CHAPTER THREE
WHAT PRODUCTS WILL
CUSTOMERS WANT TO BUY?
What products should we develop as we execute our disruptive strategy? Which market segments should we focus upon? How can we know for sure, in advance, what product features and functions the customers in those segments will and will not value? How should we communicate the benefits of our products to our customers, and what brand-building strategy can best create enduring value?
All companies face the continual challenge of defining and developing products that customers will scramble to buy. But despite the best efforts of remarkably talented people, most attempts to create successful new products fail. Over 60 percent of all new-product development efforts are scuttled before they ever reach the market. Of the 40 percent that do see the light of day, 40 percent fail to become profitable and are withdrawn from the market. By the time you add it all up, three-quarters of the money spent in product development investments results in products that do not succeed commercially.1 These development efforts are all launched with the expectation of success, but they seem to flourish or flop in unexpected ways. Once again, we argue that the failures are really not random at all: They are predictable—and avoidable—if managers get the categorization stage of theory right. Of the many dimensions of business building, the challenge of creating products that large numbers of customers will buy at profitable prices screams out for accurately predictive theory.
The process that marketers call market segmentation is, in our parlance, the categorization stage of theory building. Only if managers define market segments that correspond to the circumstances in which customers find themselves when making purchasing decisions can they accurately theorize which products will connect with their customers. When managers segment markets in ways that are mis-aligned with those circumstances, market segmentation can actually cause them to fail—essentially because it leads managers to aim their new products at phantom targets.
We begin this chapter by describing a way to think about market segmentation that might differ from what you’ve seen before. We believe that this approach, based on the notion that customers “hire” products to do specific “jobs,” can help managers segment their markets to mirror the way their customers experience life. In so doing, this approach can also uncover opportunities for disruptive innovation.
We will then crawl beneath this concept of segmentation and explore the forces that cause even the best managers to segment their markets erroneously. A lot of marketers actually know how to do what we urge in this chapter. The problem is that predictable forces in operating companies cause companies to segment markets in counterproductive ways. Finally, we show how segmenting markets according to the jobs that customers are trying to get done addresses other important marketing challenges—such as brand management and product positioning—to help disruptive businesses grow. Taken together, this set of insights constitutes a theory of how to connect disruptive innovations with the right customers in order first to create a foothold in a market and then to grow profitably along the sustaining trajectory into market-dominating products and services.
Pomp and Circumstances in Segmenting Markets
Much of the art of marketing focuses on segmentation: identifying groups of customers that are similar enough that the same product or service will appeal to all of them.2 Marketers often segment markets by product type, by price point, or by the demographics and psychographics of the individuals or companies who are their customers. With all the effort expended on segmentation, why do the innovation strategies based on these categorization or segmentation schemes fail so frequently? The reason, in our view, is that these delineations are defined by the attributes of products and customers. As we see over and over in this book, theories based on attribute-based categorizations can reveal correlations between attributes and outcomes. But it is only when marketing theory offers a plausible statement of causality and is built upon circumstance-based categorization (segmentation) schemes that managers can confidently assert what features, functions, and positioning will cause customers to buy a product.
Predictable marketing requires an understanding of the circumstances in which customers buy or use things. Specifically, customers—people and companies—have “jobs” that arise regularly and need to get done. When customers become aware of a job that they need to get done in their lives, they look around for a product or service that they can “hire” to get the job done. This is how customers experience life. Their thought processes originate with an awareness of needing to get something done, and then they set out to hire something or someone to do the job as effectively, conveniently, and inexpensively as possible. The functional, emotional, and social dimensions of the jobs that customers need to get done constitute the circumstances in which they buy. In other words, the jobs that customers are trying to get done or the outcomes that they are trying to achieve constitute a circumstance-based categorization of markets.3 Companies that target their products at the circumstances in which customers find themselves, rather than at the customers themselves, are those that can launch predictably successful products. Put another way, the critical unit of analysis is the circumstance and not the customer.
To see why this is so, consider a quick-service restaurant chain’s effort to improve its milkshake sales and profits.4 This chain’s marketers segmented its customers along a variety of psychobehavioral dimensions in order to define a profile of the customer most likely to buy milkshakes. In other words, it first structured its market by product— milkshakes—and then segmented it by the characteristics of existing milkshake customers. These are both attribute-based categorization schemes. It then assembled panels of people with these attributes, and explored whether making the shakes thicker, chocolatier, cheaper, or chunkier would satisfy them better. The chain got clear inputs on what the customers wanted, but none of the improvements to the product significantly altered sales or profits.
A new set of researchers then came in to understand what customers were trying to get done for themselves when they “hired” a milkshake, and this approach helped the chain’s managers see things that traditional market research had missed. To learn what customers sought when they hired a milkshake, the researchers spent an eighteen-hour day in a restaurant carefully chronicling who bought milkshakes. They recorded the time of each milkshake purchase, what other products the customer purchased, whether the customer was alone or with a group, whether he or she consumed it on the premises or drove off with it, and so on. The most surprising insight from this work was that nearly half of all milkshakes were bought in the early morning. Most often, the milkshake was the only item these customers purchased, and it was rarely consumed in the restaurant.
The researchers returned to interview customers who purchased a morning milkshake to understand what they were trying to get done when they bought it, and they asked what other products they hired instead of a milkshake on other days when they had to get the same job done. Most of these morning milkshake customers had hired it to achieve a similar set of outcomes. They faced a long, boring commute and needed something to make the commute more interesting! They were “multitasking”—they weren’t yet hungry, but knew that if they did not eat something now, they would be hungry by 10:00. They also faced constraints. They were in a hurry, were often wearing their work clothes, and at most had only one free hand.
