The rise of entrepreneurial start-ups focusing their attention on the Base of the Pyramid (BoP) is good news. So is the renewed interest from large companies that are learning how to compete in emerging markets.
The bad news is that so many of them fail.
Why do they fail, and how can we minimize these failures? For most companies, innovation remains a flawed business process, yielding failure rates that are consistently over 80 percent.
At the BoP, the problem is even worse.
What is the root cause of this failure? While executives, managers and entrepreneurs agree that the goal of innovation is to create products and services that address unmet customer needs, companies struggle to predictably create winning products because they fail to define their customers’ needs with the rigor, precision, and discipline that is required to discover, prioritize and capitalize on opportunities for growth.
For the past 25 years, my company Strategyn and I have focused on helping companies succeed at innovation – introducing new products and services to disrupt and often dominate markets. To do this, we use a process called Outcome-Driven Innovation (ODI). The methodology is built around our finding that studying the “underlying process” a customer is trying to execute, rather than focusing on the product or the customer, provides companies with a deep understanding of the customer’s needs and presents a path to make innovation more predictable.
We introduced ODI to Harvard Business School professor Clayton Christensen in 1999 (see the video). Christensen later popularized the theory in his book, The Innovator’s Solution (2003), labeling it “jobs-to-be-done theory” and citing Strategyn and its practices. Today, we also refer to the theory as “jobs-to-be-done theory” and describe ODI as the process that puts the theory into practice.
The Jobs-to-be-Done Needs Framework
In most companies, managers do not agree on what a “need” even is. As a result, when it comes to innovation, marketing and development managers still struggle to reach agreement on what the customer’s needs are, which of those needs are unmet, and to what degree.
Without a system for evaluating which ideas are best, companies are forced to guess at which solutions will win in the marketplace. Not surprisingly, they often guess wrong. Companies cope by adopting techniques for pivoting and failing fast, which do little to help them make the right move to begin with. The problem with innovation is clear: without knowing precisely what you target you trying to hit, your chances of actually hitting it are slim. This problem is universal.
The theory holds that to create a product or service that customers will want, companies must first understand what fundamental measures of performance customers use to measure success when getting the job done. To obtain this understanding, we suggest that companies break down the customer’s underlying “job-to-be-done” into discrete process steps and ascertain from them what must be measured and controlled to ensure the job is executed with the speed, predictability, and effectiveness they desire.
The Jobs-to-be-Done Needs Framework introduces the types of customer needs that must be considered to gain a deep understanding of what a customer is trying to accomplish. They include:
(i) the core functional Job-to-be-Done,
(ii) the desired outcomes tied to the core functional Job-to-be-Done,
(iii) related jobs,
(iv) emotional and social jobs,
(v) consumption chain jobs, and
(vi) the buyer’s financial desired outcomes.
While a job describes the overall task the customer is trying to execute, an outcome is a metric the customer uses to measure success and value while executing a job. For every functional and consumption chain job there exists a set of up to 50 or more desired outcome statements.
The Jobs-to-be-Done (JTBD) Needs Framework reveals the complexity involved in understanding all the needs in a market. It is not as if the customer has a handful of needs, or that there is just one customer. A diverse group of customers in a given market often collectively have well over 100 needs.
The quantitative research methods we have created as part of the process are designed to achieve the following goals:
• Discover opportunities to get the job done better (underserved outcomes). Once there is agreement in a company as to what a “need” is and what all the customer needs are, the next step is to gain agreement on which needs are unmet. A need is unmet if it is important to the target population, but not satis ed by the solutions customers are using today. Once these underserved outcomes are revealed, a company knows along what dimensions is has to get the job done better.
• Discover opportunities to get the job done more cheaply (overserved outcomes). A need is overserved if it is unimportant to the customer, yet very satis ed by the solutions customers are using today. Once these overserved outcomes are revealed, a company knows along what dimensions to focus to get the job done more cheaply.
• Quantify the degree to which each outcome in over/underserved. The biggest opportunities for getting the job done better and/or more cheaply are prioritized once the degree to which each outcome is over or underserved is known. Using the importance and satisfaction data obtained for each outcome, our opportunity algorithm is used to calculate an opportunity score for each outcome, revealing their priority order.
