Welcome to our series, "How Would You Beat?" In each article, we pick a company and talk about how you could use jobs-to-be-done innovation methods to beat that company's product. We discuss innovation theory and explain the methods so you can put the theory into practice at your company.
In this article we focus on Comcast and how to beat their broadband service provider, Xfinity, using jobs-to-be-done. Comcast is a huge company with a market cap of almost $250 billion and an annual revenue of over $100 billion. They own Xfinity, who accounts for about half of their revenue, as well as other properties like NBC Universal. Our first question is: Is jobs-to-be-done even useful in this type of market where there is, effectively, a regional monopoly and tons of regulatory authority with who can compete with Comcast?
What Is the Market for Beating Comcast?
Comcast has some of the lowest customer satisfaction ratings in the cable industry (which is not known for high customer satisfaction as a whole). Not only that, but they've also violated net-neutrality practices in the past, and they have plans to cap data. Overall, they don't seem to be a particularly customer-focused company, and it's not as if their internet services are particularly good either. Interestingly, the United States is ranked 13th in the world in internet speed behind countries like Norway, Sweden and Switzerland. It seems like this would present a great opportunity to beat Comcast, particularly their Xfinity service. So how could you use jobs-to-be-done and jobs theory to beat Comcast?
You'd have to start by trying to figure out what the market is. In other words, who is the key customer and what are the jobs at play in this market? In a job, the customer is the job beneficiary -- the person who benefits from getting the job done. The job itself is the the goal the customer is trying to achieve independent of any technology or solution. If you look at Xfinity, the customer is self-explanatory. But what's the job? When you think about this market as broadband service, this makes the job quite narrow and you begin to see why it's so hard to compete with Comcast. They have a regional monopoly because they own all the cables that provide broadband service, they lay the infrastructure (it's incredibly expensive to lay your own infrastructure) and, in many cases, the market is highly regulated. However, that's not the job because it's too dependent on solutions. Broadband service is a technology for some other goal that you're trying to achieve. Why do we want the broadband service? Well, we want access to the internet and we want fast internet speeds but the internet is a technology too, so is that really the job to define?
These are what are called platform-level jobs. New markets are often created with new platforms. For example, no one needed to ensure aircraft worthiness before there were aircrafts. We now have the internet with all of its associated jobs and you can use the same framework and thinking to focus on the customers. The jobs here are "to access the internet" and "access the network." How do you go about completing this job as a society, not just as individual competitors?
When there are regulated monopolies like Comcast, there won't be 50 different internet providers in a single market in a single region. The capital expense to lay all the cable initially is copper, and then there's the fiber optics infrastructure, which is very expensive. So what are you willing to pay? There needs to be a good return on that investment. That's why there wouldn't be 50 companies building different fiber optic networks -- nor should society really want to spend all this money to build 50 different fiber optic networks when one will suffice. That's different than if you're competing building software. In that situation, you could certainly have 50 different software companies all competing to create very similar applications.
The main job beneficiary in this case is the consumer or business trying to access the network. There's also the government that has jobs to get done. The government wants competitors to enter markets to lower prices on different products and services, such as broadband. The government is also responsible for allocating public resources so they can determine, for example, who has the right to lay fiber optic networks and what the cost should be. One of the problems is, though, how to keep moving forward when there is a company within the market that has a monopoly. How can the market be made more competitive? There's a technology -- either copper or fiber optics -- that can be used to help people access the internet, but are there other emerging technologies that could get that same job done?
Using Other Technologies to Compete
We're already seeing some competitors explore that area, launching new services and new technologies. There's the Boston-based Starry Internet that essentially piggybacks off of satellite networks. Their technology is more complicated than that, but it's a new, fast, inexpensive way to deliver the internet. They're also trying to provide excellent customer service, and they have a relatively high valuation. There is also Starlink, SpaceX's new satellite internet network, that's competing with the same technology as that offered by DirecTV. They're able to put more satellites in space and offer much higher speeds. Starlink's tagline for their beta is, "Better than nothing." How does that connect to getting the job done better? Why would you want just "better than nothing"?
As Clay Christensen liked to say, "It's not in consumption." The high price of getting a job like "access the internet" done today (and even just the price of the technology available to make it happen) makes it prohibitively expensive to get the job done so people and businesses don't even try. That's where non-consumption happens and that's what companies like Starlink are targeting. They're targeting the people who don't have internet access, very slow internet access, or are lacking other broadband opportunities. There are rural parts of California where there really isn't any internet. At one point, not too long ago, we'd have to use 3G, which was not very fast, and then have to use an antenna to amplify it. Trying to stream Netflix, let alone just checking your emails, was nearly impossible. This non-consumption opportunity happens to be a segment of the market who can't get the job done because they can't afford it.
Is it possible to build new technologies that lower the price, increase the speeds and essentially compete with Comcast through a different route? You'd be targeting those consumers who are not Comcast customers and competing with Comcast by disrupting the market. Remember, disruption is where you enter the market with a technology that is initially worse and you target the low-end of the market. Then, over time, your technology improves and you eventually become a direct competitor. As far as these utilities and the jobs they're trying to get done, one job is "get me on the internet." But they're also targeting their shareholders and create returns for them. How can companies navigate this tension of providing returns to shareholders and providing value to their customers?
