As I’ve written many times before I believe that great product is the key to building a successful these days, but there were 30,000 consumer products launched in 2011 and the failure rate is c95%.
Investors have to find ways of identifying which products are going to be in the 5%.
The first place that many of us look is customer engagement. It’s a great sign if lots of people are using a product regularly. It’s better still if they are telling their friends. These are the reasons investors obsess over cohort data, engagement stats and NPS scores.
If you invest in pre-product companies, as we do at Forward Partners, then there’s no customer data and it gets more difficult. A common refrain is to look for products which offer a ’10x improvement’ – that works for some products, but there are many others which succeed where there’s no obvious 10x metric – gmail is a good example. We think a lot about use cases and many of the companies we work with use customer interviews and prototypes to find the features and benefits which will make their products ‘must have’.
The ‘job to be done’ framework takes the use case and places it in a real world context asking ‘what job is the customer hiring this product or service for?’. The language of ‘hiring a product’ is a little clunky, but as Christensen notes people only buy products and use services because they have a job that needs doing. This real world context is powerful because it forces you to make the analysis from the customer’s perspective and inherently factors in competing alternatives. The risk with thinking only about use cases is that they can sound cool but not work in practice because they miss an important facet of the customer’s context.
In the post I linked to above (and again here) Carmen Nobel describes research that Christensen did into why people buy milkshakes from fast food restaurants. It turns out that 40% of milkshake purchases are made by consumers on the way to work and drunk in the car.
From the customer’s perspective (and that’s what counts) they are buying the milkshake to make their commute more interesting and to stave off 10am hunger pangs. Thick milkshakes are great because they take longer to drink and do the ‘make the commute more interesting’ job for longer. Following the research the fast food chain made their milkshakes thicker.
Another major job that milkshakes are bought for is to treat children. In this case thicker milkshakes are unhelpful because parents have to wait longer for the kids to finish. Following the research the fast food chain made thinner milkshakes just for kids.
When I think through the successful companies in our portfolio it’s clear what job they are helping customers to do. With the less successful ones, not so much. That’s why I’m drawn to this framework. The most obvious application for us is in the analysis of individual investment opportunities, but I’m also thinking that it can be used to evaluate new market sectors that we might focus on, asking the question ‘what job will products in this new sector do for consumers?’