A Winning Formula for Innovation
The theories of disruptive innovation and Jobs to be Done are natural complements: The former helps us spot threats and opportunities, while the latter guides our actions.
ANYTIME A START-UP RAISES A LOT OF CAPITAL
or an interesting product takes off, the Internet is abuzz with how that company or product is disrupting its industry. But as Clayton Christensen — the Harvard Business School professor who coined the term ‘disruptive innovation’ — has explained, the term ‘disruption’ is often misunderstood and misused. It’s about more than just someone shaking up an industry. While it might seem trivial to argue the theory’s precise definition, being able to spot the true markers of disruption enables companies to proactively capitalize on potentially game-changing areas of opportunity.
With that in mind, it’s important to recognize that being able to spot opportunity is only part of the battle. To take advantage of these openings, companies need to design solutions that satisfy real consumer needs. And that’s where another theory popularized by Prof. Christensen comes into play: Jobs to be Done — a theory used to explain why customers buy one product over another.
Used together, these two theories are a powerful force: While the former helps us see where there are promising opportunities to innovate, the latter tells us how to do so. Once they understand the details of both theories and how they intersect, leaders are left with a recipe for successful innovation.
Understanding Disruptive Innovation
The general idea of ‘disruption’ isn’t particularly complicated: A company successfully challenges an incumbent business by targeting overlooked customers or usage occasions, offering lower prices, greater convenience or totally new types of performance. More precisely, three related factors are needed for an innovation to be disruptive.
INCUMBENTS ARE FOCUSED ON UPPER-END CUSTOMERS.
An opportunity for disruption arises when businesses focus on their most demanding — and profitable — customers. These companies don’t
by Stephen Wunker and David Farber
usually run into trouble because they’re blindsided by new technologies that they never thought of; rather, they tend to ignore disruptive innovations because those new solutions are initially insufficient to satisfy the customers they prioritize. Moreover, the short-term revenues and margins on those new offerings pale in comparison to those of the solutions being sold to the upper-end customers. Yet taking those painful near-term steps down market — rather than pursuing the seemingly logical steps to satisfy upmarket customers — is precisely what is necessary to stave off trouble in the long run. This is what Prof. Christensen refers to as ‘the innovator’s dilemma’, and it’s what gives smart, forwardlooking leaders an edge.
LESS-DEMANDING CONSUMERS OR NON-CONSUMERS OFFER OPPORTUNITY.
When incumbents focus on their most demanding customers, eventually they end up over-shooting what a lot of their customers demand. Customers are forced to either pay for more than what they need, use a product that is too complex for their needs or not make a purchase at all.
NEW OFFERINGS ARE INFERIOR ALONG TRADITIONAL DIMENSIONS, BUT COMPETE ASYMMETRICALLY.
The disruptive solutions that customers end up buying offer greater accessibility or lower prices by trading off some traditional dimensions of performance. Digital cameras, for instance, initially had inferior photo quality to film, but they provided photos with no wait or additional cost. While solutions that excel along traditional dimensions don’t usually get ignored, products that compete asymmetrically are often overlooked, To show and how they not make all breakthrough it difficult for innovations incumbents to are respond. disruptive, let’s look at Tesla. The electric car company has certainly shaken up the automotive industry. While the Model S excels along certain dimensions that have been somewhat overlooked in the industry, it doesn’t fit the criteria of a disruptive innova- tion. Rather than introducing an inferior product down market, Tesla aimed for highly profitable, highly-demanding customers. In terms of technology, speed, acceleration, and safety — key existing dimensions of performance — the Model S overshoots much of what the market demands. Instead of disrupting the industry, Tesla is prompting competitors to respond.
General Motors’ entry into ride-sharing, through investing in the company Lyft, is a disruption, even if GM is courageously disrupting itself. The markets being disrupted are those for urban transport and second cars. Ordering a ride from Lyft comes with certain trade-offs: You can’t just jump in the car, you get little satisfaction from the driving experience, and you don’t express your personal style through your transportation. But on the positive side, you don’t have to worry about parking, and you avoid the fixed expense of owning a vehicle.
Understanding the theory of disruptive innovation lets us see where there is room for innovation. It predicts where there may be threats from new entrants and how incumbents will respond, but it doesn’t explain what customers want in a new solution. For that, we turn to Jobs to be Done.
Applying a Jobs-to-be-done Lens
The basic premise of the Jobs-to-be-done theory is that customers ‘hire’ a product to satisfy a ‘job’ that they are trying to get done. Jobs can be either functional in nature (e.g., making sure your children eat a nutritious meal) or emotional (e.g., having your partner appreciate the effort you put into making the meal). At any given time, an individual may have dozens of jobs that need to be satisfied, and they can occur in hierarchies; you may care first about the nutritional content of the kids’ meal, but you’d also like it to taste good.
