Jobs to be Done: Theory to Practice Page 3

  Do segments of customers exist that have different unmet outcomes?

  What unmet outcomes exist in each segment?

  What segments and unmet outcomes should we target for growth?

  How should we define our value proposition?

  How should we position our existing and pipeline products?

  What new products must we create?

  The qualitative, quantitative, and analytical methods that comprise our Outcome-Driven Innovation® process reveal answers to these questions and more.

  ODI replaces luck with a predictable process.

  This book is part of my lifelong journey. For the past 25 years, I’ve worked with the best and brightest people in industry, and have seen innovation through the lens of many companies. I’ve had the privilege of contributing to the creation of products that save and protect lives and other products that make those lives more enjoyable.

  It is my sincere hope that this book will help you and your organization on your quest for innovation success. Contact me to share your stories and insights: ulwick@strategyn.com.

  THEORY

  1.

  WHY DO INNOVATION PROJECTS FAIL?

  >> CONTENTS

  The goal of innovation is straightforward: to come up with solutions that address unmet customer needs. Today’s most popular approaches to innovation fall into one of two types: those that begin with a focus on solutions (or ideas) and those that begin with a focus on customer needs.

  In what I call the “ideas-first” approach, companies brainstorm or otherwise come up with product or service ideas and then test them with customers to see how well the ideas address the customer’s needs. In the “needs-first” approach, companies first learn what the customer’s needs are, then discover which needs are unmet, and then devise a solution that addresses those unmet needs.

  As I will explain, the “ideas-first” approach is inherently flawed and will never be the most effective approach to innovation. It will always be a guessing game that is based on hope and luck, and it will remain unpredictable. The “needs-first” approach to innovation, while not inherently flawed, is often flawed in its execution. Recognizing why it is flawed and executing it correctly is the key to success in innovation. This structural flaw in the needs-first approach is corrected in the Outcome-Driven Innovation process.

  THE IDEAS-FIRST APPROACH IS INHERENTLY FLAWED

  Many companies adhere to the “ideas-first” approach and have developed support systems and organizational cultures that reinforce its use. Companies that follow this paradigm believe that the key to success in innovation is to be able to generate a large number of ideas (the more, the better) and to be able to quickly and inexpensively filter out the ideas that will likely fail. They believe this approach gives them a better chance of coming up with a greater number of breakthrough ideas.

  Many academics, managers, and consultants support this thinking. Creators and supporters of many of the popular gated or “phase gate” development processes, for example, state that the first step of the development process is idea generation.

  Approximately 68 percent of large businesses have adopted some form of gated development, which means that this same percentage have adopted, at least to some degree, the ideas-first mentality. [Robert Cooper, “Winning at New Products: Accelerating the Process from Idea to Launch,” 3rd ed. (Da Capo Press, 2001), 311.] Examples demonstrating the prevalence of this mind-set abound.

  In their book, Innovation to the Core, Strategos CEO Peter Skarzynski and Rowan Gibson say that “successful innovation is a numbers game… the chance of finding a big, new opportunity is very much a function of how many ideas you generate, how many you pick out and test with low-cost experiments.” [Peter Skarzynski and Rowan Gibson, “Innovation to the Core” (Chicago: Strategos, 2008), 137.]

  Harvard Business School professor Teresa Amabile states in a frequently cited article that “all innovation begins with creative ideas.” [Teresa M. Amabile, Regina Conti, Heather Coon, Jeffrey Lazenby, and Michael Herron, “Assessing the Work Environment for Creativity,” Academy of Management Journal 39, no. 5 (October 1996), 1154.]

  Nearly everyone in a major corporation has participated in a brainstorming session in which, without knowing the customer’s needs, they were encouraged to generate hundreds of ideas and were told that there is no such thing as a bad idea. You can probably still picture walls of Post-It notes.

  Others who support the ideas-first approach have promoted the benefits of executing the approach quickly. Many refer to this accelerated ideas-first approach as “failing fast,” the idea being that when many ideas are generated and tested quickly, the best ideas are revealed faster. Since it is accepted that an ideas-first approach is going to generate many failures, it seems logical to try and weed out the failures quickly.

  This concept was touted by Tom Peters in Thriving on Chaos. Peters said companies should, “test fast, fail fast, adjust fast—pursue new business ideas on a small scale and in a way that generates quick feedback about whether an idea is viable.” [Tom Peters, Thriving on Chaos: Handbook for a Management Revolution (New York: Knopf/Random House, 1987), 479.]

  IBM founder Thomas Watson, who years ago said, “If you want to succeed, double your failure rate,” also supported this thinking and adopted a management style that did not punish failure.

  The fail-fast approach is still well supported today. For example, the authors of the recently published Innovators Guide to Growth believe that “if you fail fast and fail cheap, you have actually done your company a great service.” [Scott D. Anthony, Mark W. Johnson, Joseph V. Sinfield, and Elizabeth J. Altman, The Innovator’s Guide to Growth, Putting Disruptive Innovation to Work, (Harvard Business Press, 2008), 94.]