Shareholders vs. Customers
Every company is trying to do that, to some extent. Every company has shareholders, whether it be the public markets, the private investors, or just the company owners who aren't getting any outside capital. There are shareholders in every single company and everybody's trying to create equity value. The question is, what is the best opportunity to do so? With the Xfinity part of their business, Comcast seems to be taking a defensive posture. There's an example of a company in Chattanooga, Tennessee that tried to provide their own internet and Comcast sued them for doing so because they were infringing upon the fiber optic land. It's a complicated case but, the point is, when you start suing your competitors, that's clearly a defensive posture.
In one sense, you can say they're giving up on trying to get the job done better, and they're just trying to protect their turf, which is a viable strategy in this industry. Unlike other markets we've looked at where you can pick one need, or one job step, to get done better than the competition and grow from there, there's a barrier to entry in the internet access job. You can't just do the payment part of that job and not provide Internet service. You can't do the on-boarding part of "provide internet access" without actually streaming data back and forth across your network. In order to enter the job at all requires a significant investment by either laying your own fiber optic infrastructure, or creating a new technology altogether. That's where this defensive posture comes from. So what happens next? Is that all that Comcast can do to return equity value to shareholders? To have a defensive posture and keep competitors at bay who might be providing better service for their customers?
That''s a question that comes up in platform situations all the time. What additional jobs can you get done with the platform? That's exactly what you see with Comcast. They're buying NBC Universal because they realize they have a platform and that's where people are going to pay for more products and services -- for entertainment products and services. Even Apple, that makes operating systems and phones (which are platforms), is now building many of their own apps as well as their own content (with Apple TV). Apple is now making TV shows?
Of course, companies have to keep up on returns to shareholders and they have to create equity value to avoid going out of business. But do we really want that as a society? That's really the bigger question we're trying to answer.
As a specific example to illustrate this point, we should mention the situation with Pacific Gas and Electric (PG&E) in California that led to really bad consequences. PG&E is a utility. You can make a serious argument that internet access is a utility that levels the playing field. You don't want people to not have electricity, and you don't want people to not have access to the internet. But what happened with PG&E is it became a shareholder-owned utility. Because the part of generating returns to the shareholders was returning them cash in the form of dividends, in order to stay competitive in the capital markets, PG&E was taking cash and just distributing it to the debt holders and to the shareholders. What they didn't do is upgrade the safety of the infrastructure here in California to deal with climate change. As soon as we had the right conditions, things got really bad.
The result has been, for years now, fires spreading across the country. PG&E was liable for those fires that caused enormous damage and burned down entire towns and, as a result, they went bankrupt. Instead of collecting all of that cash back from those dividends and debt payments over the years and investing in a new infrastructure, they declared bankruptcy wiping out their shareholders. But they got to keep going. So that is a bigger question: what happens to these platforms? We see Apple and Amazon trying to get more jobs done on their platform, expanding to entertainment and making their own apps. Is that the better way to do it, or do we want more companies getting those jobs done more competitively?
Comcast's Main Competitor Is... the Government?
This all goes back to the idea of which jobs the government is trying to get done. One of those key jobs is economic productivity. They need to optimize and increase the economic productivity of a nation or a state because that's how they collect taxes. The more money everybody earns, the more tax revenue goes to the government and the more services they can provide. It's a beneficent cycle. When something becomes vital to economic productivity, it then becomes in the government's interest to support that and make sure it doesn't fail.
Electricity is an obvious example. Without power, we can't do most of the work that's done in any industry. During the pandemic, we're seeing that's even more true with a utility like the internet. Not necessarily more true than electricity because you can't have the internet without electricity, but there are many industries right now that are working from home and, without internet in the home, those industries would come to a standstill. School is now relying on the internet and if you can't educate your society you can't have a society that works. If those two things stop, your economic output goes to zero. If the government's going to try to get that job done, they're going to have to provide a solution to this internet access problem, especially if it's not working out with private companies. Perhaps the most fierce competitor to compete with Comcast is going to be the government.
Having the government be the provider of the services hasn't always worked out well. In an extreme case, you get the Soviet Union. However, jobs-to-be-done can help us figure this out because, clearly, the world needs a better service than Comcast, especially during a pandemic where we're incredibly dependent on being online and being connected. If this shifts society to not commuting as often, not traveling to meetings as often, and doing everything through Zoom and Google Hangouts, that's fantastic. It lowers our carbon output. That's a good long-term benefit. To beat Comcast, who has this entrenched $50 billion monopoly with Xfinity, one way is through new technology. (Think satellite 5G.)
So what do you do from a competitor standpoint? It might involve helping the government rethink these platforms to allow different types of competition. Figure out what the jobs are that the government is trying to do, as well as the jobs the individual companies are trying to do. If you were to try and beat Comcast, the best bet would be to do it from a technological standpoint. Whether it's 5G or satellite or some combination of technologies, there needs to be more direct competitors to Comcast. Figure out what the core underlying jobs are of accessing the internet and consider the role of government and the jobs they're trying to get done.
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