When planning new products, companies often start by segmenting their markets and positioning their merchandise accordingly. This segmentation involves either dividing the market into product categories, such as function or price, or dividing the customer base into target demographics, such as age, gender, education, or income level.
Unfortunately, neither way works very well, according to Harvard Business School professor Clayton Christensen, who notes that each year 30,000 new consumer products are launched—and 95 percent of them fail.
"The jobs-to-be-done point of view causes you to crawl into the skin of your customer and go with her as she goes about her day, always asking the question as she does something: Why did she do it that way?"
The problem is that consumers usually don't go about their shopping by conforming to particular segments. Rather, they take life as it comes. And when faced with a job that needs doing, they essentially "hire" a product to do that job. To that end, Christensen suggests that companies start segmenting their markets according to "jobs-to-be-done." It's a concept that he has been honing with several colleagues for more than a decade.
"The fact that you're 18 to 35 years old with a college degree does not cause you to buy a product," Christensen says. "It may be correlated with the decision, but it doesn't cause it. We developed this idea because we wanted to understand what causes us to buy a product, not what's correlated with it. We realized that the causal mechanism behind a purchase is, 'Oh, I've got a job to be done.' And it turns out that it's really effective in allowing a company to build products that people want to buy."
Christensen, who is planning to publish a book on the subject of jobs-to-be-done marketing, explains that there's an important difference between determining a product's function and its job. "Looking at the market from the function of a product really originates from your competitors or your own employees deciding what you need," he says. "Whereas the jobs-to-be-done point of view causes you to crawl into the skin of your customer and go with her as she goes about her day, always asking the question as she does something: Why did she do it that way?"
Hiring a milkshake
In his MBA course, Christensen shares the story of a fast-food restaurant chain that wanted to improve its milkshake sales. The company started by segmenting its market both by product (milkshakes) and by demographics (a marketer's profile of a typical milkshake drinker). Next, the marketing department asked people who fit the demographic to list the characteristics of an ideal milkshake (thick, thin, chunky, smooth, fruity, chocolaty, etc.). The would-be customers answered as honestly as they could, and the company responded to the feedback. But alas, milkshake sales did not improve.
The company then enlisted the help of one of Christensen's fellow researchers, who approached the situation by trying to deduce the "job" that customers were "hiring" a milkshake to do. First, he spent a full day in one of the chain's restaurants, carefully documenting who was buying milkshakes, when they bought them, and whether they drank them on the premises. He discovered that 40 percent of the milkshakes were purchased first thing in the morning, by commuters who ordered them to go.
The next morning, he returned to the restaurant and interviewed customers who left with milkshake in hand, asking them what job they had hired the milkshake to do. Christensen details the findings in a recent teaching note, "Integrating Around the Job to be Done."
"Most of them, it turned out, bought [the milkshake] to do a similar job," he writes. "They faced a long, boring commute and needed something to keep that extra hand busy and to make the commute more interesting. They weren't yet hungry, but knew that they'd be hungry by 10 a.m.; they wanted to consume something now that would stave off hunger until noon. And they faced constraints: They were in a hurry, they were wearing work clothes, and they had (at most) one free hand."
The milkshake was hired in lieu of a bagel or doughnut because it was relatively tidy and appetite-quenching, and because trying to suck a thick liquid through a thin straw gave customers something to do with their boring commute. Understanding the job to be done, the company could then respond by creating a morning milkshake that was even thicker (to last through a long commute) and more interesting (with chunks of fruit) than its predecessor. The chain could also respond to a separate job that customers needed milkshakes to do: serve as a special treat for young children—without making the parents wait a half hour as the children tried to work the milkshake through a straw. In that case, a different, thinner milkshake was in order.
Proven success and purpose branding
Several major companies that have succeeded with a jobs-to-be-done mechanism:
FedEx, for example, fulfills the job of getting a package from here to there as fast as possible. Disney does the job of providing warm, safe, fantasy vacations for families. OnStar provides peace of mind.
Procter & Gamble's product success rate rose dramatically when the company started segmenting its markets according to a product's job, Christensen says. He adds that this marketing paradigm comes with the additional benefit of being difficult to rip off. Nobody, for example, has managed to copy IKEA, which helps its customers do the job of furnishing an apartment right now.
Christensen also cites the importance of "purpose branding"—building an entire brand around a particular job-to-be-done. Quite simply, purpose branding involves naming the product after the purpose it serves.
Kodak, for example, has seen great success with its FunSaver brand of single-use cameras, which performs the job of preserving fun memories. Milwaukee Electric Tool Corp. has cornered the market on reciprocating saws with its trademarked Sawzall, which does the job of helping consumers safely saw through pretty much anything. Its Hole-Hawg drills, which make big holes between studs and joists, are also quite popular. The company's other tools, which rely on the Milwaukee brand, are not nearly as celebrated.
"The word 'Milwaukee' doesn't give you any market whatsoever," Christensen says.
So, if jobs-to-be-done market segmentation is so effective, why aren't more companies designing their products accordingly? For one thing, future product planning usually involves analyzing existing data, and most existing data is organized by customer demographics or product category.