  As a result of this ideas-first thinking, an entire ideation industry has evolved to compete on developing ways to generate and evaluate more and more ideas, faster and faster.

  But there is a problem: despite its popularity, academic support, and widespread use, the ideas-first approach to innovation cannot be counted on for predictable growth and is inherently doomed to failure.

  There are three reasons for this:

  First, generating more ideas does not meaningfully improve the probability that someone will come up with the optimal idea to satisfy unmet customer needs. People are in effect brainstorming ideas without ever knowing what all the customer’s needs are or which of those needs are unmet. We know that in any given market a customer has 50 to 150 needs (how we know this will be discussed later) and that anywhere from 5 to 80 percent of those needs may be unmet.

  The mathematical probability of someone coming up with an idea that satisfactorily addresses all the customer’s unmet needs without knowing what they are or whether or not they are satisfied is close to zero. [Given the number of possible ways that just 15 unmet needs could be satisfied by products and services in any given market, millions of ideas would have to be generated before an exhaustive set of ideas could be created. If you assume three competing ideas for each of 15 unmet needs in various combinations, then you are generating ideas on the order of three to the power of 15, which is 14 million ideas. The chances of any one idea effectively addressing 15 unmet needs are one in 14 million. Furthermore, in most markets, we find there are more than 15 unmet needs.]

  Generating more ideas that fail to address unmet customer needs is misguided, and doing something bad faster does not lead to better results.

  This approach to innovation is analogous to expecting a sharpshooter to hit a target without knowing what the target is. It is like expecting a doctor to recommend the right treatment without knowing what is wrong or what the symptoms are.

  This brings us to a second reason why the ideas-first approach is doomed to failure: the evaluation and filtering processes are flawed.

  Because the customer’s unmet needs are unknown, the evaluation and filtering processes used today can easily miss great ideas and fail to filter out bad ideas. Let’s
remember what the evaluation and filtering process is supposed to do: separate the useful ideas from the useless ones. Or, in other words, choose the ideas that best address the customer’s unmet needs. And yet, this evaluation and filtering process is typically executed without knowing what the customer’s needs are.

  Lacking explicit knowledge of customers’ unmet needs, managers rely on intuition or evaluate proposed concepts using methods such as conjoint analysis, paired comparisons, and forced-choice scaling techniques, along with surveys and qualitative methods such as focus groups. These methods and others like them rely on customers to evaluate how well a proposed idea will address their unmet needs without truly understanding the product or technology and how it explicitly relates to those needs. Such an evaluation and filtering process is faulty in several respects. The first and most obvious one, mentioned earlier, is that chances are great that the best solution is not even in the consideration set. But there is also the fact that customers may not be able to make the connection between the technology and their needs. It is not surprising, then, that companies using the ideas-first approach to innovation struggle to achieve success rates greater than 10 to 20 percent.

  The third reason why the ideas-first approach is doomed is that customers cannot articulate the solutions they want. In most cases, the customer is not a scientist, engineer, researcher or materials expert. They don’t know what solutions are possible, but why should they?

  The question I like to ask is, “Why are we even asking customers what solutions they want?”

  Why should a company depend on the customer to know the best solution?

  Why hire the customer to do the job of the marketing, development, and product planning team?

  Coming up with the winning solution is not the customer’s responsibility. It is the responsibility of the company.

  THE NEEDS-FIRST APPROACH IS OFTEN FLAWED IN EXECUTION

  Those who have recognized the inherent flaws in the ideas-first approach often attempt to follow a needs-first approach to innovation. Using this approach, companies first attempt to understand the customer’s needs, and then figure out which are unmet and devise a concept that addresses those unmet needs.

  This thinking, though different from the ideas-first approach, is also supported by many academics, businesses, and suppliers.

  Theodore Levitt, for example, in his 1960 landmark Harvard Business Review article, “Marketing Myopia,” states, “An industry begins with the customer and his or her needs, not with a patent, a raw material, or a selling skill.” [Theodore Levitt, “Marketing Myopia,” Harvard Business Review 38, no. 4 (July-August 1960).]

  Since then, others have drawn a similar conclusion.

  Harvard Business School professor David Garvin has noted, “Studies comparing successful and unsuccessful innovation have found that the primary discriminator was the degree to which user needs were fully understood.” [David Garvin, A Note on Corporate Venturing and New Business Creation (Boston: Harvard Business School Press, 2002), 5.]

  In theory, if all the customer’s unmet needs are known, then ideas can be generated to address them—and these ideas will have obvious value.

  Over the years, many methods have been utilized to capture customer needs. These include focus groups, personal interviews, customer visits, and ethnographic, contextual, and observational research methods in addition to interviewing techniques such as voice of the customer (VOC), lead user analysis, and storytelling.

