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Jobs Theory Blog

11 Ways to Think Different about Product Management Using Jobs-to-be-Done

This is the introduction to a series about how Jobs-to-be-Done can change your product development mindset. Part 1 explains the first five rows of the chart using the example of an educational publisher. Part 2 discusses Idea Generation, Pricing, and Market Sizing. Part 3 covers Road Mapping, Aligning the Team, and Scoping an MVP.

Jobs-to-be-Done is often presented from a theoretical point-of-view. To help you apply it to your everyday life in product development, we've created a Jobs-to-be-Done Cheat Sheet.

The Jobs-to-be-Done Cheat Sheet illustrates the practical difference between a traditional approach to product management, and the JTBD approach from thrv. If you've ever found the theory to be a little overwhelming, this breakdown may help.

To ground the concepts, we imagine how Microsoft could have used JTBD to think differently when competing with the iPod. If you were a PM at Microsoft then and focused on the customer's unmet needs in the job of curating music, would you have proposed the Zune?

Think of the Cheat Sheet as a first step towards setting yourself apart from all other product managers and companies who don't know about Jobs-to-be-Done. Save the image and refer to it when you're about to do something the same way you always have.

To dig deeper into the Zune vs iPod, sign up for our free email course: How Microsoft Could Have Beaten the iPod Using Jobs-to-be-Done.

To apply JTBD to your market, check out our training, software, and services or contact us.



Posted by Jared Ranere , 3 comments

The Math Behind Warren Buffett's $1 Billion Stake in Apple

The news of Berkshire Hathway's billion dollar stake in Apple reminded me of a post I wrote in January, 2014 explaining the math behind valuing Apple at over one trillion dollars.

From Matt Phillips at Quartz "Apple is the New IBM" and Timothy Green at Motley Fool "Apple is Not a Warren Buffett Stock" to Daniel Sparks at the same publication "Warren Buffett is Right: Apple, Inc. Stock is Undervalued" and John Gruber "Apple has long struck me as the sort of company Berkshire likes to invest in" opinions and interpretations of Buffett's investment have been all over the map.

To add to the conversation, I've reposted my January 2014 thoughts here. This is likely how Warren Buffett valued Apple before he invested.

Apple just released impressive quarterly results: $57.8 billion in revenue, 51 million iPhones, 26 million iPads, 4.8 million Macs, and 6 million iPods sold. So how should we value Apple? How much is a share of Apple really worth?

Let's combine a few things to value Apple: (i)Warren Buffett's intrinsic value model, (ii) market disruption theory, and (iii) jobs-to-be-done innovation theory.

To read the headlines, you might think Apple is, again, doomed: "Apple's Shares Slump on Weak Forecast" and "Apple iPhone Shares, Outlook Come Up Short" are just two examples. These headlines always encourage people to tell Apple what they must do, and John Gruber wrote about the problem with this approach.

If you look at any valuation number for Apple (for example, a P/E of 12.6, an EBITDA multiple of 8.4) it is remarkably low relative to its competitors (for example, Google has a P/E of 32.2 and an EBITDA multiple of 18.6).

To put this into perspective, if Apple had Google's P/E, it would be worth $1.2 trillion (yes, trillion with a "t") instead of the $452 billion it is worth today. So why is Apple valued with a multiple so much lower than Google?

The Buffett model is important because it will tell us what assumptions we should analyze to determine Apple's value and ultimately its multiple. The model is straightforward: a company's value is based on its ability to generate future cash for its owners (what Buffett calls "owner earnings"). We can analyze Apple's owner earnings by taking its net income plus depreciation and amortization less capital expenditures. This number was $34.7 billion for the 2013 fiscal year.

The key to the Buffett model (and any valuation model, really) is projecting the growth rate of this owner's earnings number. If we assume a future growth rate we can determine the company's value. All of the future owner earnings are discounted back to today's dollars to determine the value of the company. The trick, of course, is being accurate about these growth assumptions, which is where disruption theory and jobs-to-be-done theory can help us.

