Companies sometimes obsess over the wrong things when they design new products and services — like digging for demographic and psychographic insights into various segments of customers.
Instead, the authors of the new book Competing Against Luck: The Story of Innovation and Customer Choice argue that the most successful companies focus on why people “hire” a product or service. What’s the job they are trying to get done?
“Organizations around the world have devoted countless resources — including time, energy, and mindshare of top executives — to the challenge of innovation,” the authors write. “But if all this effort is aimed at answering the wrong questions, it’s sitting on a very tenuous foundation.” The question that authors David Duncan, Clayton Christensen, Taddy Hall, and Karen Dillon recommend keeping front and center is, “What job did you hire that product to do?” (They dub that approach Jobs Theory, and it’s explained in more detail in the book.)
Below is an excerpt from “Competing Against Luck,” which deals with the metrics companies use to ensure that they’re focusing on whether they are getting the customer’s job done.
What Gets Measured Gets Done
Jobs Theory changes not only what you optimize your processes to do, but also how you measure their success. It shifts the critical performance criteria from internal financial-performance metrics to externally relevant customer-benefit metrics. Amazon focuses on when orders are delivered, not when they are shipped. For each new product, [software maker] Intuit develops a unique set of performance metrics based on the specific customer benefit that the specific Intuit solution delivers.
Keeping what matters in focus is challenging for any organization, especially with the forces at play as a company grows. “Now that we’re a much larger company, it’s been a challenge to keep the various parts of the company focused on the customer benefit,” says Intuit founder Scott Cook. “It’s so tempting for parts of the organization to start looking at other things. In our kind of business, you get all this data about ‘conversions’ and ‘retention,’ and so on. We got seduced by that.” It is, to be sure, easier to focus on efficiency rather than effectiveness. Most businesses are very, very good at that. Creating the right metrics is hard. But so important.
For example, Cook recounts, as Intuit was rolling out a new version of QuickBooks for small businesses, the sales organization suggested that trial users be forced to register before they could access and test the product. “Why not force them to call us? That way we can sell them more stuff,” Cook says. “Buy our payroll service!” On the surface, testing suggested it could be the source of immediate new revenue for Intuit. So the company set up an internal process to field the registration calls and try to upsell them more services. “But it turns out, we made it hard for customers to register. Now they had to call us. Sometimes the line was busy. They had to talk to a salesperson when really they just wanted to register. People got focused on revenue instead of delivering the customer benefit.” But that line revenue number, Cook says, can be deceiving. Yes, maybe Intuit converted some of those callers to other products or services. New revenue. But that number doesn’t take into account how much of that revenue Intuit might have gotten anyway if it had focused better on solving customers’ jobs, rather than the jobs of salespeople to generate new sources of revenue.
If Intuit wanted to accurately measure how well the company was responding to customers’ Jobs to Be Done, it needed to find new ways to think about it. How much time did we save this customer? Did we allow them to not spend time doing something they didn’t want to do? Did we improve their cash flow? Are our processes supporting the things customers are hiring us to do?
But measuring the success in achieving these goals is not easy, Cook admits. “This is hard stuff in our business. The metrics don’t fall out of our systems. There is no way to continuously and automatically measure the labor hours avoided by accountants. We have to interpolate survey and server data,” Cook says. “Because without it we just don’t know how we’re doing on the job the customer wants done.”
At Amazon, Focusing on Three Things
Having the right measurements in place helps institutionalize a process. It’s how your employees know they’re doing the right thing, making the right choices. As the old saying goes, “What gets measured, gets done.” From its inception, Amazon has laser-focused on three things that solve customers’ jobs—vast selection, low prices, and fast delivery—and designed processes to deliver them. Those processes include measuring and monitoring how it’s achieving those three ultimate goals on a minute-by-minute basis. The end goal is getting the customers’ jobs done—everything works backward from there. “We always start with the customers and look at all the metrics that matter for the customer,” explains Amazon’s senior vice president for international retail Diego Piacentini.
Think about the signal sent by this simple line on every Amazon product page, for example: “If you order within the next 2 hours and 32 minutes, you’ ll receive your product Tuesday.” But hundreds of processes have been designed to ensure that happens. The customer’s click of the “checkout” button triggers a series of processes that extend all the way to the fulfillment center or to the vendor. Amazon then tracks and measures if it meets its promise. Did it arrive tomorrow, as promised?