"I've got a list of mistakes that God made in creating the world, and one of them is, dang it, he only made data available about the past!" Christensen says. "All the data is organized by product category or customer category because that's easy to get. To go out and get data about a job is really hard. But there are a lot of people who hire consultants to tell them how big the market is. And because the data is organized in the wrong way, you start to believe that's how the market should be organized."
Furthermore, it's difficult for product developers to break the mold when many of their customers organize their store shelves around traditional marketing metrics. Christensen gives the example of a company that developed a novel tool designed to help carpenters with the daunting task of installing a door in a doorframe, a job that usually took several tools to do. But a major home goods store refused to sell the tool because its shelves were organized by product category—and there was no shelf in the store dedicated to the singular job of hanging a door.
"Most organizations are already organized around product categories or customer categories," Christensen says, "and therefore people only see opportunities within this little frame that they've stuck you in. So you have to think inside of a category as opposed to getting out. You've just got to make the decision to divorce yourself from the constraints that are arbitrarily created by the design of the old org chart." WK
Carmen Nobel is senior editor of HBS Working Knowledge.
Republished with permission of HBS Working Knowlegde
Interview: With Dr Wolfgang Amann, Executive Director Executive Education, Goethe Business School Frankfurt
Short biography: Dr. oec. (HSG) Wolfgang Amann learned his research skills at the Wharton School in Philadelphia and his executive education skills at IMD in Lausanne. After gathering experience in top management consulting, he has been marketing, designing, directing and delivering executive education seminars for a number of years. He directed in the past the Henley Center for Creative Destruction as well as the Henley Center of Excellence in Case Writing. He has also been Vice-Director of the Executive School at the University of St.Gallen where he was the Executive Director of a variety of international programs including all activities along the ‘value’ chain from program innovations, marketing, admission, operations, career services and alumni management.
He has also been a visiting professor in the field of international strategy and sustainability at Hosei University in Tokyo, Tsinghua in Beijing, the Indian Institute of Management in Bangalore, ISP in St.Petersburg, Warwick Business School and Henley Business School in the UK.
He now serves as Executive Director of Executive Education at Goethe Business School of the University of Frankfurt where he also teaches top management seminars on strategy and governance. He has written more than 100 case studies for executive education seminars and won the oikos global sustainability case writing award. He has received several best lecturer awards, such as for two times in a row the most prestigious European teaching award for his course on “Corporate strategy and governance: how to add value”, which was chosen as the top course amongst all CEMS courses offered at top business schools in 17 European countries.
He has written several books on corporate strategy, governance, managing complexity, humanism in business and work-life-balance.
The interview with Dr. Amann focuses on two questions:
•What are the three key aspects in complexity management to create and retain value when one tries to reduce or manage it
•What are strategies to successfully manage a high rate of innovation without being victim of an exploding complexity
As the audio is in German I have written a short summary of the key points Dr. Amann made during the interview.
The first aspect is that one has to accept the turbulent context in which organisations have to operate in today’s world. This affects a company’s strategies and its success with innovative products. Research shows that up to 80% of strategies have to change along the way to adapt to market changes; up to 95% of new product initiatives cannot be classified as successful. This requires high level of flexibility in planning and thinking to operate successfully in dynamic markets.
The second aspect is to shift complexity into areas where it really creates value. Key areas would be using the market and the consumers to find solutions to problems and create new product ideas; hence, tapping into the rich resources of the market through Open Innovation. This requires a shift in the company culture as the creative process happens in the market and the organisation needs to be prepared to use such a diversity offered by the market to filter out those ideas with the highest value to consumers. Although this creates more complexity, yet only in areas where the customer/consumer really values and pays for it.
The third aspect is to be very rigorous in standardizing processes and possibly products to eliminate energy drains in administrative work and to allow managers to focus their energy on core tasks of the business where value is added. A survey showed that only 10% of managers focus their energy consciously on these areas. This requires a more conscious mindset to invest time and energy in areas which are of importance and add value to the organization.
Strategies on how to deal with complexity in organization can be found in the book introduced below. It is written in a sort of ‘buffet style’ covering a wide variety of industries and companies with plenty of examples.
While geographic co-location has obvious benefits for firm innovation, it can also have serious drawbacks.
HBS professor Juan Alcácer and Ross School of Business professor Minyuan Zhao explore how firms tap into the rich resources of technology clusters while protecting the value of their innovations. To understand R&D dynamics in a cluster, the scholars argue, we must recognize that a firm located in a particular cluster may also be part of an extended network, with its operations strategically integrated across multiple locations and multiple business lines.
Key concepts include:
* When surrounded by direct competitors, the technology leaders in a cluster favor technologies that can be quickly developed internally, and more of their R&D projects involve researchers from other locations, particularly from primary R&D sites.
* Internal linkages across a firm protect firm knowledge from appropriation not only in countries where intellectual property rights protection is weak, but also in risky competitive environments in general.
The full article is avilable via: my dowload site
Repulisched with permission of HBS Working Knowledeg
Can you out-negotiate Wal-Mart? Can women overcome gender stereotypes to win equitable pay? Recent research from Harvard Business School looks at important factors to consider before sitting down at the bargaining table.