If we assume that Apple will grow its owner earnings at 5% for the next 10 years, and then 2% for all years after that (with adjustments for cash and debt), Apple's market cap wouldn't be $453 billion. It wouldn't even be $1.2 trillion. It would be $3 trillion. This is a share price of $3,275 in contrast to today's share price of $506. At just 5% annual growth for Apple.

Here is the math behind this valuation:

Intrinsic Value AAPL

Let's put this in perspective: from 2004 to 2013, Apple grew at a compound annual growth rate of 74% (meaning it grew owner's earnings basically 74% every year, see the chart above). That is impressive, but not likely to continue forever. So how do we determine if this historical growth rate will slow to 5% then 2%? As Horace Dediu and Jesse Felder have noted, the market is undervaluing Apple's ability to produce future cash flow, so understanding this growth rate assumption is critical to our assumptions.

Disruption helps us analyze Apple's future growth rate because (i) Apple's recent growth has been based on the premium iPhone and (ii) disruption ends up displacing the premium players in a market.

A quick review: Clay Christensen first described disruption as the "process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors." (Christensen somewhat famously analyzed the iPhone's disruptive power incorrectly, but the theory of disruption is still correct).

So will Apple be disrupted? If they were, their growth rate would clearly slow, and thus their valuation would fall as well. The market seems to be saying that Apple will almost certainly be disrupted.

But let's look at an interesting chart tweeted by Jason Snell. It shows Apple's percentage revenue by product.


If we simplify this a bit, it looks like almost exactly like the classic disruption theory chart explaining how incumbents over-serve the market at the high end, while a low-end entrant starts at the bottom of the market, but takes over to become the dominant player.

Here is the simplified Apple chart:

Apple Disruption
And here is the disruption theory chart:


But there is a fundamental difference between the two. In disruption theory, it is a new entrant who disrupts the incumbent. But in Apple's case, the iPhone and the iPad are an example of self-disruption. Apple disrupted the Mac (and the PC) with the iPhone and iPad. While the Mac continues to be a healthy high-end product, Apple absolutely destroyed its own iPod. Six years ago, the iPod was almost half of Apple's revenue. In the latest quarter, iPod sales fell by 50%.

MG Siegler noted that Apple "wants to be the ones to disrupt themselves... But never with stakes this high..." But I would argue the stakes were incredibly high when Apple decided to disrupt the Mac and the iPod (both about 100% of their revenue) at the same time. And history is a good indication that Apple is probably thinking about disrupting the iPhone, even now. A truly disruptive product to the iPhone might not emerge for years, but I can't think of another company that would prepare for and execute a self-disruption strategy like Apple. It is in their culture to do it, as long as the new product is insanely great. As a result, Apple deserves a higher future growth rate than the market is currently giving it.

Disruption theory is a good tool to analyze what happens to companies, but it is not a good tool to help companies figure out what to do. How do you respond to disruption? When is the right time to disrupt? How do you disrupt yourself before a competitor does? These are the really hard questions.

The answer is jobs-to-be-done (JTBD) theory, popularized in Christensen's Innovator's Solution. In short, JTBD theory shows that markets should be defined not by products, which change (and are disrupted) over time. Markets should be defined independently of any product. They should be defined based on the job the customer needs to get done. Products change, jobs are stable.

The iPod is a great example. Microsoft made the mistake of targeting the "iPod market" with the Zune. But JTBD theory shows us that there is no such thing as an iPod market, just as there isn't a cassette market, an LP market, or a CD market. Companies get disrupted because they define the market based on their product, not on the customers job-to-be-done, e.g. the markets for listening to music and discovering new music.

And even simple jobs are extremely complex. Every job has 50 to 150 different customer needs that are independent of any product or solution.

