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    January 18, 2021

    How Would You Beat Home Depot?

    competing in the home improvement market

    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'll discuss innovation theory and explain the methods you can use to put the theory into practice at your company. Today, we're going to look at how you would beat Home Depot.

    We like looking at large corporations and certainly Home Depot would be one of those. They have a $290 billion market cap and are one of the dominant companies in the home improvement market. In 2020, they earned $33 billion in revenue in Q3 alone, which was up 23% year over year. This raises a very interesting question: In the middle of this pandemic, and with millions of people out of work, how are they still growing?

    How Is Home Depot Growing?

    If you were a new entrant coming into the market, a startup, or even an existing competitor, how would you compete with Home Depot using jobs-to-be-done? What jobs are people hiring Home Depot to help with?

    Home Depot is in the home improvement market so, very simply, we could say the job is "improve your home." Given that we're all in a lockdown right now and spending more time at home, we start to see why Home Depot has been able to grow. If we're socializing at home, schooling at home, working at home, and just generally at home more than we have ever been before, we're going to be inclined to improve it and to make it work for our unique situation. So how does Home Depot help you do that? How are they helping you get the "improve your home" job done?

    The reason why they're growing is that people are taking funds that they've previously allocated for things like travel and vacation, and since they're not traveling or going on vacation anymore, they're using those funds to improve their homes instead.

    "Home improvement" is one way of looking at the market. If you're going to compete with Home Depot -- if you're Lowe's, for example -- you're in a direct, head-to-head competition with them. You're going to be looking at what Home Depot is doing, making the necessary adjustments and likely asking yourself, "Do they have a product that we don't have in our inventory? Are they offering a service in their stores that we don't have?” That's the traditional, direct method of feature-to-feature competition. What we like to do is to use jobs-to-be-done to help companies think a little differently. 

    Competing with Home Depot

    If you're going to compete with Home Depot, how would you go about it? First, we'd want to break down all the jobs that people are hiring Home Depot to do. Start with a simple job: improving the home office. What are the jobs that people are doing in their home office? Once you've answered that question, then you can go through your entire home. What are you doing in your kitchen, for example? Or what are you doing in the bathrooms and showers? Your living room? In other words, the job is more than just "improve your home." Improving your home is almost a solution to all these other jobs.

    Perhaps your job is "make my bedroom look nicer." You might look at that job specifically and realize that, yes, you want your bedroom to look nicer, but really, the core functional job would be "getting a good night's sleep." That's true in every part of your house. "Preparing a meal" is a good example of a job in your kitchen. The point is, there are solutions to these jobs that don't require direct competition with Home Depot. 

    If you look at that high-level job of improving your home as a domain, all Home Depot really helps you with this gathering the materials. There are a bunch of other steps in that job covering everything from figuring out how to improve it, to designing that improvement and actually executing it. I cannot tell you the number of things that I would like to improve about my home that I just don't have the time to do, even if they're really simple (this includes maintenance jobs too).

    Your home needs to provide shelter. To do that, you need to keep out water. You need to keep your HVAC system working appropriately and that requires regular maintenance. Unfortunately, none of the existing solutions for those things last forever and that's a whole other domain; there are the improvements to the current condition of your home... and then there's the ongoing maintenance of all these things. 

    This holds true for something like landscaping as well. You can go to Home Depot to buy a rake, or you can hire a landscaper. This brings up an interesting point about segmentation: some people have the time to do more of the job steps on their own, and those are the people who use Home Depot to gather materials.

    I'm sure I'm not just speaking for myself when I say that when you have a family, and you have two adults who work full time, speed and accuracy is critical for the home improvement job. You do not have time to personally take care of all of the maintenance a home requires. It almost makes you regret owning a home in the first place. This job is incredibly underserved. Even finding help to do it is time consuming. (I can't get a contractor to call me back for next to anything.) There's so much opportunity in this in this domain, quite frankly, it's surprising that Home Depot earns as much revenue as it does when this job is so underserved.

    What Is the Actual Market?