When these customers looked around for something to hire to get this job done, sometimes they bought bagels. But bagels got crumbs all over their clothes and the car. If the bagels were topped with cream cheese or jam, their fingers and the steering wheel got sticky. Sometimes they hired a banana to do the job, but it got eaten too fast and did not solve the boring commute problem. The sorts of sausage, ham, or egg sandwiches that the restaurant also sold for breakfast made their hands and the steering wheel greasy, and if customers tried to drag out the time they took to eat the sandwich, it got cold. Doughnuts didn’t last through the 10:00 hunger attack. It turned out that the milkshake did the job better than almost any available alternative. If managed competently, it could take as long as twenty minutes to suck the viscous milkshake through the thin straw, addressing the boring commute problem. It could be eaten cleanly with one hand with little risk of spillage, and the customers felt less hungry after consuming the shake than after using most of the alternatives. Customers were not satisfied that the shake was healthy food, but it didn’t matter because becoming healthy wasn’t the job for which they were hiring the product.5
The researchers observed that at other times of the day, it was often parents who purchased milkshakes, in addition to a complete meal, for their children. What job were they trying to get done? They were emotionally exhausted from repeatedly having to say “No” to their kids all day, and they just needed to feel like they were reasonable parents. They hired milkshakes as an innocuous way to placate their children and to feel like they were loving parents. The researchers observed that the milkshakes didn’t do this job very well, though. They saw parents waiting impatiently after they had finished their own meal while their children struggled to suck the thick milkshake up the thin straw. Many were discarded half-full when the parents declared that time had run out.
Segmenting the market along demographic or psychographic lines indeed provides information on individual customers.6 But the same busy father who needs a viscous, time-consuming milkshake in the morning needs something very different later in the day for his child. When researchers asked customers who have multiple jobs in their lives what attributes of the milkshake they should improve upon, and when the researchers then averaged each consumer’s response with those of others in the same demographic or psychographic segment, it led to a one-size-fits-none product that didn’t do well any of the jobs that customers were trying to get done.7
Who is the quick-service chain really competing against in the morning? Its statistics compare its sales with the milkshake sales of competing chains. But in the customers’ minds, the morning milkshake competes against boredom, bagels, bananas, doughnuts, instant breakfast drinks, and possibly coffee. In the evening, milkshakes compete against cookies, ice cream, and promised purchases in the future that parents hope their children won’t remember.
Knowing what job a product gets hired to do (and knowing what jobs are out there that aren’t getting done very well) can give innovators a much clearer road map for improving their products to beat the true competition from the customer’s perspective—in every dimension of the job. To tackle the boring commute job, for example, the chain’s managers could swirl in tiny chunks of real fruit. This would nail the boring commute job even better, because the drivers would at random suck crisp, flavorful chunks into their mouths, adding a dimension of unpredictability and anticipation to a monotonous morning routine. (Remember, fruit might make it healthier, but improving health is not the primary job that the shake gets hired to do.) The chain could make the shake even thicker, so it would last longer. And they could set up a self-service machine in each restaurant that customers could operate with a prepaid card, to get in and out fast.
Addressing the evening job-to-be-done would entail a very different product—one with lower viscosity for quicker consumption, and served in a small, entertainingly designed container. It would be an inexpensive add-on to the bundled children’s meal, so that when a child begged the parent for it, the parent could readily say “OK” with little forethought.
If the restaurant chain implemented innovations such as these that really helped get the jobs done and discarded improvements that were irrelevant to the jobs that the product is hired to do, it would succeed—but not by capturing milkshake sales from competing quick-service chains or by cannibalizing other products on its menu. Rather, the growth would come by taking share from products in other categories that customers sometimes employed, with limited satisfaction, to get their particular jobs done. And perhaps more important, the products would find new growth among “nonconsumers.” Competing against nonconsumption often offers the biggest source of growth in a world of one-size-fits-all products that do no jobs satisfactorily. We will return to this topic in chapter 4.
Using Circumstance-Based Segmentation
to Gain a Disruptive Foothold
The first time that builders of a new-growth business need to assess what the target customers really are trying to get done is when they are searching for the disruptive foothold—the initial product or service that is the point of entry for a new-market disruption. When managers position a disruptive product squarely on a job that has been poorly addressed in the past that a lot of people are trying to get done, they create a launch pad for subsequent growth through sustaining innovations that build on the initial platform.8
How can managers identify these foothold opportunities? It may never be possible to get every dimension of a product introduction in a new-market disruption right at the outset, which makes it very important to use the methods of strategy discovery we outline in chapter 8. We believe, however, that a jobs-to-be-done lens can help innovators come to market with an initial product that is much closer to what customers ultimately will discover that they value. The way to get as close as possible to this target is to develop hypotheses by carefully observing what people seem to be trying to achieve for themselves, and then to ask them about it.9
Sony’s founder, Akio Morita, was a master at watching what consumers were trying to get done and at marrying those insights with solutions that helped them do the job better. Between 1950 and 1982, Sony successfully built twelve different new-market disruptive growth businesses. These included the original battery-powered pocket transistor radio, launched in 1955, and the first portable solid-state black-and-white television, in 1959. They also included videocassette players; portable video recorders; the now-ubiquitous Walkman, introduced in 1979; and 3.5-inch floppy disk drives, launched in 1981. How did Sony find these foothold applications that yielded such tremendous up-side fruit?
Every new-product launch decision during this era was made personally by Morita and a trusted group of about five associates. They searched for disruptive footholds by observing and questioning what people really were trying to get done. They looked for ways that miniaturized, solid-state electronics technology might help a larger population of less-skilled and less-affluent people to accomplish, more conveniently and at less expense, the jobs they were already trying to get done through awkward, unsatisfactory means. Morita and his team had an extraordinary track record in finding these footholds for disruption.
Interestingly, 1981 signaled the end of Sony’s disruptive odyssey, and for the next eighteen years the company did not launch a single new disruptive growth business. The company continued to be innovative, but its innovations were sustaining in character—they were better products targeted at existing markets. Sony’s PlayStation, for example, is a great product, but it was a late entrant into a well-established market. Likewise, its Vaio notebook computers are great products, but they too were late entrants into a well-established market.