This is the real reason Apple succeeds: they focus on jobs and the customer needs. In the recently discovered Lost Interview with Steve Jobs, we get a look at how Jobs thought and how I think Apple as a company innovates. Jobs says designing a product is a process of "keeping 5,000 things together in your brain" and getting them to fit together. In addition, while people frequently think Jobs said "customers don't know what they want," he actually never said that. What he did say was: "you can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new." And second he said, "you've got to start with the customer experience and work back toward the technology--not the other way around."

So this is how Apple innovates: they don't ask customers what product they want, they focus on the job they are trying to get done (the customer experience), the hundred of needs required to get the job done (the details of the customer experience) and the different technologies and solutions to get the job done best (the "5,000 things" are the 50 to 150 needs combined with an almost infinite number of possible product solutions).

I have worked with a lot of companies over 25 years, and almost none think like Apple and are organized to focus on the customer experience like Apple. And I have been an Apple customer continuously since 1979. If Apple is acquiring new customers today that have even a tiny percentage of my loyalty to Apple products (and I buy them because they help me get important jobs done better in my personal and professional lives), then they will almost certainly be able to sustain at least a 5% growth rate.

Finally, let's look at Apple's product success rate vs. Google. This is another important number, like a batting average for a baseball player. Who would you rather bet on? A player with a .175 average or one with .400?

I am sure my list isn't complete, but if you look at the Google Graveyard of products and the history of Apple launches (from the new Jobs era), Google has about a 7% success rate and Apple has about a 90% success rate. My quick analysis is here (Download Apple vs. Google), and while I am sure it isn't entirely accurate, it is generally correct.

So in summary, this is Apple:

1. A company with a track record of growing at 74% per year.

2. A company that knows how to disrupt its own products better than any other company.

3. A company that knows how to focus on the customer's job-to-be-done.

4. A company with a 90% product launch success rate.

It is a good bet that Apple will beat a 5% growth forecast over the next ten years...


Posted by Jay Haynes , 1 comment

Why thrv, or How I Set Out to Improve Product Launches and Product Teams' Lives

It's one of the toughest moments for any company. You've spent time and money, pushed a great team to their limits, and now you are ready to launch a product into the world. You should be proud, elated even, but your stomach is in knots. Why?

Because, despite all your efforts, you're not sure if it's going to be a success. You've seen this movie before. A big investment in all the best ideas from all the most talented people results in a lackluster response from your customers. The stakes are high so you tightened up your sprints and got more ruthless with your prioritization. Maybe this time will be different?

I've been there and know the feeling well. Excitement, fear, hope and trepidation all swirling around inside your heart, head and stomach. I've optimized design and engineering processes until my team is a well-oiled machine, but it had no effect growth. It's an experience I kept coming back to when thinking about the next challenge to take on in my career. The more thought I gave to it, the more it became clear: I was passionate about the product launch, or more specifically, helping organizations launch products with more confidence, less risk, and in ways that not only brought business success but also led to happy and focused teams.

The turning point for me occurred when I learned and adopted the Jobs-to-be-Done framework. JTBD clarified my thinking and reoriented my perspective on product management. After years with a product-centric point of view, JTBD asked me to take a customer-centric view. It made all the difference in the world. I realized that the tightest sprints in the world won't fix a broken product strategy that doesn't focus on customer needs. I'll admit, it was challenging at first. I had to break the way I had been thinking and speaking about products for years.

Eventually, I understood Jobs-to-be-Done was more than a buzzword and more than a mindset. It's also a process that brings science to the art of product management and increases the product launch hit rate and efficiency for those willing to put in the effort. When it came time for me to venture out on my own, I knew that helping others reap the benefits from this approach was not only what I wanted to do, but was also something that the product community needed.

thrv helps companies and product teams understand that successful launches aren't about innovative features (though that can help) or user tests saying your product is "cool" but rather about satisfying unmet customer needs. People buy products, people switch from other products, not just because something new comes along, but because it helps them do something they are already trying to do faster or with greater accuracy. With thrv, we are building the only platform for product managers based on understanding and quantifying the unmet needs of the customer's job-to-be-done.

