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

by Clayton

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 imp...

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.

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, fun...

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.

There are multiple ways of looking at this. In the context of the ongoing example, the current category winner is a one-size-fits-all product, but one-size-fits-all mobile devices are commoditized at this point. Doing anything less will mean being less relevant to the customer.

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 r...

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.

Data purchased from external sources have the same impact, because they are structured by product attributes, not by job.

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.

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.

Finding or building new channels often means turning your back on profits that probably would not have materialized in existing channels anyway.

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.

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.

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.

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 mainstre...

Creating a purpose brand for a disruptive job differentiated the product, clarified its intended use, delighted the customers, and thereby strengthened the Kodak 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.

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.

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.

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.

Strategyn, Inc., has developed and used a very similar concept in his consulting work, using the phrase “outcomes that customers are seeking.”

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.

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.

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.

The industry gradually converged upon undifferentiated, one-size-fits-all products, into which everybody had appended everybody else’s features.

Anthony W. Ulwick, “Turn Customer Input into Innovation,” Harvard Business Review, January 2002, 91–98.

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.

I think that customer perception has changed regarding this. Because great brands have the tools and ability to design great products rapidly, people are now more likely to purchase products from a known brand in a different category because they trust that the brand creates great products. Apple’s AirPods. Amazon’s Echo.

Which customers should we target? Which customer base will be the most valuable foundation for future growth? Is our growth potential greatest if we pursue the largest markets? How can we predict which competitors will target which sets of customers? What sales and distribution channels will most capably embrace our product and devote the resources required to grow the market as fast as possible?

The message of chapter 2 was that although sustaining innovations are critical to the growth of existing businesses, a disruptive strategy offers a much higher probability of success in building new-growth businesses.

Using flawed segmentation schemes, they often introduce products that customers don’t want, because they aim at a target that is irrelevant to what customers are trying to get done.

Which initial customers are most likely to become the solid foundation upon which we can build a successful growth business? And how should we reach them? It’s relatively straightforward to find the ideal customers for a lowend disruption.

The key to success with low-end disruptions is to devise a business model that can earn attractive returns at the discount prices required to win business at the low end.

When only a fraction of a population is using a product, of course, some of the nonconsumption may simply reflect the fact that there just isn’t a job needing to be done in the lives of those non-consumers. That is why the “jobs question” is a critical early test for a viable new-market disruption. A product that purports to help non-consumers do something that they weren’t already prioritizing in their lives is unlikely to succeed.

Another kind of nonconsumption occurs, however, when people are trying to get a job done but are unable to accomplish it themselves because the available products are too expensive or too complicated. Hence, they put up with getting it done in an inconvenient, expensive, or unsatisfying way. This type of nonconsumption is a growth opportunity.

A new-market disruption is an innovation that enables a larger population of people who previously lacked the money or skill now to begin buying and using a product and doing the job for themselves. From this point onward, we will use the terms nonconsumers and nonconsumption to refer to this type of situation, where the job needs to get done but a good solution historically has been beyond reach. We sometimes say that innovators who target these new markets are competing against nonconsumption.

We’ll begin with three short case studies of new-market disruption, and then synthesize across these histories a common pattern that typifies the customers, applications, and channels where new-market disruptions tend to find their foothold. We’ll explore why so few companies historically have sought nonconsume...

New-market disruptions follow a remarkably consistent pattern, regardless of the type of industry or the era in history when the disruption occurred.

Targeting customers who had been nonconsumers worked magic for Sony in two ways. First, because its customers’ reference point was having no television or radio at all, they were delighted with simple, crummy products. The performance hurdle that Sony had to clear therefore was relatively easy. This entailed a much lower R&D investment prior to commercialization than the vacuum tube makers had to make to commercialize the identical technology. The established market presented a much higher performance barrier to surmount, because customers there would only embrace solid-state electronics when they became superior to vacuum tubes in those applications.

When the crisis became clear, the manufacturers of vacuum tube products couldn’t just switch to the new technology and pull customers back into their old business model, because the cost structure of that model and of their distribution and sales channels was not competitive. The only way they could have retained or recaptured their customers would have been to reposition their companies in the new value network. That would have entailed, among other restructurings, shifting to a completely different channel of distribution.