Sharpening Your Skills dives into the HBS Working Knowledge archives to bring together articles on ways to improve your business skills.
Questions to be Answered:
* How is negotiation evolving?
* How important are opening talks in determining a negotiation's outcome?
* Can you win against a non-negotiable partner?
* How can women negotiate past gender stereotypes?
How is negotiation evolving?
The New Deal: Negotiauctions
Whether negotiating to purchase a company or a house, dealmaking is becoming more complex. Harvard Business School professor Guhan Subramanian sees a new form arising, part negotiation, part auction. Call it the negotiauction. Here's how to play the game. Key concepts include:
* In a negotiauction, the rules are never perfectly pinned down, which creates both opportunities and challenges.
* The three common negotiauction moves are set-up, rearranging, and shut-down.
* Negotiauctions help in the current economic downturn by providing a more nuanced mechanism and better outcome for both parties.
How important are opening talks in determining a negotiation's outcome?
Walking the Talk in Multiparty Bargaining: An Experimental Investigation
At the onset of negotiation in multiparty talks, the dominant logic in discussions—be it fairness or competition—strongly influences the equality of payoffs even in complex, full-information multiparty bargaining. Research in this working paper by HBS professor Kathleen L. McGinn and coauthors Katherine L. Milkman and Markus Nöth add critical insights to our understanding of the role of communication in multiparty bargaining. Key concepts include:
* In multiparty bargaining, as in two-party bargaining, communication may work in part through social awareness and in part by allowing players to threaten to walk away.
* Communicating the willingness to walk away, in conjunction with loss aversion by stronger players, may help weaker players convince stronger players to move toward a more equal split of the available surplus, but it also permits strong players to threaten weak players.
* In a competitive, multiparty game, communication may play a more nuanced role than observed in simpler bargaining contexts.
Can you win against a non-negotiable partner?
What happens when you encounter a company with a great deal of power, like Wal-Mart, that is also the ultimate non-negotiable partner? A series of Harvard Business School cases by James Sebenius and Ellen Knebel explore successful deal-making strategies. From the HBS Alumni Bulletin. Key concepts include:
* Driving a mutually agreeable deal with a large company such as Wal-Mart means price alone can't be the centerpiece of the interaction.
Publisched with permission of HBS Working Knowledge
Communicating in difficult times, 5 things to ask yourself and 4 steps to enhance your effectiveness
We are living in times when leading people and organisations can be a very challenging job. We have to make tough calls with budgets, people and programmes - tougher probably than ever before. Yet, we want to make sure that we convey the right messages and people at the receiving end understand them in the way we want them to.
Some leaders are being kept awake by these tough calls and would rather not have to make them.
Still, we have to be highly effective in our communication to do the best for the organisation and -in the long run- also for our people and ourselves.
When we communicate we sometimes tend to forget that communication has a long way to travel to reach the receiver’s cognitive brain. In theory we all know that in one way or another we filter information we absorb with our senses. Yet, when things get tough somehow we lose sight of this. And in doing so we lose the sensitivity our communication approach should incorporate when we deal with tough calls and give bad news to our direct reports or teams.
Here are 5 things we should ask ourselves when planning a conversation with people or communicating into the organisation in challenging times.
• Am I clear for myself what assumptions I am making? Can I envisage what kind of assumptions this topic could create in the others’ minds?
• What is my intent of the communication? Does the content I am planning to communicate fully reflect my true intent?
• What level of complexity can the audience handle under stress? How simple can I keep my content to make in digestible?
• Am I authentic with what I want or have to say?
• Am I able to show great empathy through ‘tough on subject but caring on people’?
After reflecting on these questions the following model could be very useful to plan for what and how we want to say it. The tool is called ‘ladder of inferences’ and was initiated by Chris Argyris and further developed by Peter Senge.
The model describes in a simple way how we process real data and observable information. Several internal steps which are influenced by our experience, our beliefs and our values lead us to certain new beliefs and conclusions. These in turn determine actions we take or how we communicate a particular subject.
The tool is as simple as it looks on the picture but will require some effort to really get used to and to be made part of our thinking.
To make it work for you in a conversation go through the following 4 steps in your mind as a preparation
Step 1: What facts do I have? Which of them do I select as relevant? Does my audience have the same facts in mind?
Step 2: What are my inferences about these facts? Why do I focus on them? What assumption am I making with these facts in mind? How can people follow my thinking process? What do I need to tell to open my perspective to them?
Step 3: What are my conclusions for the facts and assumptions? What is really important to me (my values, my beliefs) in this subject? What does my discussion partner or the audience make out if these?
Step 4: What actions have I decided to take? How do the conclusions influence my view of the world and my beliefs? What would others decide to do? What do they need to follow my proposed actions?This may look a bit laboured at first, however, I am convinced you will reap great benefits when using it and you will get used to it very quickly, in fact, in any conversation. Just give yourself a gentle reminder and reflect on this process when things are getting really tough and you will continue to be successful and have effective conversations.
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