What caused this abrupt shift in Sony’s innovation strategy? In the early 1980s Morita began to withdraw from active management of the company in order to involve himself in Japanese politics.10 To take his place, Sony began to employ marketers with MBA’s to help identify new-growth opportunities. The MBA’s brought with them sophisticated, quantitative, attribute-based techniques for segmenting markets and assessing market potential. Although these methods uncovered some underserved opportunities on trajectories of sustaining improvement in established markets, they were weak at synthesizing insights from intuitive observation. In searching for an initial product foothold in new-market disruption, observation and questioning to determine what customers are trying to do, coupled with strategies of rapid development and fast feedback, can greatly improve the probability that a company’s products will converge quickly upon a job that people are trying to get done.
Innovations That Will Sustain the Disruption
Gaining a foothold is just the first battle in the war. The exciting growth happens when an innovation improves in ways that allow it to displace incumbent offerings. These are sustaining improvements, relative to the initial innovation: improvements that stretch to meet the needs of more and more profitable customers.
With low-end disruptions, it can be easy to determine the right sequence of product improvements in the up-market march. After the steel minimills established their foothold in the rebar market, for example, the next logical step was fairly obvious: Tackle angle iron and thicker bars and rods—the grades of steel that were just above rebar. For Target Stores, the goal was to replicate the product line, brands, and ambiance that previously were only available in expensive, full-service department stores. The low-end disruptor’s marketing task is to extend the lower-cost business model up toward products that do the jobs that more profitable customers are trying to get done.
With new-market disruptions, in contrast, the challenge is to invent the upward path, because nobody has been up that trajectory before. Choosing the right improvements is critical to the disruptive march up-market. Here again, job-based segmentation logic can help.
Let’s examine one of the hottest markets of the last decade—hand-held wireless electronic devices. The BlackBerry, a handheld wireless e-mail device made by the Canadian company Research in Motion (RIM), is an important competitor in this field. RIM found the BlackBerry’s disruptive foothold at a new spot on the third axis in the disruption diagram, competing against nonconsumption by bringing the ability to receive and send e-mail to new contexts such as waiting lines, public transit, and conference rooms. So what’s next? How does RIM sustain the product improvement and growth trajectory for its BlackBerry? Surely, dozens of new ideas are pouring into RIM executives’ offices every month for improvements that might be introduced in the next-generation BlackBerry. Which of these ideas should RIM invest in, and which should it ignore? These are crucial decisions, with hundreds of millions of dollars in profits at stake in a rapidly growing market.
RIM’s executives could believe that their market is structured by product categories characterized by some moniker such as “We compete in handheld wireless devices.” If so, they will see the BlackBerry as competing against products such as the Palm Pilot, Handspring’s Treo, Sony’s Clié, mobile telephone handsets made by Nokia, Motorola, and Samsung, and Microsoft Pocket-PC-based devices such as Compaq’s I-Paq and Hewlett-Packard’s Jordana. In order to get ahead of these competitors, RIM would need to develop better products faster than the competition. Sony’s Clié, for example, has a digital camera. Nokia’s phones offer not just live conversation and voice messages, but short text messaging as well. The Palm Pilot’s consummately convenient calendaring, rolodexing, and note-keeping features have almost become industry standards. And does the fact that Compaq and Hewlett-Packard offer stripped-down versions of Word and Excel software mean that RIM will be left behind if it does not follow suit?
Defining the market by the characteristics of the product causes managers to think that in order to beat the competition, RIM would need to build some number of these features into its next-generation BlackBerry device. RIM’s competitors, of course, would be thinking the same thing—all trying to cram their competitors’ superior features into their products in a race to get ahead of the pack. As suggested in table 3-1, our worry is that defining market segments in a product-based way actually causes a headlong, arms race–like rush toward undifferentiable, one-size-fits-all products that perform poorly any specific jobs that customers might hire them to do.
Alternatively, RIM’s executives might segment their market in demographic terms—targeting the business traveler, for example—and then add to the BlackBerry those product improvements that would meet those customers’ needs. This framing would lead RIM to consider a very different set of innovations. Stripped-down customer relationship management (CRM) software might be considered essential, because it would allow salespeople to review account histories and order status quickly before contacting customers. Downloadable electronic books and magazines would obviate customers’ having to carry bulky reading material in their briefcases. Wireless Internet access, with the attendant capabilities to alter travel reservations, trade stocks, and find restaurants via global positioning satellites, could be very appealing. Expense-reporting software coupled with the ability to transmit reports to headquarters wirelessly might be a must.
Every executive who has participated in decisions to define and fund innovation projects will empathize with the tortured difficulty of answering questions such as these. No wonder that many have come to regard innovation as a random crap shoot—or worse, a game of Russian roulette.
TABLE 3 - 1
| How You View the Market for Handheld Devices Will Determine What Product Features You Consider to Be Relevant | ||
| Product View | Demographic View | Job-to-Be-Done View |
| Market Definition The handheld wireless device market |
Market Definition The traveling salesperson |
Market Definition Use small snippets of time productively |
| Competitors Palm Pilot, Handspring Treo, Sony Clié, HP Jordana, Compaq I-Paq, wireless phones |
Competitors Notebook computers, wireline Internet access, wireless and wireline telephones |
Competitors Wireless telephones, Wall Street Journal, CNN Airport News, listening to boring presentations, doing nothing |
| Features to consider Digital camera |
Features to consider Wireless Internet access; bandwidth for data |
Features to consider |
| Word | Voice mail | |
| Downloadable CRM | ||
| Excel | data/functionality | Voice phone |
| Outlook | Wireless access to online | Headline news, frequent |
| travel agencies | updates | |
| Voice phone | ||
| Online stock trading | Simple, single-player games | |
| Organizer | ||
| E-books and e-technical | Entertaining “top ten” lists | |
| Handwriting recognition | manuals | |
| Always on | ||
| Voice | ||
But what if RIM structured the segments of this market according to the jobs that people are trying to get done? We’ve not conducted serious research on this, but just from watching people who pull out their BlackBerries, it seems to us that most of them are hiring it to help them be productive in small snippets of time that otherwise would be wasted. You see BlackBerry owners reading e-mails while waiting in line at airports. When an executive puts an always-on BlackBerry on the table in a meeting, what is she trying to do? Just in case the meeting gets a little slow or boring, she wants to be able to glance through a few messages unobtrusively, just to be a bit more productive. When the pace of the meeting picks up, she can slide the BlackBerry aside and pay attention again.
