Over the past 24 years, we have studied the dynamics of product and service innovation while producing successful innovation strategies in hundreds of markets for dozens of Fortune 500 companies. Over the course of these engagements, we have developed a framework that explains what causes new product and service offerings to win or fail in the marketplace and that can be used proactively to formulate and pursue a winning growth strategy.
Our framework is built upon “jobs-to-be-done” theory, the fundamental notion that people buy products and services to help them get a job done. When we use a jobs-to-be-done lens to examine product successes and failures, we observe the same phenomenon time and time again: new products and services win in the marketplace if they help customers get a job done better and/or more cheaply.
This simple observation led to the discovery and classification of five unique growth strategies companies can adopt in the quest to win in a market. It also resulted in the creation of the jobs-to-be-done growth strategy matrix, a framework that illustrates when and how these strategies should be used. With this framework, companies can understand their past successes and failures and can adopt a strategy to create winning products and services in the future.
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Establishing the theory
Having recognized that new products and services win when they get a job done better and/or more cheaply, we set out to transform this insight into a predictive framework for growth. We began by categorizing the possibilities using the matrix shown in Figure 1. The matrix suggests that companies can create products and services that are (1) better and more expensive, (2) better and less expensive, (3) worse and less expensive, and (4) worse and more expensive.
The matrix prompted us to ask what types of customers might be targeted with a product or service offering in each quadrant. Our experience and the work of others in this field led us to the following five conclusions regarding the four quadrants:
1. A better-performing, more expensive product will only appeal to underserved customers. These are customers who have unmet needs and are willing to pay more to get a job done better.
2. A better-performing, less expensive product will appeal to all customers.
3. A worse-performing, less expensive product will appeal to overserved customers (those with no unmet needs). It will also appeal to nonconsumers. These are people whose current solutions don’t involve the market at all, or who are not even attempting to get the job done as they cannot afford any of the existing solutions.
4. A worse-performing, more expensive product will only appeal to customers for whom limited (or no) alternatives are available. This happens in unique or atypical situations.
5. Some products are “stuck in the middle” (to borrow a term from Michael Porter): they only get a job done slightly better or slightly cheaper. Such a product will likely fail to attract any new customers. This is clearly a poor strategy for a new market entrant, but it may help an incumbent company retain existing customers.
The Jobs-To-Be-Done Growth Strategy Matrix
We concluded that each of the five situations warranted its own distinct strategy. With the goal of creating a framework for proactive strategy formulation, we asked, What unique strategy can be employed in each of these five situations? We set out to define and name a type of strategy that would work for each unique situation. We chose a naming convention that built upon well-established strategy and innovation terminology and accurately described the uniqueness of the situation.
The five strategies we identified address all the situations a company can face as it contemplates a product or service strategy. The strategies are introduced in the jobs-to-be-done growth strategy matrix shown in Figure 3.
The product/service strategies introduced in this framework are defined as follows:
1. Differentiated strategy. A company pursues a differentiated strategy when it discovers and targets a population of underserved consumers with a new product or service offering that gets a job (or multiple jobs) done significantly better, but at a significantly higher price. Examples of offerings that successfully employed a differentiated strategy include Nest’s thermostat, Nespresso’s coffee and espresso machines, Apple’s iPhone 2G, the Herman Miller Aeron chair, Whole Foods’ organic food products, Emirates airlines’ international flights, Bang & Olufsen’s personal audio products, BMW sports cars, Sony’s PlayStation (original model), and the Dyson vacuum cleaner and Airblade hand dryer.
2. Dominant strategy. A company pursues a dominant strategy when it targets all consumers in a market with a new product or service offering that gets a job done significantly better and for significantly less money. Examples of offerings that successfully employed a dominant strategy include Google Search, Google AdWords, UberX, Netflix’s streaming video, Progressive Insurance’s nonstandard automobile insurance, and Vanguard Group’s personal investment services.
3. Disruptive strategy. A company pursues a disruptive strategy when it discovers and targets a population of overserved customers or nonconsumers with a new product or service offering that enables them to get a job done more cheaply, but not as well as competing solutions. Examples of offerings that successfully employed a disruptive strategy include Google Docs (relative to Microsoft Office), TurboTax (relative to traditional tax services), Dollar Shave Club’s razor offering (relative to Gillette), eTrade’s online trading platform (relative to traditional financial brokerages) and Coursera’s online educational services (relative to traditional universities).
4. Discrete strategy. A company pursues a discrete strategy when it targets a population of “restricted” customers with a product that gets the job done worse, yet costs more. This strategy can work in situations where customers are legally, physically, emotionally, or otherwise restricted in how they can get a job done. Examples of offerings that successfully employ a discrete strategy include drinks sold in airports past security checkpoints, stadium concessions at sporting events, check-cashing and payday-lending services, and ATMs in remote locations.
5. Sustaining strategy. A company pursues a sustaining strategy when it introduces a new product or service offering that gets the job done only slightly better and/or slightly cheaper. Examples of offerings that successfully employ a sustaining strategy are plentiful.
To learn more about the Jobs-to-be-Done Growth Strategy Matrix and how to use it to drive growth, see the new release JOBS TO BE DONE: Theory to Practice. Also, learn more about Strategyn’s innovation process, Outcome-Driven Innovation.