• Determine the strengths and weaknesses of competing solutions. Customers that use different solutions rate the outcomes for satisfaction, revealing how well competing solutions address each of the outcomes. This approach results in a detailed competitive analysis that shows where each competing solution fails to help the customer get the job done effectively.
Jobs-to-be-Done @ the BoP
At the Base of the Pyramid, the JTBD Needs Framework can be revised to add several key insights. One of the leading practitioners of this approach is Paul Polak, who has devoted a considerable amount of time and energy to using business to help lift the poor out of poverty.
From Paul’s blog >>
Paul had direct experience attempting to persuade large corporations to start designing products and services that could profitably serve customers living on $2 a day or less. In this he failed miserably. For example, one-acre farmers in Asia and Africa desperately needed — and still need — affordable small-plot drip irrigation technology, but when he tried to persuade the largest drip irrigation companies in the world to enter this market, they turned him down flat. Inevitably, he concluded that most multinational corporations prefer not to serve $2-a-day customers. Why? Because (1) they don’t feel they can earn attractive profits in this space; (2) they don’t have a clue how to design radically affordable products and services that are attractive to poor customers; and (3) they haven’t found ways to cross the last-mile distribution barrier and make a profit.
Mobile phones are the one exception to this pattern. Most poor people in the world now either own a mobile phone or have access to someone who does. This sudden new reality created a revolution in communication for $2-a-day customers, but it was largely home grown enterprises, not multinational corporations, that spread the technology within emerging nations. Furthermore, the most promising innovations to result from the widespread availability of mobile telephony—such as the M-PESA system of funds transfer by text messaging in Kenya—were local innovations, not invented in the West.
I think Paul misunderstands where Stuart Hart is coming from when he says that Hart and Prahalad are simply looking at targeting the “middle class” in poor and emerging countries.
Let’s talk about targeting the base of the Base of the Pyramid.
The question is still: How do we persuade large corporations to start designing products and services that could profitably serve customers living on $2 a day or less?
An effective innovation process must produce answers to the following questions:
- Who is the customer?
- What job is the customer trying to get done?
- What are the customer’s desired outcomes?
- How do they measure value?
- Do segments of customers exist that have different unmet outcomes?
- What unmet outcomes exist in each segment?
- What segments and unmet outcomes should we target for growth?
- How should we define our value proposition?
- How should we position our existing and pipeline products?
- What new products must we create?
Here are some of the elements in the JTBD Needs Framework that will need attention.
The core functional job is the anchor around which all other needs are defined. It is defined first, then the emotional, related and consumption chain jobs are defined relative to the core functional job. For example, if the core functional job were defined as “access clean water for family”, then we would seek to discover the customer’s emotional and related jobs as they are trying to “access clean water for family”. All other jobs are in the context executing the core job.
The desired “financial outcomes” will have to take into account that any solution for the BoP will have to be characterized by extreme affordability. Without extreme affordability, there is no market. How does this fit into the design of your product. Polak tells us that the product should be priced at one-fifth the going rate for the similar product in use by the “middle class.”
Instant impact. The new product must pay for itself as quickly as possible, and deliver an instant difference. Payback cycles of 3 to 6 months (or shorter) should be engineered into the product lifecycle.
Scale down to scale up. The product may well be a micro-offering – selling singles or sachets – for example, in order to allow for sales based on demand. The final product must sell at least half a million units without price rebates or subsidies. It must stand on its own merits. (Note Polak’s paper on micro-farming.)
Emotional jobs. The poor are proud, and must be treated dignity. The need for social acceptance and status can make all the difference in how a product is perceived and used. The $300 House project finds that no matter how innovative the design approach, the poor want a “pucca” (solid) house – one that is comparable in strength to the houses of the rich. Thus we see the success of new design approaches like Moladi, that take these emotional and social jobs into account. The question for Moladi is how can we miniaturize the process, and make the house radically affordable?
The story is just beginning to unfold. Companies that use a Jobs-to-be-Done approach will succeed.