What is the BlackBerry competing against? What gets hired when people need to be productive in small snippets of time and they don’t pick up a BlackBerry? They often pick up a wireless phone. Sometimes they pick up the Wall Street Journal. Sometimes they make notes to themselves. Sometimes they stare mindlessly at the CNN Airport Network, or sit with glazed eyes in a boring meeting. From the customer’s point of view, these are the BlackBerry’s most direct competitors.
What improvements on the basic BlackBerry wireless e-mail platform does this framing of the market imply? Word, Excel, and CRM software are probably out—it’s just really hard to boot up, shift mental gears, be productive, and gear down these activities within a five-minute snippet of time. Snap-on digital cameras likewise aren’t likely to be hired to get this job done.
However, wireless telephony is a no-brainer for RIM, because leaving and returning voice messages is another way to be productive in small snippets of time. Financial news headlines and stock quotes would help the BlackBerry compete more effectively against the Wall Street Journal. And mindless, single-player games or automatically downloaded Letterman-like lists of ten might help the BlackBerry gain share against boredom. Viewing the market in terms of the jobs that its customers are trying to get done would define for RIM an innovation agenda that is grounded in the way its customers live their lives. The good news for RIM shareholders is that this appears to be the trajectory the BlackBerry is on.11
Doing this make-me-productive-in-small-snippets-of-time job perfectly is not trivial, of course. Adding voice telephony to the BlackBerry would increase power consumption. This, however, is the type of challenge classically associated with sustaining innovation. RIM’s biggest issue is probably not a lack of engineering talent; it is deciding which problems it should deploy that talent against.12
What should Palm do? In the context of the job that the BlackBerry is hired to do, a camera makes no sense. But might it make sense on a product like the Palm Pilot that is used to keep track of people? In addition to just displaying a name card, a camera would enable users to store the person’s image as well—helping Palm Pilot users be better organized by remembering not just people’s names but their faces, too.13
In the Japanese mobile phone market, the strategies of mobile telephony providers J-Phone and NTT DoCoMo to add a camera and photo viewer to the mobile phone and to provide the data services required to send and receive low-quality digital photos met with instant success in the early 2000s. Why? A few years earlier these firms had created a booming new-market disruption selling wireless Internet access through services like DoCoMo’s I-Mode. Their customers were primarily teenagers, who had hired mobile access to the Internet in order to have fun with their friends downloading wallpaper and ring tones. The popularity of limited-functionality cameras and photo viewers on these teenagers’ phones makes sense when viewed through the lens of jobs to be done: Mobile phones that send and receive photos offer these young people more and newer kinds of fun.
Should European and North American service and handset providers attempt to emulate this success by incorporating this functionality in their phones? At this writing, we expect camera-equipped phones to take off much more slowly in these markets, because many mobile phone users in these markets are adults who seem to have hired mobile phones to get work done or exchange important information in small snippets of time. Cameras and viewers rarely help get these jobs done better. If these companies were to market phones and these services to teenagers and children as a new way to have fun by taking and transmitting images, this product feature could create substantial growth. But if they follow their demonstrated propensity to deploy the functionality as a high-priced feature on phones that serious multitasking adults have hired to get down to business rather than play, our bet is that little growth will result.
If RIM evolved the BlackBerry to help people be ever more productive in small snippets of time, if Palm evolved its Pilot to help people be ever better organized, and if J-Phone’s handsets were optimized to help teenagers have fun, the products would become quite differentiated in consumers’ minds—and each could grow to own a large market share of its respective job. And because these different jobs arise at different points in time and space in consumers’ lives, we’d bet that for a very long time most consumers would opt to own each product individually rather than having a single, Swiss army knife–like device—that is, until a one-size-fits-all device can do all these jobs without compromising functionality, simplicity, and convenience.
Unfortunately, it appears that many manufacturers in this space are now on a collision course. Each seems bent on packing every other competitor’s functionality into a single, all-purpose device. Unchecked, this will lead to commoditized, undifferentiated products that don’t do really well any of the jobs that they once got hired to do. This need not be so. The suicidal trajectory results from framing the market in terms of the attributes of products and the attributes of customers, rather than in terms of jobs to be done.
Why Do Executives Segment Markets Counterproductively?
In many ways, what we have said to this point is not news—or at least it shouldn’t be. Good researchers have written persuasively, using their own vocabulary, that a jobs-to-be-done perspective is the only way to see accurately what products and services customers will value in the future, and why.14 Indeed, all executives would say that they dream of dominating their market with a highly differentiated product. And most marketers will claim that the very purpose of their work is to understand what customers do with their products.
In the face of such desires and beliefs, why do so many managers instead seem to rush headlong in the other direction, basing product improvement trajectories on attribute-based segmentation schemes that lead to undifferentiated, one-size-fits-all products? There are at least four reasons or countervailing forces in established companies that cause managers to target innovations at attribute-based market segments that are not aligned with the way that customers live their lives. The first two reasons—the fear of focus and the demand for crisp quantification—reside in companies’ resource allocation processes. The third reason is that the structure of many retail channels is attribute focused, and the fourth is that advertising economics influence companies to target products at customers rather than circumstances.
Fear of Focus
One reason why it is difficult to create packages of products and services that do particular jobs well is that the more clearly a product is focused on getting a specific job done perfectly, the less appealing it might become when hired for other jobs. Clarifying what job a product should be hired to do, unfortunately, often clarifies what it should not be hired to do. Focus helps and it hurts—and it is easier to quantify the hurt than the help.
This is an especially vexing issue for companies such as RIM, Palm, Nokia, and HP as they chart course into a seemingly uncertain future. Each company is more or less positioned, for now, on a specific job: RIM’s BlackBerry and Nokia in killing time productively, Palm’s Pilot in keeping folks organized, and HP in stripped-down access to computer-based tasks.
