop and did little more than an iPod?

As it turned out, customers loved holding what amounted to a big iPod Touch, and its lack of Flash and a keyboard wasn't an issue. When using an iPad, it was easier to view webpages and applications with its larger screen, and its ability to turn on instantly made it significantly more accessible than a computer, which takes time to start up.

Solving hassles leads to revolutionary products
In short, the iPad solved a few hassles of both mobile computing (through a larger screen) and traditional computing (through instant accessibility). In Demand: Creating What People Love Before They Know They Want It, author and top consultant Adrian Slywotzky describes the "hassle maps" that lead to revolutionary products and great companies like Apple (NYSE: AAPL  ) , Netflix (Nasdaq: NFLX  ) , and Zipcar (Nasdaq: ZIP  ) .

In a hassle map, companies note each point of pain that a customer experiences and work to alleviate those points in their products or services. Instead of cloning a competitor's offering, these companies venture outside traditional design. For Netflix's Reed Hastings, his hatred toward video stores' late fees led him to create his DVD-by-mail service. For Zipcar, immediately available cars that were parked less than a five-minute walk away supplanted the dreaded wait at the car rental office. Zipcar, while struggling at first and only having 6,000 members in 2003, focused on making cars even more convenient and putting them closer to its customers, and it now claims 673,000 members.

Because of their ability to make life easier, these companies have been rewarded with huge growth in customers, with Netflix's customer base looking similar to the prized "hockey stick":

Source: Netflix 10-Ks.

The next hassle-free companies
Which companies will be next to solve the problems we consumers don't even recognize? I would argue, as Foolish colleague Jeremy Bowman did, that Zipcar is poised to explode like Netflix, especially with continued innovation and offerings like rentable cargo vans.

Another pain that is growing by the semester is student debt and the falling returns of costly higher education. While for-profit universities take heat over their high withdrawal rates and large portion of this student debt, they may also be the best positioned to accommodate lower prices, as their cost per student is dramatically less than that of public and private colleges.

And companies that are always solving pain -- actual physical pain -- are, of course, related to health care. Fool Evan Niu makes the case for Mako Surgical (Nasdaq: MAKO  ) . The company has moved beyond knee surgeries to even more lucrative hip surgeries, with analysts expecting it to become profitable in one to two years without needing to issue more shares or take on more debt. And as Fool Alex Planes details, Becton Dickinson's (NYSE: BDX  ) FocalPoint medical imaging system "has nearly doubled a human examiner's speed of operation while simultaneously improv[ing] the ability to find cell abnormalities." Plus, Al Gore's investing firm believes in the company.

Finally, perhaps Google's new glasses will be the next form of widespread computing. They would certainly solve the problem of having to move one's fingers or hold a tablet while surfing the Web.

A portfolio of solutions
Any company that can make consumers' lives easier -- and beat its competitors to the hassle-relieving punch -- has the ability to return huge profits to shareholders. And having a portfolio made up of such companies means that only one of them has to reach its lofty goals for respectable returns.

To read more about investing in revolutionary companies with huge growth potential, as well as a more detailed look at the prospects of one of the companies mentioned above, check out our free report: "Discover the Next Rule-Breaking Multibagger."

Fool contributor Dan Newman can't wait for self-driving cars swerving to avoid pedestrians absorbed in their Google glasses. He holds share of Zipcar, but no shares of the other companies mentioned above. Follow him @TMFHelloNewman.

The Motley Fool owns shares of Apple, Zipcar, MAKO Surgical, and Google. Motley Fool newsletter services have recommended buying shares of Zipcar, MAKO Surgical, Becton, Apple, Google, and Netflix, as well as creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On April 09, 2012, at 9:01 PM, accelerando wrote:

    Here is a simple one. I call up a company -- pretty much any company bigger than a ma and pa store except L.L Bean -- and I get some menu, get put on hold with some awful music or advert, then eventually get a person who is usually not helpful. If I could ray gun hatred through the phone I would fry their entire call handling system. Talk about pain and hassle!!

    Most any company that puts callers in touch with actual knowledgeable representatives will gain market share overnight. I mean if Citibank did this and advertised it, they would steal 25% of the retail customers from Bofa within six months. Of course this is expensive. But if growth is the target -- if gaining market share is the issue -- than this is the way to go!!

    Said only partly tongue in cheek as a jab at all those new economy stocks that sell dimes for nickels and hope to make it up on the volume.

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