Jobs to be Done: Theory to Practice Page 5

  Other consumption chain jobs are also a possible focal point for product improvement and competitive differentiation. Helping bio-meds more easily sterilize a surgical tool, for example, may result in a point of differentiation. Consumption chain jobs impact the customer journey and experience. Understanding the desired outcomes associated with relevant consumption chain jobs gives designers and engineers the information they need to be proficient at design-centered innovation. These inputs are an important ingredient in the recipe for innovation.

  FINANCIAL DESIRED OUTCOMES

  When buying a product or service, the purchase decision maker (buyer) uses a set of financial metrics to decide whether or not to buy product A or product B, or to buy from supplier A or supplier B. An understanding of the buyer’s financial needs informs the decisions that lead to product and business model innovation. It is not uncommon to find that buyers consider 40 to 80 financial outcomes (metrics) when making the purchase decision. A hospital administrator who is responsible for buying medical devices, for example, may be looking for products that “reduce the patient’s length of stay”, or “reduce morbidity rates”. These metrics have cost implications that drive the purchase decision.

  In the case where the buyer is also the user, it is important to make sure the buyer is wearing the buyer’s hat when describing the financial metrics used when making the purchase decision. Otherwise outcome statements regarding the core functional job may uncovered instead.

  Jobs-to-be-Done Theory unlocks the mystery that has for decades been clouding the understanding of customer needs. Knowing how to classify all the customer’s needs changes everything.

  3.

  THE JOBS-TO-BE-DONE GROWTH STRATEGY MATRIX

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  Once a company knows all the customer’s needs, which of those needs are underserved and overserved, and what unique under-and overserved segments of customers exist, it must decide if and how it will target each segment. For example, managers would want to determine if they should (i) add a new feature set to its existing offering, (ii) develop a new low cost offering, (iii) create a new platform-level solution that gets the job done significantly better, or do something else entirely.

  A company must decide what strategy should be pursued to ensure it wins in the marketplace.

  Over the course of many client engagements, we have employed Jobs-to-be-Done Theory to help create a strategy framework that (i) explains what causes new product and service offerings to win or fail in the marketplace, and (ii) helps to select the growth strategy that fits the situation and will ensure a win in the marketplace.

  When we use Jobs-to-be-Done Theory to examine product successes and failures, we observe the same phenomenon time and time again: new products and services win in the marketplace if they help customers get a job done better (faster, more predictably, with higher output) and/or more cheaply.

  This simple observation led us to the effective classification of five unique growth strategies companies can adopt in the quest to win in a market. It also resulted in the creation of the Job-to-be-Done Growth Strategy Matrix, a framework that illustrates when and how these strategies should be used. With this framework, companies can understand past successes and failures and can adopt a strategy to create winning products and services in the future.

  ESTABLISHING THE THEORY

  Having recognized that new products and services win when they get a job done better and/or more cheaply, we set out to transform this insight into a predictive framework for growth. We began by “categorizing the possibilities” using the matrix shown.

  The matrix suggests that companies can create products and services that are (1) better and more expensive, (2) better and less expensive, (3) worse and less expensive, and (4) worse and more expensive.

  The matrix prompted us to ask what types of customers might be targeted with a product or service offering in each quadrant. Our experience and the work of others in this field led us to the following five conclusions regarding the four quadrants:

  A better-performing, more expensive product will only appeal to underserved customers. These are customers who have unmet needs and are willing to pay more to get a job done better.

  A better-performing, less expensive product will appeal to all customers.

  A worse-performing, less expensive product will appeal to overserved customers (those with no unmet needs). It will also appeal to nonconsumers. These are people whose current solutions don’t involve the market at all, or who are not even attempting to get the job done as they cannot afford any of the existing solutions.

  A worse-performing, more expensive product will only appeal to customers for whom limited (or no) alternatives are available. This happens in unique or atypical situations.

  Some products are “stuck in the middle” (to borrow a term from Michael Porter): they only get a job done slightly better or slightly cheaper. Such a product will likely fail to attract any new customers. This is clearly a poor strategy for a new market entrant, but it may help an incumbent company retain existing customers.

  Next, we place the customers in their respective quadrants, highlighting the differences in target customer-type:

  THE JOBS-TO-BE-DONE GROWTH STRATEGY MATRIX

  We concluded that each of the five situations warrant its own distinct strategy. With the goal of creating a framework for proactive strategy formulation, we asked, “What unique strategy can be employed in each of these five situations?”