If they define their market in terms of the product category, the most tangible growth opportunities are customers and applications that already have been captured by the other companies. So RIM looks to organizer software to help it steal Palm’s customers, even as Palm wrestles with ways to make its Pilot a mobile e-mail device.15 If these companies frame the market as a product category, then not to pack all these features into the product indeed seems to sacrifice growth potential.
In contrast, a theory of growth that is grounded on circumstance-based categories—jobs to be done—would lead RIM not to copy most features in other handheld devices. This is because the real competition comes from newspapers, mobile phones, CNN Airport Network, and plain old boredom. There is exciting growth potential within this job, if RIM can improve its product so that it does the job better than the real competition. It would grow the size of the product category by stealing share from competitors that are outside the category. Furthermore, pursuing this trajectory of improvement would enhance, rather than destroy, RIM’s product differentiation and its consequent ability to sustain profit margins.
Focus is scary—until you realize that it only means turning your back on markets you could never have anyway. Sharp focus on jobs that customers are trying to get done holds the promise of greatly improving the odds of success in new-product development.
Senior Executives’ Demand for Quantification of Opportunities
The job that line executives often hire market research to do in the resource allocation process is to define the size of the opportunity, not to understand how customers and markets work.
The information technology (IT) systems in most companies collect, aggregate, and summarize data in various ways to help managers make better decisions. The reports are undoubtedly helpful, but they also lead companies to develop new products and services destined to fail in the marketplace. Almost all corporate IT reports are structured around one of three constructs: products, customers, and organizational units. The data show managers how much of each product is being sold, how profitable each is, which customers are buying which products, and what costs and revenues are associated with servicing each customer. IT systems also report revenues and costs by business units, so that managers can measure the success of the organizations for which they have responsibility.
The odds of developing successful new products begin to tumble when managers collectively begin to assume that the customer’s world is structured in the same way that the data are aggregated. When managers define market segments along the lines for which data are available rather than the jobs that customers need to get done, it becomes impossible to predict whether a product idea will connect with an important customer job. Using these data to define market segments causes managers to aim innovation at phantom targets. When they frame the customer’s world in terms of products, innovators start racing against competitors by proliferating features, functions, and flavors of products that mean little to customers.16 Framing markets in terms of customer demographics, they average across several different jobs that arise in customers’ lives and develop one-size-fits-all products that rarely leave most customers fully satisfied. And framing markets in terms of an organization’s boundaries further restricts innovators’ abilities to develop products that will truly help their customers get the job done perfectly.
Like it or not, although market researchers often develop a solid understanding of the jobs that customers are trying to do, the primary language through which the nature of the opportunity must be described in the resource allocation process is the language of market size. Asking marketers to understand this concept is not the solution to the problem—because whether it is called “marketing myopia” or jobs-to-be-done, this concept has been taught before.17 It is a process problem. Because senior managers typically hire market research to quantify the size of opportunities rather than to understand the customer, the resource allocation process systematically and predictably perverts companies’ concept of the structure of their market so that it ultimately conforms to the lines along which data are available.
As a result, corporate IT systems and the CIOs who administer them figure among the most important contributors to failure in innovation. Data purchased from external sources have the same impact, because they are structured by product attributes, not by job. The readily available data actually obfuscate the paths to growth.
The solution is not to use data that are collected for historical performance measurement purposes in the processes of new-product development. Keep such data quarantined: They are the wrong data for the job. The size and nature of job-based or circumstance-based market categories actually can be quantified, but this entails a different research process and statistical methodology than is typically employed in most market quantification efforts.18
The Structure of Channels
Many retail and distribution channels are organized by product categories rather than according to the jobs that customers need to get done.19 This channel structure limits innovators’ flexibility in focusing their products on jobs that need to be done, because products need to be slotted into the product categories to which shelf space has been allocated.
As an illustration of this challenge, a manufacturer of power tools observed that when hanging a door, tradesmen used at least seven different tools, none of which were job specific, and wasted a lot of time picking up these tools and putting them down. The company developed a new tool concept positioned on the job that made it much easier to hang doors accurately. However, it could not be categorized as a plane, a chisel, a screwdriver, a drill, a level, or a hammer. When the company presented the product to the tool buyer of a major retail chain, the buyer responded, “Look. I have a job to do. Here’s the plan-o-gram for my shelf space. I buy drills, sanders, and saws. The vendor that offers the most horsepower at a price point gets the space. Your product doesn’t help me.”
This phenomenon leads many new-market disruptors to seek new channels to the customer—a topic we address in chapter 4. If the product is disruptive to the established retail or wholesale channels because it doesn’t help those institutions make more money in the way they are structured to make money, they won’t sell it. Consequently, successful disruptive innovators often find that their product must enable a new class of retailers, distributors, or value-added resellers to move up-market and disrupt established channels.20
Solving this problem by devising a new channel that is structured and motivated to sell the disruptive, job-positioned product seems ludicrous to executives who need innovations to grow very big, very fast. Doesn’t a big established channel promise a much faster ramp to volume? Ironically, it often does not. Finding or building new channels often means turning your back on profits that probably would not have materialized in existing channels anyway.
Advertising Economics and Brand Strategies
The fourth reason why marketing executives tend to segment markets by product or customer attributes is to facilitate communication with customers. It seems easier to devise a communications strategy and to choose the most cost-effective marketing media buys if consumer markets are sliced along dimensions such as age, sex, lifestyle, or product category. The same seems true if marketers slice commercial markets by geography, industry, or size of business. But when communication strategies drive segmentation schemes, the attributes of the targeted customers can confuse the product development process, causing companies to develop products that do several jobs poorly, and none perfectly.