Nothing gets me more excited than working with an organization and being there for the "lightbulb moment" when the customer-centric approach kicks in. thrv helps people understand and leverage the Jobs-to-be-Done process in a way that makes adoption faster and keeps the entire team focused on the customer throughout product development. While the theory of JTBD has a growing influence within the product management field, little has been done to help teams implement the practice. And as product managers, we all know a great idea doesn't launch a successful product--it's all about implementation and execution. thrv's tools and services are here to support you every step of the way.


Posted by Jay Haynes , 0 comments

Welcome to thrv and Jobs-To-Be-Done

Welcome to thrv! We're excited you're here and we can't wait to tell you more about our company, our people and our software. Why are we so excited? Because we believe the discipline of Product Management is ready for a new approach, one that will have you seeing your customers, your career and your product road map in a whole new light. We thought the best way to introduce ourselves to you would be by letting you hear directly from our Founder & CEO, Jay Haynes.

Jay has 25 years of experience running companies and shipping products, including time at Microsoft as a Product Manager. He is the holder of three U.S. patents, and received an MBA with Distinction from the Harvard Business School. Jay's taken that experience and expertise and focused it on one mission: To help product teams launch successful products. That's ultimately why he started thrv, the first and only software application for Jobs-to-be-Done product management.

So, if you're involved in product management and you're struggling with questions about features, customer needs, pricing, or customer acquisition, grab a cup of your favorite caffeinated beverage and start your journey with this introductory interview that will help you understand what Jobs-to-be-Done is all about, how thrv leverages this innovative approach, and most importantly, how it can help product managers excel at their jobs.

I've heard of Jobs-to-be-Done. It has something to do with a milkshake, right?

Jobs-to-be-done was made famous by Clayton Christensen of the Harvard Business School, who wrote about analyzing milkshake sales for a major fast food company (watch this great video for a description of the milkshake example). 40% of shakes were sold first thing in the morning. Did this company's milkshake have a flavor that early birds craved? No, they had a "Job-to-be-Done"--keep hunger at bay until noon and reduce the boredom of their morning commute. Christensen stumbled upon a real insight: People weren't buying a product, they were hiring a product to help them get a job done.

The milkshake served the job because it kept you full until lunch, you couldn't drink it quickly, and it only took one hand to consume--perfect for driving. It's interesting to note that recently Taco Bell created a line of breakfast items and focused on the fact you could eat it with one hand, leaving you free to go about your business. Now, that's a relatively simple consumer example, but Jobs-to-be-Done is a very potent approach in much more complex markets like medical devices, business information and complex consumer markets where the job itself is actually much more complicated.

Ok, but what is thrv?

thrv is the first and only software to use the Jobs-to-be-Done methodology for product teams and product managers. And what that means is thrv puts your customer's job front and center, so everything you do as a product manager and a product team, from analyzing competitors to prioritizing your product road map, to figuring out your messaging and positioning is done in thrv. That's very different than other product management tools and software which start with ideas about what your product should do. Because thrv focuses on your customer's job rather than your product, it helps you to generate ideas that will help your customers with their most critical issues.

With thrv, how do I use it with things like Buyer Personas or developing a cool new feature set?

Buyer Personas are interesting. They tend to be based on things like demographics, where you have an urban woman in her 60s and a rural man in his 20s and each is a different buyer persona. But the power of Jobs-to-be-Done is that it focuses on what those personas, those customers, are actually trying to accomplish. In the traditional view of things, a buyer persona might lead you astray from potential customers. For example, could an urban 60-year old woman and a rural 20-year old man both be trying to reach a destination on time? And the answer, of course, is yes. And they could both struggle with executing that job the same way, but because personas use demographic information to define your customers, rather than the job itself, that can lead you to make extraneous or even inaccurate assumptions. Jobs-to-be-Done can be very useful because it gives you insights into why customers are struggling to execute the job, not just who they are demographically. And once you understand why they are frustrated with executing the job, then you have the key to developing a new feature that they are likely to connect with and use, because now youve helped them get the job done quicker or more accurately.