  We set out to define and name a type of strategy that would work for each unique situation. We chose a naming convention that built upon well-established strategy and innovation terminology and accurately described the uniqueness of the situation.

  The five strategies we identified address all the situations a company can face as it contemplates a product or service strategy. The strategies are introduced in the Jobs-to-be-Done Growth Strategy Matrix shown below:

  The product/service strategies introduced in this framework are defined as follows:

  Differentiated strategy. A company pursues a differentiated strategy when it discovers and targets a population of underserved consumers with a new product or service offering that gets a job (or multiple jobs) done significantly better, but at a significantly higher price. Examples of offerings that successfully employed a differentiated strategy include Nest’s thermostat, Nespresso’s coffee and espresso machines, Apple’s iPhone 2G, the Herman Miller Aeron chair, Whole Foods’ organic food products, Emirates airlines’ international flights, Bang & Olufsen’s personal audio products, BMW sports cars, Sony’s PlayStation (original model), and the Dyson vacuum cleaner and Airblade hand dryer.

  Dominant strategy. A company pursues a dominant strategy when it targets all consumers in a market with a new product or service offering that gets a job done significantly better and for significantly less money. Examples of offerings that successfully employed a dominant strategy include Google Search, Google AdWords, UberX, Netflix’s streaming video, Progressive Insurance’s nonstandard automobile insurance, and Vanguard Group’s personal investment services.

  Disruptive strategy. A company pursues a disruptive strategy when it discovers and targets a population of overserved customers or nonconsumers with a new product or service offering that enables them to get a job done more cheaply, but not as well as competing solutions. Examples of offerings that successfully employed a disruptive strategy include Google Docs (relative to Microsoft Office), TurboTax (relative to traditional tax services), Dollar Shave Club’s razor offering (relative to Gillette), eTrade’s online trading platform (relative to traditional financial brokerages) and Coursera’s online educational services (relative to traditional universities).

  Discrete strategy. A company pursues a discrete strategy when it targets a population of “restricted” customers with a product that gets the job done worse, yet costs more. This strategy can work in situations where customers are legally, physically, emotionally, or otherwise restricted i
n how they can get a job done. Examples of offerings that successfully employ a discrete strategy include drinks sold in airports past security checkpoints, stadium concessions at sporting events, check-cashing and payday-lending services, and ATMs in remote locations.

  Sustaining strategy. A company pursues a sustaining strategy when it introduces a new product or service offering that gets the job done only slightly better and/or slightly cheaper. Examples of offerings that successfully employ a sustaining strategy are plentiful.

  A company may have many products and services in one market, each employing different strategies, as defined above. For that reason, it is important to source examples at the product level, not at the company level.

  Uber, for example, has offerings that make use of three of the strategies: UberBLACK employs a differentiated strategy, while UberPOOL employs a disruptive strategy (see figure below). The importance of this distinction becomes obvious when we begin to apply the model to predict the success or failure of a new product or service:

  EMPLOYING THE FIVE GROWTH STRATEGIES

  The Job-to-be-Done Growth Strategy Matrix can be used to prescribe proactive short- and long-term strategies for success, but to use it, a company must know whether or not there are underserved and/or overserved segments of customers in the target market. Without this knowledge, there is no way to know which strategy to adopt, and the chances of picking the wrong one are high. For example, in an overserved segment, a differentiated strategy would likely fail, as no customer is seeking a more expensive product or service that will get the job done better. Conversely, in an underserved segment, a disruptive strategy would likely fail, as no customer is seeking a cheaper product or service that would get the job done worse.

  The most effective way to discover whether or not there is an under-or overserved population is to segment a market around a complete set of prioritized customer desired outcome statements.

  Our Outcome-Based SegmentationTM methodology, which has always been part of our ODI process, was specifically designed for this purpose (see chapter 4).

  Once a company knows where in the matrix its target customers can be found, it can adopt the appropriate strategies for each segment. Let us examine each strategy more closely.

  Employing a Differentiated Strategy

  A differentiated strategy works when a highly underserved segment of customers is targeted with a premium-priced offering that gets the job done significantly better. This strategy results in a disproportionate share of profits and is the strategy pursued by many of the world’s fastest-growing and most profitable companies.

  Nest, for example, a recent entrant into the home thermostat market, beat Honeywell, White-Rodgers, and other well-established incumbent firms with a product that was targeted at a highly underserved segment of the market, superior in performance, and offered at seven times the price of competing solutions ($250 versus $35). While capturing less than 10% market share, Nest is estimated to have captured over 25% profit share while shaking up the industry and putting its competitors on the defensive.

