Is this the access to profitable revenues, loyal customers and enduring success? (Part I)

Being a physics graduate I value an insightful theory that opens up new domains of enquiry and provides access to breakthroughs in performance.  Now and then I come across a business author who nails it, who provide such a theory.  It occurs to me that Clayton Christensen nails the essence of the customer-centric approach to doing business. And it just happens to be at the core of my consulting work.  Let’s start.

Do you have a deep understanding of what problems customers are trying to solve?

Let’s start with a truth that is so neglected. When I say neglected, I am not saying that you have not heard this truth.  I am clear that many of you will have heard of it – most likely it is a platitude.  And that is the very reason that this truth is not taken to heart, not lived, not given life in the world of business.  What truth?  This is what Clayton Christensen says in his marvellous book How Will You Measure Your Life?(bolding is my work):

“Many products fail because companies develop them from the wrong perspective.  Companies focus too much on what they want to sell their customers, rather than what those customers really need. What’s missing is empathy: a deep understanding of what problems customers are trying to solve.  The same is true of our relationships: we go into them thinking about what we want rather than what is important to the other person.  Changing your perspective is a powerful way to deepen your relationships.”

Why does this passage speak to me? It is my experience. Time after time in my consulting work I am struck by the truth of this understanding.  A lack of empathy and understanding for the customer as a human being who becomes a customer of the organisation in order to ‘hire’ that organisation – through its people and ‘products’ – to get a job that matters, done.

What can we learn from IKEA?

IKEA is an incredibly successful discount furniture retailer.  It has been in business for over 40 years, it has global revenues in excess of 25 billion euros and Ingvar Kamprad (the owner) is one of the richest men in the world.  The success of IKEA is not based on secret formulas, intellectual property, nor barriers to entry. So why is it that nobody has successfully copied IKEA?  This is what Clayton Christensen says (bolding is my work):

IKEA’s entire business model – the shopping experience, the layout of the store, the design of the products and the way they are packaged – is very different from the standard furniture store.  Most retailers are organised around a customer segment, or a type of product….

IKEA has taken a totally different approach. Rather than organising themselves around the characterisation of particular customers or products, IKEA is structured around a job that customers periodically need to get done.

The “job to be done” as a source of innovation, growth and competitive success?

Let’s continue listening to the wisdom of Clayton Christensen:

Through my research on innovation ….. my colleagues and I have developed a theory about this approach to marketing and product development, which we call the “job to be done”. The insight behind this way of thinking is that what causes us to buy a product or service is that we actually hire products to do jobs for us.

We don’t go through life conforming to particular demographic segments: nobody buys a product because he is an eighteen to thirty five year old white male getting a college degree. That may be correlated with a decision to buy this product instead of that one, but it doesn’t cause us to buy anything. Instead, periodically we find that some job has arisen in our lives that we need to do, and we then find some way to get it done.  If a company has developed a product or service to do the job well, we buy, or “hire” it, to do the job.

The mechanism that causes us to buy a product is “I have a job I need to get done, and this is going to help me do it.“

So if you are going to segment your customers then segment them by the jobs that they “hire” you for. Here, I want to point out that you can use this “jobs to be done” approach for all customer touchpoints.  For example, what jobs do your customers hire your call-centre for?  What jobs do they hire your website for?  What do they hire your facebook page for?

Back to what we can learn from IKEA? 

Having set out his theory, Clayton Christensen returns to IKEA and explains the cause of its success as follows:

IKEA doesn’t focus on selling a particular type of furniture to any particular demographically defined group of consumers. Rather, it focuses on a job that many consumers confront quite often as they establish themselves and their families in new surroundings: I’ve got to get this place furnished tomorrow, because the next day I have to show up at work. Competitors can copy IKEA’s products. Competitors can even copy IKEA’s layout. But what nobody has done is copy the way IKEA has integrated its products and its layout.

This thoughtful combination allows shoppers to quickly get everything done at once….. In fact, because IKEA does the job so well, many of its customers have developed an intense loyalty to its products.

What is the lesson according to Clayton Christensen?

He sums it up well and find me in total agreement:

When a company understands the jobs that arise in people’s lives, and then develops products and the accompanying experiences required in purchasing and using the product to do the job perfectly, it causes customers to instinctively “pull” the product into their lives whenever the job arises. But when a company simply makes a product that other companies also can make – and is a product that can do lots of jobs but none of them well – it will find that customers are rarely loyal to one product versus another. They will switch in a heartbeat when an alternative goes on sale. 

I will continue the conversation around the ‘jobs to be done’ approach of doing business and creating superior value – for the customers and your business – in the next post in this series.