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.

Rotman Management Magazine - - FRONT PAGE -

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.

Stephen Wunker is Man­ag­ing Di­rec­tor and U.S. Of­fice Head of New Mar­kets Ad­vi­sors. He is the co-au­thor of Jobs to be Done: A Roadmap for Cus­tomer-cen­tered In­no­va­tion (AMACOM, 2016). He co-founded Yowzit, one of Africa’s lead­ing sites for rat­ings and...

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