The Innovator's Solution: Creating and Sustaining Successful Growth (Creating and Sustainability Successful Growth)

by Clayton

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.

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.

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 sustaini...

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.

Affinities.

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.

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 define...

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 ...

Predictable marketing requires an understanding of the circumstances in which cus...

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 “h...

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 ...

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

Minimalist full screen multitouch OLED panel and a UX focused UNIX-based operating system in beautifully designed hardware.

“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.

I will venture a guess that keyboards play a major role in a consumer’s decision to purchase a mobile device. I used Blackberry phones because of: 1. The ergonomic feel of the keyboards on the mobile device - I used Sony Ericsson’s P990 prior. It was easier to type on the Blackberry even though it was cheaper. 2. The network effect of the fully encrypted BlackBerry Messenger and that elusive BB PIN which has become the hallmark blue bubble on iOS devices. The design and precision of the iPhone’s touchscreen in concert with the iOS operating system just makes the usability of an iPhone much better. The closed system, it is argued, makes Apple ensure that this remains true. An iOS device hardly ever seems clunky to use. Oh, and a great camera. #iphonography - certainly helped that they had the iPod, which created the brand equity that they leveraged. Apple had come to be known for great ‘cool’ design on portable consumer devices. For some people, the iPhone became a super iPod. They continue to leverage that brand equity on everything that they build today.

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.

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 ...

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.

But what if RIM structured the segments of this market according to the jobs that people are trying to get done?

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 bori...

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 BlackB...

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.

It’s 2023, and RIM didn’t make it alive 😕. A super iPod won the game. People love their music 🤣.

RIM’s biggest issue is probably not a lack of engineering talent; it is deciding which problems it should deploy that talent against.

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.

Here we are. Apple leads on performance parity due to having a closed system, tight integration between its high quality devices, usability, design, and network effects. For these reasons, they are consistently up-market. The Android operating system is winning an OS market share game because it is open source software and is used on many devices - large ecosystem, but this is a very fragmented space.

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.

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 tha...

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 align...

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 influen...

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 n...

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.

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.