Process acts as a sort of the subconscious of an organization—it subtly pushes companies toward or away from a Jobs to Be Done– aligned strategy by governing thousands of decentralized events, decisions, and interactions each day. “We’re much more focused on processes than organization,” says Piacentini. “It’s one of the reasons we can move fast. We have the same technology, the same platform, the same guiding principles across all of our companies.” New innovations at Amazon famously start with a mock “press release” that is presented to the team that will consider and work on that innovation. The press release contains the guiding principles for that innovation—all experiences and processes are derived from the clarity of what job customers will hire this product or service to do, as outlined in the press release at the innovation kickoff meeting. In that room are not just marketing people, but engineers, analysts, and so on—everyone whose work will play a role in fulfilling that Job to Be Done. “It all starts with that press release,” Piacentini says. “No matter who owns the pieces of the product, you’re part of that process.”
The textbook definition tells us that process optimization relates to efficiency. But what Jobs Theory—and Amazon’s example— says is, “Yes, but …” The “but” is that optimization should also incorporate a factor for job alignment—otherwise you’re focusing on getting better and better at the wrong things.
Processes Need to Flex Over Time
There is a second very important lesson in the Amazon story: there is a degree of ambidextrousness that enables processes to be both highly efficient and flexible. Jobs are not flexible—they have existed for years and years, even centuries. But how we solve for jobs varies over time. The important thing is to be attached to the job, but not the way we solve it today. Processes must flex over time when a better understanding of customer jobs calls for a revised orientation. Otherwise you’ll risk changing the concept of the job to fit the process, rather than the other way around.
Interestingly, this principle of a modular internal-process structure in which some pieces persist and others change is fundamental to what computer coders know as subroutines. The idea is that repeated functions—say basic arithmetic and trigonometry, for example—can be coded as subroutines and then essentially copied and pasted wherever that operation is called for in a different process. In programming, this is a very big deal. The right use of subroutines will decrease the cost of developing and maintaining a program, while simultaneously improving its quality and reliability. Solutions to common challenges are not invented ad hoc by programmer X or Y sitting at a desk in the basement. They’re universal, logical, and easily inserted in the right places.
Amazon has imported what are essentially subroutines into its operating processes, too, and their power and efficiency are very apparent. This is a huge advance over the traditional practice of “sharing best practices” across regions. Instead, the use of subroutines poses the question of “Are we likely to need to repeat this process (or subroutine) in other activities?” This creates a very dynamic view of an organization as a collection of processes wherein each process is a string of subroutines—some custom and some modular imports—that align perfectly with a customer’s Job to Be Done.
Aligning with jobs is considering what “process optimization” means. In so doing, you avoid the trap of allowing today’s critical processes to become tomorrow’s inhibitors to growth.
…Cook, who served on the board of Amazon for years, points to the online retail giant as the model of understanding how to measure what matters most to customers’ Jobs to Be Done — while still focusing on improving efficiency. As we discussed earlier, Amazon founder Jeff Bezos has been crystal clear since its inception that there are three things that matter in the retail business: vast selection, low prices, and fast delivery. In Amazon’s now famous “customer backward” innovation process, those three measures are monitored on a minute-by-minute basis. Bezos doesn’t consider delays to be accidents or poor performance, he considers them “defects” to be eradicated.
For example, to stay true to its foundational promise of “lowest prices,” Amazon built a shopping robot, an automated search engine that scours the prices of hundreds of benchmark products twice a day. If a lower price was found, the Amazon price was automatically lowered to beat that competitor’s price. That’s why you sometimes see an unexpected price drop while a product sits in your Amazon shopping cart. If the lower price dips below some appropriate gross-margin threshold, it triggers human review, everything about that system is designed for efficiency — but its focus is squarely on efficiently delivering on the jobs customers are hiring Amazon to do. Bezos personally hands out the Amazon “Just Do It” award — an old Nike shoe — every few months to an employee who has strayed from his or her official job responsibilities to do something for the greater good of Amazon. That kind of focus keeps employees clear on what matters most to Amazon’s customers.
From Competing Against Luck by Clayton M. Christensen, Taddy Hall, Karen Dillon, and David S. Duncan Copyright © 2016 by Clayton M. Christensen, Taddy Hall, Karen Dillon, and David S. Duncan. Reprinted courtesy of HarperBusiness, an imprint of HarperCollins Publishers.