Manufacturing firms tend to focus on their products. In fact, we often fall in love with them. It consumes most of our time at work, and for many in the business, much of their time away from the office as well. We celebrate big orders and naively assume the good times will last forever. Elaborate marketing campaigns tout the benefits of our product vs. competitive offerings. We obsess on how to continually improve the product to out-do our competition. So what’s the problem, you ask?
The harsh reality is that the customer could care less about your product. Instead, you should ask: what problem is our product really solving for them? Thinking about your product in terms of a “job to be done”, or JTBD, is a concept popularized by Harvard Business School professor Clayton Christensen (1).
For example, when we buy a lawnmower, all we really care about is how that product will help us cut the grass. We are simply “hiring” a solution. By focusing on what the customer really wants to accomplish, in this case keeping the grass low and beautiful, other ways to solve that problem can be envisioned. Perhaps by genetically engineering grass seed that does not need to be cut. If you manufacture lawnmowers, how might that affect your business?
There’s a second issue when we focus on the product. Namely, almost by default we choose an attrition strategy. In
their recent book, OutManeuver, Phillips and Verjovsky describes this strategy as a group of competitors who compete head-to-head, battling for market share supremacy with virtually identical products (2). We are all too familiar with this strategy. It can be a path to shrinking profits.
There is a better choice, according to the authors. Preemption is taking valuable but unoccupied market space before a competitor recognizes it. If there is not an option to preempt, then you can dislocate or disrupt your competitor using a number of tactics.
By considering “jobs to be done” and why customers “hire” your product, and by seeking to outmaneuver your competition rather than always focusing on head-to-head competition, you can begin to re-think better ways to grow your business. It is really about elevating your thinking away from the product and towards the business model itself.
Let’s start with a basic definition of a business model. Simply stated it is defined as the rationale for how your business creates, delivers and captures value. Based on this simple definition, you should immediately recognize that how your company generates revenue involves many other factors above and beyond the product.
A powerful tool I recommend is the “business model canvas” as described by Osterwalder and Pigneur in their book Business Model Generation (3). It’s a tool I use in my Innovation Coach Workshops. The tool utilizes a grid with nine building blocks. In practice the grid can be plotted on a large format document, attached to the wall and used with sticky notes as an interactive and engaging way to discuss not only your existing model, but brainstorming other models. In other words, innovating on your business model.
The nine segments of the “canvas” include all the important aspects of how you create, deliver and capture value. They include customer segments, value proposition, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure. Each element of the canvas provides an opportunity to envision how you might out-maneuver the competition rather than simply competing head-to-head in every case, with every product.
The fact is that much of what we see today in terms of “innovation” has nothing to do with the product. It is the business model innovation. There are many well-known examples such as Apple’s IPod and ITunes. Uber is another example. In both cases, the technology existed but the innovation was putting existing technology together and understanding the jobs-to-be-done, finding a space where there was no competition.
In the B2B world, Hilti is another example (4). Hilti’s old model was based on mostly selling high-end power tools to contractors. Like many companies, however, they were faced with increased competition and decreasing margins. By critically examining why customers purchased their power tools and understanding the job-to-be-done, they created a brand new service-based business model. Rather than selling the tools to the end-user, they manage the tools as a service. This satisfied the job-to-be-done better by helping contractors deliver projects on time, and for Hilti led to higher margins, recurring revenues and better differentiation.
In conclusion, it is not all about your product. Ask yourself some important questions. Do you really understand what job-to-be-done your product satisfies? Are you by default using an attrition strategy that will eventually lead to declining margins? Do you have the foresight to change your business model before a competitor disrupts your business?
- For a description of this tool, and many others, see: David Silverstein, et al, The Innovator’s Toolkit. (Hoboken, NJ: John Wiley & Sons, 2012)
- Jeffrey Phillips and Alex Verjovsky, OutManeuver. (Bloomington, IN: Xlibris, 2016)
- Alexander Osterwalder and Yves Pigneur, Business Model Generation. (Hoboken, NJ: John Wiley & Sons, 2010)
- Marc W. Johnson, Seizing the White Space: Business Model Innovation for Growth and Renewal. (Boston, MA: Harvard Business Press, 2010)
Jeff Groh is President of New Product Visions (newproductvisions.com) located in Flat Rock, NC. New Product Visions helps companies drive revenue and earnings growth by improving their innovation management practices. We focus on processes, organization, management engagement and culture. Services include consulting, Innovation Coach™ Workshops (newproductvisions.com/workshops) and software enablers. Mr. Groh spent 30+ years in industry in a variety of management roles in sales, manufacturing and new product development prior to starting New Product Visions. For additional information or to join our mailing list, contact us. Available for select speaking engagements.