    Another good way of thinking about this is, what is the size of this market? Sure, you could say people are buying materials to improve their home on their own and that's one market. But is that really the market?  We have to think about it more broadly. Home Depot is serving multiple customers, as well as serving the homeowner who wants to go and build their own garden, do their own kitchen improvements, etc. They have services to help you with all of that. However, they also provide a bunch of stuff to contractors who are doing that for you.

    As we mentioned, with jobs like "optimize your home" and "maintain your home", those can be further broken down until you decide Home Depot is actually going to be a part of your solution. In jobs-to-be-done, the job beneficiaries are the reason the market exists. This market doesn't exist because of a contractor; it exists because homeowners have a home. They're the job beneficiary. They're the core element. Obviously, homeowners are hiring contractors to help, but also, in the jobs-to-be-done jobs theory framework, they're hiring contractors as part of the solution. 

    home improvement contractor

    You could add a layer: "optimize my home subscription service." Whenever I have anything go wrong, I just want to make one phone call and have this single service provider come and take care of it. Again, if you've got a busy family, who has the time to take care of this stuff? That's where the big market opportunity is. Imagine different real estate models, different types of homeowners in different communities where you're outsourcing the maintenance, repairs and optimizations.

    Condos and co-ops are great examples of this. You pay a maintenance fee and somebody takes care of most of the infrastructure. They don't take care of the inside of your apartment and all the little nooks and crannies, but they make sure the HVAC system is working, the plumbing is working and that the roof isn't leaking. You even see this at the high-end of the market in the case of seasonal homes, or hotels doubling as homes because people want to outsource everything.

    If you were to going to compete with Home Depot using jobs theory, you would want to look at all these different markets that they're in. There isn't a single market here. Home Depot is providing all the stuff around your home, but when you're in your home, there are tons of other jobs, from "preparing meals" to "getting a good night's sleep." You can start to see how there's a disconnect just by searching for stuff on Home Depot. A good example is, if you search their site for something like "home office", you'll probably see a bunch of ceiling fans in the search results. That might relate to achieving comfort, but it doesn't necessarily address any of the jobs that you're trying to do with your home office (and it might actually make your home office worse). It  might not be a good solution to get the job done.

    Capturing Market Share

    If you were trying to compete with Home Depot and take market share, go through each of the true markets, or jobs, involved in being productive at home. One example is "renovate the kitchen." What you might really be focused on -- what the market actually is -- is "prepare a meal." One of the most innovative meal prep solutions ever was the microwave. Think of how much changed with the microwave. New foods were created specifically for the microwave. There's a newer product, called the Brava, which is a type of oven. It's another solution to prepare a meal that uses light instead of microwaves to heat water. (It's really good, I have to say. They're not paying us anything, I just happen to like the product.) Then there are services like Blue Apron and Gobble who deliver prepared meals right to your door.

    These solutions are all in the same kitchen-improvement market as Home Depot, even though it doesn't seem like they're directly competing with Home Depot. The end job that customers are trying to get done is the same. These other solutions aren't home improvement retailers but they still present a real risk to Home Depot nonetheless. For instance, if you're using these other solutions, you might not have to renovate your old stove like you originally thought you would. And you might not even be motivated to anymore because now another solution gets the job done so much better. 

    Anybody who listens to our podcast knows this situation is analogous to the one we were talking about before the pandemic: airlines should be buying web conferencing companies. They're both targeting the same job, it's just that salespeople are acquiring customers with very different platforms. This holds true for Home Depot as well. Even though they're not in the business of making new, innovative types of ovens, those ovens are helping people get the job done. These new ovens might not be as big of a threat to Home Depot as, say, Zoom was to United Airlines, but the competitive mentality is the same. What are those underlying jobs? How can you think outside the box (or, literally, outside the Home Depot store)?

    One of the reasons why retailers continue to compete with Home Depot is because they can sell those products like the Brava. Under their existing business model, any new appliance that's out there as an innovation to help you do something in your home, Home Depot can sell it and make some money off of it. They may miss out on big opportunities to innovate and get the whole job done, but they seem firmly entrenched in the preparation aspect of most of these jobs. By that, we mean the types of jobs where you have to make lots of decisions about how you're going to get the job done, and then acquire whatever materials you might need to do that.