Think back to our example of the quick-service food restaurant’s milkshakes, and consider a member of a demographic segment—a forty-year-old married man with two young sweet-toothed children, who also has a long, boring commute to work and gets hungry at lunchtime. What and how should the chain communicate to this customer? If it tells him that he can quickly buy a viscous, interestingly chunky milkshake from a self-serve machine when he needs something to keep his hands busy during his boring commute, how can the chain also tell him that he should come back to hire a small liquid shake when he needs to capitulate to his children? Or drop by to hire a hamburger when feed-me-fast-at-lunchtime is the job? Sending separate communications about each of these jobs to the same customer is prohibitively expensive, and yet communicating all of them to the customer at once would be confusing. So what’s the chain to do?
The answer is that just as it needs to develop products for the circumstance and not the customer, the chain needs to communicate to the circumstance, and not necessarily to the consumer. It can communicate to the circumstance with a brand, if it employs the right branding strategy. If it does this, then when customers find themselves in the circumstance, they will think instinctively of the brand and know what product to buy in order to get that job done.
Brands are, at the beginning, hollow words into which marketers stuff meaning. If a brand’s meaning is positioned on a job to be done, then when the job arises in a customer’s life, he or she will remember the brand and hire the product. Customers pay significant premiums for brands that do a job well.
Some executives worry that a low-end disruptive product might harm their established brand. They can escape this problem by appending a second word to their corporate brand. We call this word a purpose brand because it communicates to a circumstance—to a job that the disruptive product should be hired to do. If customers hire a disruptive product to do the wrong job, it will disappoint and thereby tarnish the corporation’s brand.21 If the disruptive product is hired for the job that it was designed to do, it will delight the customer and thereby strengthen the corporate brand—even though the disruptive product’s functionality may not be as good as that of mainstream products. This is because customers define quality within the context of the job to be done.
Let’s examine Kodak’s experience when it launched single-use cameras, which were a classic new-market disruption. Because of their inexpensive plastic lenses, the quality of photographs taken with single-use cameras was not as good as the photos taken by good 35mm cameras. As a result, the proposition to launch a single-use camera business encountered vigorous opposition within Kodak’s film division. The corporation finally gave responsibility for the opportunity to a completely different organizational unit, which launched single-use cameras with a purpose brand—the Kodak Fun-saver. This was a product to be hired when customers needed to save memories of fun occasions but had forgotten to bring a camera. The Funsaver camera competed against nonconsumption. Customers whose basis of comparison was to have no photos at all were delighted with the quality of this solution to saving their fun. Creating a purpose brand for a disruptive job differentiated the product, clarified its intended use, delighted the customers, and thereby strengthened the Kodak brand.
Marriott Corporation has done the same thing by developing a brand architecture that is consistent with several different jobs its customers experience in life. This architecture has facilitated the creation of new disruptive businesses, while strengthening the Marriott brand at the same time. Under the endorsement of the Marriott brand, we have been taught to hire a Marriott Hotel when the job is to convene a major business meeting, and to choose a Courtyard by Marriott (“The hotel designed by business travelers for business travelers”) when the job is to get a clean, quiet place to work into the evening. We learned to hire Fairfield Inn by Marriott when the job is finding an inexpensive place to stay as a family, and Residence Inn by Marriott to find a home away from home. The Marriott brand remains unsullied by all of this, because the purpose brands make the job clear.
In contrast, if Marriott marketers had positioned Courtyard hotels in a segment defined by a lower price point—a cheaper, lower-quality solution to the same job that the top-tier Marriott-brand hotels are hired to do—then the disruption could indeed have damaged the Marriott brand. But if a crisply defined purpose brand guides customers to hire the various hotels to do very different jobs, and if the hotel chains each are designed to do their respective jobs perfectly, then they all will be viewed as high-quality hotels, thereby strengthening the endorsing power of the Marriott brand. Brand strategies that make it easy for customers to make the connection between a job that arises and the product they can hire to do the job perfectly can make disruption all the easier.
The Dangers of Asking Customers to Change Jobs
At a fundamental level, the things that people want to accomplish in their lives don’t change quickly. This is why in our disruptive innovation research, the trajectories of improvement that customers can utilize in any given application or tier of the market tend to be quite flat. Given this stability, an idea stands little chance of success if it requires customers to prioritize jobs they haven’t cared about in the past. Customers don’t just “change jobs” because a new product becomes available. Rather, the new product will succeed to the extent it helps customers accomplish more effectively and conveniently what they’re already trying to do.
Let’s test the viability of a new-product idea by exploring the potential for digital imaging to create growth by disrupting photographic film. How did most of us use photographic film prior to digital photography? We wanted good shots, so we often took multiple pictures of the same pose, in case somebody blinked at the wrong instant. When we dropped our film off at the developer’s, most of us ordered double prints. If one of the pictures turned out well, we wanted a spare easily available to send to a friend or relative. We brought the photos home, flipped through them, put them back into the envelope, and put them into a box or drawer. About 98 percent of all images were looked at only once. Only rare, conscientious people went back and mounted the best photos in an album. Most of us wanted to maintain good photo albums and intended to do so, but the fact was that we just had higher priorities.
Some digital imaging companies then came along with interesting propositions. “If you’ll just take the time to learn how to use this software, you can edit out the red-eye in all those flash pictures that you only look at once” was one. “You can now keep all your pictures neatly arranged and sortable in online photo albums” was another. It turns out that the vast majority of digital camera owners do neither of these things. Why? Because they weren’t prioritizing those things before. Innovations that make it easier for customers to do what they weren’t already trying to get done must compete against customers’ priorities. This is very hard to do.
Digital camera owners use their cameras for jobs they already had been trying to get done. For example, most of us use such a camera to verify on the spot that the image is good, and if it isn’t, we delete it and try again—the same job as taking multiple shots on film of the same pose. And we send digital images much less expensively and conveniently to far more people over the Internet than we ever had been able to do when we ordered double prints. (Interestingly, have you noticed what we do after we’ve looked at an image that has been e-mailed to us? We click “close,” putting it back in some “envelope” on our hard drive.) The things we prioritize in our lives are remarkably stable.