  A differentiated strategy is attractive because it enables a company to enter a market at the high end, capture significant profit share, and work its way down market over time to gain additional market share. This is a way to move from employing a differentiated strategy with an initial product entry to employing a dominant strategy with other products over time. A company can successfully move down market by lowering the price of its older products as it introduces newer and better products into its portfolio, as Apple did with the series of iPhone product offerings, and/or by using operational innovation as a means to lower production costs, as Uber did when it employed freelance drivers to supply rides in its UberX offering.

  Incumbents have much to gain by pursuing a differentiated strategy as they can afford to target their existing products at well-served or even overserved customers once their new, high-profit products are introduced. This puts the incumbent in a position of both profit and market share growth.

  Employing a Dominant Strategy

  A dominant strategy is always the most appealing approach for a new market entrant to take because incumbents cannot defend against it. Our experience suggests that companies can win with a dominant strategy if they introduce a product or service that gets the job done (addresses the customer’s unmet desired outcomes) at least 20% better and at least 20% more cheaply. This can be measured with high precision and probability when evaluating a proposed concept against a complete set of desired outcome statements.

  Netflix’s streaming services, for example, offered greater convenience than traditional rental stores such as Blockbuster by making it easier to find, obtain, and consume movies. In addition, they reduced the cost of watching a movie by eliminating the annoying late-return fees and enabling customers to watch more content for a low monthly subscription rate.

  We helped Kroll Ontrack enter the electronic evidence discovery market with a dominant strategy. While traditional competitors in this field gathered evidence manually, Kroll Ontrack created a solution that enabled legal teams to get the job done significantly better and more cheaply through the use of digital technology. This strategy led them to immediate success and market leadership that they have sustained for over a decade.

  In any market, an incumbent or a new market entrant can win with a product or service that gets the job done significantly better and more cheaply. Incumbents are less likely to create such a product or service because it could dramatically cut their margins and may require an investment in a new product platform, capabilities, and resources.

  Employing a Disruptive Strategy

  The Jobs-to-be-Done Growth Strategy Matrix confirms that Clayton Christensen, who coined the term disruptive innovation, was correct: companies can win in overserved segments with products that enable customers to get a job done more cheaply, but not as well as competing solutions. Based on our model, we also agree with Christensen that a disruptive strategy successfully serves two customer segments: highly overserved customers (like users of Microsoft Word who switched to Google Docs) and nonconsumers—people who do not buy currently available products.

  A disruptive strategy works in both situations, but for different reasons. It works for current consumers who are overserved, as Christensen’s theory suggests, and are willing to make some sacrifices to get the job done more cheaply. Nonconsumers, on the other hand, are underserved: they simply can’t afford any of the solutions that are currently available. If a product comes along that they can afford, it will allow them to get the job done better than they can currently.

  Christensen also correctly identified another phenomenon that occurs in the marketplace when he described disruptive innovation as “a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.” Seen through the Job-to-be-Done lens, the “process of disruption” is best described as the introduction of a series of products, the first of which employs a disruptive strategy that gets the job done worse and more cheaply, followed by a series of products that build on that technology platform, with more and more features, until the newest offerings get the job done better and more cheaply (figure on next page).

  Although a new market entrant is more likely to pursue a disruptive strategy, incumbents have an equal or better chance at winning with a disruptive offering if they pursue it. The problem for many companies is that it is often a less profitable strategy. Proponents have to convince management that it will defend against competitors and new market entrants. Since a company is not limited to one product, it can choose, as Uber did, to create separate products to address over-and underserved customer segments.

  Employing a Discrete Strategy

  A discrete strategy is employed as a separate (discrete) part of an existing product strategy: with a discrete strategy, a company takes an existing product and sells it in a unique si
tuation that justifies a higher price. A discrete strategy is best suited for situations in which a higher-priced version of the existing product would be very welcome—or where a captive clientele cannot object. Pursuing a discrete strategy can be very profitable.

  The key to a successful discrete strategy is the ability to identify situations in which the customer, in need of the company’s product, has restricted or no access to it. In such a situation, the company can justify charging a higher price for its purchase. For example, people who are unable to cash a check at a bank because they do not have a bank account have no choice but to pay high fees to cash their checks at an independent check-cashing center. Stubhub.com also capitalizes on this scarcity strategy by allowing tickets that are sold out to be re-sold/auctioned to people for what the market will pay, often at much higher-than-normal prices.