Successfully launching a new product requires understanding where there are jobs that customers find both important
and hard to satisfy with the existing array of available products. There are a number of factors that can be used to predict demand for a new solution. We use a tool called the Jobs Atlas to show the overall landscape of Jobs to be Done. It groups those factors into three primary categories.
1. KNOW WHERE YOU’RE STARTING FROM
The first step in predicting future customer behaviour is understanding what is happening today. Successful innovators look at the jobs customers are trying to get done, as well as the job drivers that make certain jobs more or less important for particular customer types. Think about Planet Fitness — a gym franchise that boasted a compound annual growth rate of 26 per cent from 2008 to 2012 and ranked as one of Forbes’ top franchises in 2014. By many standards, the gym appears to be far inferior to the competition: The facilities have fewer free weights and no pools. It regularly puts out pizza, bagels and candy. It hardly seems like a place for fitness buffs. And that’s precisely the point. The people who choose Planet Fitness prioritize ‘jobs’ such as easily staying in shape, feeling like they’re doing something for their health and avoiding judgment as they work out.
It’s also important to understand how people try to get certain jobs done today and where they experience ‘pain points’. Finding ways to eliminate the frustrations and awkward workarounds that customers experience can be a powerful way to innovate. At the same time, telling people that they need to upend their lives to use your new product is a fast way to make sure that your launch goes nowhere.
2. CHART THE DESTINATION AND ROADBLOCKS
The second stage of understanding customer decision-making involves defining what success looks like from the customer’s perspective and looking at what obstacles will stand in the way of consumers buying or using a new product. For Planet Fitness, success might have a few metrics like ‘compliments received from friends’ or ‘feelings of accomplishment’ — things that gyms can foster through social gatherings where people talk about how they’ve gotten more into fitness, for example. Obstacles could include the lack of occasions that might trigger a visit to the gym on any particular day — which might be avoided through having frequent ‘special occasions’ motivating a visit.
3. MAKE THE TRIP WORTHWHILE
Finally, as much as we want to focus on the customer, it’s important to look at what else the customer is seeing and how much they’re willing to pay to get a job done. As good as your new solution may be, it doesn’t exist in a vacuum. There are a number of competitors out there, and they may not be who you think. Sree Sreenivasan, the former Chief Digital Officer at New York’s Metropolitan Museum of Art, once described the museum’s competition quite insightfully. “Is it MOMA? The Guggenheim? No, our competition is Netflix. Candy Crush. It’s life in 2017.” Understanding the real competition means looking at any products that could conceivably satisfy the jobs customers are trying to get done — and then understanding what the value of accomplishing those jobs is really worth.
Tying the Theories Together
Companies seeking opportunity — or looking to avoid threats — from disruption can combine these theories in powerful ways. Jointly, they show where incumbents are vulnerable and how customers hunger for new solutions.
Finding where low-end disruption might occur requires disaggregating offerings into the jobs they get done for people. Which of these jobs are over-served, and in what circumstances? Seen this way, it’s obvious that ride-sharing services can disrupt automakers. Second cars, for instance, may not be commonly used for big family outings and large shopping trips. Rather,
a significant number of families may use them when circumstances spring up or for short commutes — ideal situations for disrupting car ownership.
These low-end opportunities often stem from a handful of common job types:
• Access a solution quickly, without worrying too much about whether it’s perfect;
• Avoid having to acquire any special skills to use the solution;
• Make do in a temporary situation, such as being away from your usual home or office;
• Save money however possible.
By contrast, new market opportunities stem from understanding the full landscape of jobs that people are trying to get done in certain situations, no matter how they might be accomplishing those jobs today. For instance, digital cameras, and then cellphone cameras, sprung up not because people were too cheap to buy film (these solutions started out being expensive) but because people wanted to have a good image even if that meant taking a lot of pictures, and they wanted to share those images immediately and widely.
There are innumerable types of jobs that can give rise to new markets, but very rarely are the jobs themselves new. You need to look at what people are trying to get done, and then think about how novel solutions could accomplish those jobs in distinct ways. Understand what jobs really matter to people, and where current approaches are cumbersome or frustrating, even if people take those limitations for granted. People used albums and double
prints to share pictures before the advent of digital photography, but digital’s better way of doing so created entirely new industries by addressing problems many people didn’t even realize they had.
In closing
The theories of disruptive innovation and jobs to be done are natural complements. The former helps us spot threats and opportunities, while the latter guides us on what to do about them. But success can only come once the fundamental elements of those two theories are extracted and thoroughly understood. By breaking industry movements and customer behaviours down into identifiable parts, companies can develop concrete views on how to plan for the future.