    If you're going to prepare a meal at some point, you need to make lots of decisions. How are you going to cook meals on a regular basis? Are you going to use a Brava? Are you going to use a microwave? Are you going to use an oven? An induction range? How am I going to do this? And then you have to acquire those things. That's the risk for Home Depot: they're not in the part of the job that you do every single day. However, their model continues to work as major innovations come onto the scene because they can always become a part of the solution.

    The Role of Retailers

    So what is the role of retailers? In this home improvement job, retailers are targeting just one step, not the whole job. In "prepare a meal", they're not actually helping you right now to make the meal, or even choose which meals to eat. You can see clearly that with Brava and their business model. It's very much a type of subscription model. They're not just selling you the oven, they want to sell you everything you put in that oven which is providing recurring business. Preparing food is the job that people actually have to do every single day and that's a really big market relative to the market for, say, retiling your kitchen.

    Home Depot isn't targeting the whole job and that presents a tremendous opportunity for competitors. As we mentioned before, if you created a service to help homeowners maintain and optimize their home, Home Depot could become a competitor, but right now they're just getting one step done. It's critically important when analyzing a competitor or trying to enter a new market to go through all the different jobs steps. What does it really take to get the job done? You want to know where to focus that home maintenance. You want to be aware of everything going on in your house, from water and electricity to sewage and garbage.

    That’s a great way to look at how jobs-to- be-done could be applied specifically to home improvement. You can dissect that job, look at all the different job steps, see what would happen with it, and then you can go into the individual jobs as well.

    What Is the Willingness to Pay?

    Returning quickly to what we mentioned earlier about segmentation being based on the willingness to pay, in the case of the hotel-type homes offering the plug-and-play maintenance services at the high-end of the market, those are the people willing to pay a lot to get that job done. They consistently spend money on those services to stay on top of maintenance. Then, thinking about the "Do It Yourself" end the market as the lower end, those people aren't willing to pay nearly as much to get this job done. They'd rather just notice it themselves, not spend money on somebody who's monitoring the situation for them, and then actually execute the solution on their own. They just want to spend money on materials they need. In the meaty middle of this market are the people who aren't willing to spend as much to get the whole thing done for them with a single service, but they recognize they're short on time and they're willing to spend more than just the cost of materials. 

    It brings up something we don't talk about much, which is the need to create a solution that's profitable. This boils down to a single question: how can you create a service that's almost as good as what the high-end is getting, but at a more economical price point that's still profitable for your business? There should be a business model innovation opportunity as much as a product innovation opportunity. You may use technology to scale whatever the solution is, but it's not a brand new solution because it's already in the market. The high-end is using it and you just need to figure out how to make that cost effective for a different segment.

    Map the Job Steps First

    The key is, whether you're innovating your business model, products or services, mapping out all those home improvement job steps is the first thing you should do because those are never going to change. With the exception of big platform changes, such as connecting your home to the Internet or building a smart home, most of the improvements people are making to their houses now are the same ones they were making 100 years ago. We're humans. We live in a home. That was true 100 years ago, it's going to be true a 100 years from now. If you're in this home improvement market, break down those jobs and understand what they are before focusing on innovating.

    One last note, looking at Home Depot's jobs, for example (or any home improvement retailer's job), the goal is to grow sales. There's a service that identifies a home maintenance project that people wouldn't be doing otherwise, thereby increasing sales of materials. You're getting a job done for the retailers that they might be willing to pay for. If you can give them information about people who are willing to buy materials, and you give them the pole position to sell those materials to them, that's worth money for them. This is one way to decrease the cost of delivering that service.

    This is a great example of cooperating with competitors in trying to shift the market. Use jobs-to-be-done to ask yourself a few questions:

    • Is Home Depot competitive if you're in this market?
    • Are they a direct competitor? Are they a threat?
    • Are they a cooperator or a partner?

    When you map out and really understand the job steps, then you can place the competitors in the market and realize where you need to differentiate yourself for particular job steps and how to satisfy customer needs for each by partnering with other companies. You can't do everything, which is why you need to find partners along the way. That's often where market evolution happens.

    To learn more about our jobs-to-be-done software try it for free today or reach out to get one of our free how-to guides.

    Posted by Jay Haynes

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