Another example: Hundreds of millions have been spent to apply new technologies—the Internet and e-book displays, specifically—to reshape the college textbook industry. Innovators have attempted to develop and sell tablets that can display downloaded e-books. And with many textbooks, you can click on a URL to obtain far more information about the topic than could possibly be included within the limits of a book. Would we expect these investments to generate significant growth? Our guess is that they will not. Although we would like to believe that all undergraduate students are rigorous seekers of knowledge, the job that many college students are really trying to get done, from our observation, is to pass their courses without having to read the textbook at all.
These companies have spent a lot of money helping students to do more easily something that they have been trying not to do. It would probably take far less money to create from the same technology a service called “Cram.com”—a utility that would make it easier and cheaper for students to cram more effectively for their exams. This would likely work because cramming is something that students already are trying to do, but with marginal efficacy. There are a lot of textbook-avoiders on campuses—a huge market of nonconsumption.
After logging on, Cram.com would ask subscribers what course they need to cram for—say, College Algebra. Then it would ask which of this list of textbooks the professor expected them to have read by now. It would ask them to click on the type of problem that they are having trouble with, and it would walk them through a tutorial.
The next year, Cram.com would need to offer a new and improved service, one that made it even easier and faster to cram better—inching up from the least-conscientious to the sporadically diligent tiers of the student population. After a few years, two students might be overheard in the college bookstore anguishing over the exorbitant price of a textbook: “You know, my brother took that course last year. He’s a good student, but he never even bought the book. He just used Cram.com from the beginning of the semester, and he did great.” Bingo. A new-market disruption that helped customers achieve what they already had been trying to do.
Identifying disruptive footholds means connecting with specific jobs that people—your future customers—are trying to get done in their lives. The problem is that in an attempt to build convincing business cases for new products, managers are compelled to quantify the opportunities they perceive, and the data available to do this are typically cast in terms of product attributes or the demographic and psychographic profiles of a given population of potential consumers. This mismatch between the true needs of consumers and the data that shape most product development efforts leads most companies to aim their innovations at nonexistent targets. The importance of identifying these jobs to be done goes beyond simply finding a foothold. Only by staying connected with a given job as improvements are made, and by creating a purpose brand so that customers know what to hire, can a disruptive product stay on its growth trajectory.
Notes
1. See, for example, chapter 7 in Dorothy Leonard, Wellsprings of Knowledge (Boston: Harvard Business School Press, 1996).
2. Some researchers (for example, Joe Pine, in his classic work Mass Customization [Boston: Harvard Business School Press, 1992]) argues that ultimately segmentation may be unimportant because individual customers’ needs might be addressed individually. Although this is conceivable, getting there will take some time. We will show in chapters 5 and 6 that in many circumstances it is not possible. Segmentation, in other words, will always be important.
3. We are deeply indebted to two of our colleagues who originally introduced us to this way of thinking about the structure of markets. The first is Richard Pedi, CEO of Gage Foods in Bensenville, Illinois. Rick coined for us the language “jobs to be done.” Independently, Anthony Ulwick of Lansana, Florida–based Strategyn, Inc., has developed and used a very similar concept in his consulting work, using the phrase “outcomes that customers are seeking.” Tony has published a number of pieces on these concepts, including “Turn Customer Input into Innovation,” Harvard Business Review , January 2002, 91–98. Tony uses these concepts to help his firm’s clients develop products that connect with what their customers are trying to get done. We are also indebted to David Sundahl, who as Professor Christensen’s research associate helped formulate many of the initial ideas upon which this chapter was built.
4. Many of the details in this account have been changed to protect the proprietary interests of the company while preserving the fundamental character of the study and its conclusions.
5. The language in this paragraph reveals a nested system. Within the overarching job to be done are many unique outcomes that need to be achieved in order for the job to be done perfectly. Hence, when we use the term outcome in our work on segmentation, we refer to the individual things that need to be done right, such as lasting a long time, not creating a mess, and so on, in order for the job to get done right.
6. One can see this problem even in the recent marketing trend toward so-called markets of one. Markets of one drive companies to provide customization options that meet all the needs of individual customers. But customization comes at a price. What is more, it often does not provide an understanding of the underlying outcomes-driven logic of customer purchasing decisions. Because market research tools as sophisticated as geocoding pay attention to the attributes of people, they cannot yield market segmentation schemes that make sense to customers—each of whom has many jobs that he or she is trying to get done. There actually is a lot of commonality in jobs to be done within a population of people and companies, suggesting that targeting markets of one may often not be a viable or desirable marketing objective.
7. The observation that customers search across product categories to find ways to achieve needed outcomes is grounded in psychological research, which demonstrates that our perceptual systems are geared toward understanding what we can use objects to do and whether they are optimal for such purposes. For example, psychologist James J. Gibson, widely respected for his research on theories of perception, has written about “affordances,” a concept that mirrors what we term “jobs” or “outcomes.” According to Gibson, “The affordances of the environment are what it offers . . . , what it provides or furnishes, either for good or ill.” Gibson asserts that we see the world not in terms of primary qualities, like being yellow or being twenty-four ounces by volume, but in terms of outcomes: “What we perceive when we look at objects are their [outcomes], not their qualities. We can discriminate the dimensions of difference if required to do so in an experiment, but what the object affords us is what we normally pay attention to.” What matters about the ground, for example, is that it provides us a platform on which to stand, walk, build, and so forth. We don’t “hire” the ground for its color or moisture content per se. The affordances of products, in Gibson’s terms, are the outcomes that those products enable their users to achieve. See James J. Gibson, The Ecological Approach to Visual Perception (Boston: Houghton Mifflin, 1979), 127.
8. Finding a “killer app” has been a holy grail of innovators ever since Larry Downes and Chunka Mui popularized the term in Unleashing the Killer App (Boston: Harvard Business School Press, 1998). Unfortunately, much of what has been written on this search has simply comprised accounts of historically successful killer apps. We think that a rigorous study of such applications would show that they were killers because the product or service was squarely positioned on a job that a lot of people already were trying to get done—the innovation in question simply helped them get it done better, and more conveniently.
9. The firm headed by Mr. Ulwick that we mentioned in note 3 has proprietary methods for categorizing job-defined markets and measuring their size.