  Despite the available needs-gathering methods, companies nearly always fail to uncover all or even most of the customer’s needs.

  How is this possible?

  While nearly every manager agrees that the goal of innovation is to devise solutions that address unmet customer needs, a common language for communicating a need does not exist.

  In research we conducted, we found that 95 percent of managers say there is internal disagreement on what a need is and how a need should be defined. Marketing and development teams in particular have strongly opposing views on what constitutes an actionable need statement. Consequently, while many employees may have customer knowledge, companies rarely have a complete list of agreed upon customer needs. Is there anyone in your organization that knows all the customer’s needs? Is there agreement across the organization on what the customer’s needs are? Is there agreement on which needs are unmet? If not, then how can there be agreement on what products and services to produce?

  The sad reality is that despite all the talk about satisfying customer needs, there is very little understanding of what characteristics a customer need statement should possess and what the structure, content, and syntax of a need statement should be.

  Abbie Griffith and John Hauser loosely defined “customer need” in their 1991 article “Voice of the Customer” as “a description, in the customer’s own words, of the benefit that he, she or they want fulfilled by the product or service.” [Abbie Griffin and John Hauser, “Voice of the Customer,” Marketing Science 12, no. 1 (Winter 1993), 4.]

  Today we know that obtaining inputs in the customer’s own words will more often than not result in the wrong inputs. Most managers, consultants, and academics agree that companies must look beyond the customer’s own words to extract the kind of input that is needed, but they cannot seem to agree on whether or not a need is a description of customer benefit, a measure of customer value, a statement of a problem, or something else entirely.

  We also find that managers cannot agree on how the statement should look, what information it should contain, how it should be grammatically structured, or what types of words and phrases should be used or avoided to ensure variability is not introduced into the statement—variability that can adversely affect later prioritization of unmet needs. Managers find themselves in a position that is analogous to that of a chef who knows that certain ingredients are required to produce a certain taste but is unable to figure out precisely what combination to use. And once forced into that position, getting it right becomes a process of trial and error.

  Many academics, consultants, and supplier firms end up regarding the collection of these customer inputs as an art. In fact, some of the most popular approaches today utilize anthropologists to “seek out epiphanies through a sense of Vuja De,” as IDEO general manager Tom Kelley says in The Ten Faces of Innovation. [Tom Kelley makes that statement on page 17 of The Ten Faces of Innovation (New York: Doubleday, 2005). He goes on to say that anthropologists have a half a dozen distinguishing characteristics that include, for example, practicing the Zen principle of “beginner’s mind,” embracing human behavior with all its surprises, and drawing inferences by listening to their intuition. Our opinion is that while this approach works for IDEO, it makes innovation more of an art than a science.

  Others do not discriminate one type of input from another. For example, Gerry Katz, the vice president of Applied Marketing Science, Inc., writes, “[In distinguishing between needs and solutions] Ulwick adds the term desired outcomes... a useful description to be sure, just as Christensen has popularized the term jobs. But neither of these is conceptually any different from the other terms that have been in use since at least the mid-1980’s: wants, needs, requirements, benefits, problem, tasks that the customer is trying to accomplish, and jobs which the customer is trying to get done.”

  All these terms are not conceptually the same. As we shall show, the nuanced differences between these terms, as revealed through Jobs-to-be-Done Theory, represent a breakthrough in innovation—one that can easily be overlooked when viewed through a traditional VoC lens.

  To make matters worse, there is also a widely held assumption amongst company managers that customers have latent needs, or needs that customers are unable to articulate.

  For 20 years, this belief has been supported and perpetuated by many well-respected individuals and organizations. In their 1991 best seller, Competing for the Future, Gary Hamel and C. K. Prahalad warn companies of the risk they run if they cannot get a view
of the needs customers can’t articulate.

  The Product Development Management Association (PDMA) states that “customer needs, either expressed or yet-to-be-articulated, provide new product development opportunities for the firm.” [From the definition of “customer needs” in The PDMA Glossary for New Product Development (Mount Laurel, NJ: PDMA, 2006), http://www.pdma.org/npd_glossary.cfm.]

  Peter Sharzynski and Rowan Gibson explain in Innovation to the Core that “radical innovators are deeply empathetic; they understand—and feel—the unvoiced need of customers.” [Peter Skarzynski and Rowan Gibson, Innovation to the Core, 69.]

  Even the process-oriented P&G CEO, A. G. Lafley, says in The Game-Changer that “great innovations come from understanding the customer’s unmet needs and desires, both articulated and unarticulated—that is, not only what they say, but, more important, what they cannot articulate or do not want to say.” [A. G. Lafley and Ram Charan, The Game-Changer (New York: Crown Business, 2008), 45.]

  As a result of this belief, many companies assume that it is impossible to capture a complete set of customer need statements and that they have no choice but to execute the innovation process without knowing all of them. But this conclusion is far from the truth.