10. This information was recounted to us in a July 2000 interview with Mickey Schulhoff, who worked for over twenty years as CEO of Sony America and served for much of this time as a member of Sony Corporation’s board of directors.
11. We must emphasize here that we have absolutely no inside information about any of the companies or products mentioned in this section, nor have we conducted any formal market research on these products or jobs. Rather, we have written this material simply to illustrate how theories that are constructed on circumstance-based categories about what products will connect with customers can bring clarity and predictability to what historically has been a hit-and-miss task in innovation. It may very well be, for example, that given RIM’s strategy of emphasizing sales to enterprises rather than individual customers, it is the corporate CIO manager who has the job to do: being sure that the firm’s knowledge workers are able to communicate and be contacted on a real-time, no-excuses basis. The same exercise would be useful if applied to this job.
12. As this book was being written, in fact, RIM and Nokia announced a partnership through which Nokia will license RIM’s software to enable wireless e-mail on Nokia’s phones—a deal that makes sense for both firms because in many ways their products are hired to do the same job. Whether one would prefer to produce the BlackBerry that ultimately will compete against wireless phones to do this job, or whether it would be better to provide the software inside others’ wireless phones, as the new Nokia-RIM arrangement provides, is a question that the theory in chapters 5 and 6 will address.
13. We have gone out on the end of a very long limb in making these statements, because the future has not yet happened. We have presented this analysis provocatively in order to illustrate the fundamental principle. In all probability, the makers of wireless hand-held devices will engage in a headlong rush to incorporate every competitor’s latest features on their products, leading the industry very prematurely to a situation in which products are un-differentiated, commoditized, one-size-fits-all solutions. When this happens, we urge our readers not to conclude that “Christensen and Raynor were wrong.” We would assert that although some blurring and copying of features will inevitably occur, the longer each manufacturer focuses on incorporating those features and functions that do a unique job well and the longer they position their marketing message on that unique job, the faster the suppliers of these devices will grow because they will gain share not against each other, but against other products and services that get hired to do those jobs. We would also argue that these firms will preserve their differentiability and profitability longer if they focus their improvement trajectory on a unique job. The fact that they are unlikely to do this does not disprove the principle.
14. See, for example, Leonard, Wellsprings of Knowledge ; Eric von Hippel, The Sources of Innovation (New York: Oxford University Press, 1988); and Stefan Thomke, Experimentation Matters: Unlocking the Potential of New Technologies for Innovation (Boston: Harvard Business School Press, 2003).
15. In concept, of course, being able to carry one small device that does everything in a briefcase or purse is something that all customers would say they want. But it is rare that there are no technological trade-offs to adding diverse functionality to a product. Software makes it less expensive to tailor a single physical platform to do a range of focused jobs. Our proposition, however, is that even in this situation, a company would do better by using one single hardware platform to market different software-defined, optimized products that are positioned on different jobs. It is likely that for a long time electronic devices that combine such a wide range of functionality in the interests of doing many jobs simultaneously—organize me, connect me, help me have fun, and so forth—are likely to end up more like a Swiss army knife: a pretty good knife, terrible scissors, a marginal bottle opener, and a crummy screwdriver. As long as the jobs that customers need to get done arise at independent points in time and space, we would expect that most customers will continue to carry multiple devices until a one-size-fitsall omnibus device can do all jobs as well as its focused competitors.
16. The experience that Intuit had in disrupting the small business accounting software market with its QuickBooks product typifies this situation. Until the early 1990s the only available small business software had been written by accountants for accountants. Because they defined their market in terms of the product, they framed their competitors as other makers of accounting software. The vision that this framing gave them about how to get ahead of their competitors, therefore, was to engage in an arms race of sorts: Be faster adding features and functionality in the form of new reports and analyses that could be run. The industry gradually converged upon undifferentiated, one-size-fits-all products, into which everybody had appended everybody else’s features.
Intuit’s marketers were wont to watch what jobs the customers of Intuit’s Quicken personal financial management software were trying to get done for themselves when using the product. In the course of doing this, they observed to their surprise that a large proportion of Quicken users were employing it to keep track of their small business’s finances. The job, they learned, was basically to keep track of cash. These small business owners had their fingers in every dimension of their business and did not need all of the financial reports and analyses that the prevailing software providers had cobbled into their products. Intuit launched QuickBooks at this job that small business owners needed to get done—“Just help me be sure I don’t run out of cash”—and succeeded spectacularly. Within two years the company had seized 85 percent of the market with a disruptive product that lacked most of the functionality of the competing products.
17. Theodore Levitt has been a leading proponent of this view among those who research and write about issues in marketing. Christensen remembers that when he was an M.B.A. student he heard Ted Levitt declare, “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole.” In our words, they have a job to do, and they hire something to do the job. Levitt’s best-known explanation of these principles is found in Theodore Levitt, “Marketing Myopia,” Harvard Business Review, September 1975, reprint 75507.
18. For suggestions on how the magnitude of job-defined market segments can be measured, see Anthony W. Ulwick, “Turn Customer Input into Innovation,” Harvard Business Review, January 2002, 91–98.
19. We are grateful to Mike Collins, founder and CEO of the Big Idea Group, for his comments that led to many of the ideas in this section. Mike reviewed an early draft of this chapter, and his thoughts were extraordinarily helpful.
20. One reason that some (but not all) “category killer” retail formats—companies such as Home Depot and Lowe’s—have been able to disrupt established retailers so successfully is that they are organized around jobs to be done.
21. Because many marketers inadvertently and over time tend to segment their markets along attribute-based categorizations of products and people, it is unfortunate, but not surprising, that they often do to their brands the same thing that they have done to their products. Brands often have become omnibus words that don’t do well any of the jobs that customers need to get done when they hire the brand. Because most advertisers want a brand’s meaning to be flexible enough for a range of products to be housed under its umbrella, many brands have lost their association with a job. When this happens, customers remain confused about what product to buy to get the job done when they find themselves in a particular circumstance.