Will using thrv and the JTBD methodology help me to get more people to buy and use my product?

That is the entire goal! To make you a product management hero. The goal with JTBD and within thrv is to coordinate your entire product team on what your customer is trying to do. In other words, to help you figure out, before you invest in building and marketing and selling a product, what is it that people are likely to buy and use? And what they're likely to buy is something that helps them get a job done. This of course was the famous milkshake marketing example. Clayton Christensen, when he was writing about it, realized that if you thought about improving the milkshake, if you realized that 40% of the people drinking milkshakes were drinking them in the morning on their commute, then you could study and analyze what's happening on their morning commute and gain insights into the job they are trying to execute. Rather than just studying how you make a milkshake better, you would study the job. And this is where you come up with breakthrough innovations that people will more likely buy and use.

Wait, so JTBD sounds different than what I thought. I don't have the time to learn new stuff, and we've already got a system at work. Why should I try this new approach?

There are three main reasons you might want to try the JTBD approach: One is, you want to convert more customers, and JTBD can be very powerful because it can quickly help you improve your positioning and your messaging just by thinking about what your customer is trying to accomplish. The second is that it can help de-risk your product road map. Your company is likely planning to invest potentially millions of dollars in new product features that are theoretically going to help you beat your competition. But that investment can be very risky because frequently companies launch new products or product features and they don't generate the revenue growth that they need. With thrv and JTBD framework you can assess the risk in your product roadmap. The third reason is that its a much better way to identify your competitors' weaknesses. If you have competitors that you are worried about, that are launching new products and/or are taking market share from your company, you can use thrv and JTBD to figure out where their weaknesses are by analyzing not just your product vs. their product, but how well your competitors product gets the job done, and how well your products get the job done.

I'm just a product manager, doesn't this need to get approved by the C-Suite?

It's good to have executive buy-in into any new approach or new tool, but as a product manager you can train your team, and get the training you need yourself to help improve in your job as a product manager independent of your C-Suite. Because as a product manager you're always looking for new insights into what your customers want and what your competitor's weaknesses are. JTBD and thrv can help you as a product manager which can help you help your team, which is the ultimate goal of thrv, to create highly effective product teams.

I get what you're talking about, but this will totally baffle my colleagues.

JTBD is a very logical process. When you explain your customer's job and what theyre trying to accomplish in a logical, coherent story, which is what JTBD enables you to do, your colleagues are more likely to agree on what your goal as a product team should be. In traditional methods, where there isn't an agreed upon method to understand customer needs or what your customer is trying to accomplish, problems such as conflict, dissatisfaction, and emotional arguments among colleagues can arise. One of the real advantages about thrv and JTBD is, you can translate a customer story into a series of metrics that can be measured, so then you and your colleagues can agree on what your customers are trying to accomplish which makes it easier to agree on what you should put in your product road map and how you should message and position your product.

Ok, this all sounds pretty good, but the Head of Product wants to push new features out by the end of the quarter, will thrv help us do that?

What you want to ask yourself (and your team) is, why do you want these new features for your customers? This is the power of JTBD thinking, understanding that customers don't necessarily want new features. In fact, what they want is to get a job done. If you can get the job done with fewer features, in many markets, thats actually a better solution. Ultimately what your Head of Product wants is satisfied customers and more revenue by selling more of your product. Jobs-to-be-Done enables you to focus and measure where your customers struggle so you can identify if you truly need more features, or you may in fact need fewer features to help your customers get the job done quicker and more accurately.

This requires a paradigm shift in thinking for the Head of Product and his/her team. Rather than measure their success by the number of features launched, they should be looking at customer satisfaction as a key metric of success, and customer satisfaction is measured, in the mind of the customer, by how well they can get their job done. That was my job at Microsoft as a product manager - we measured ourselves against the competition by who had the most features. Most of the time that didn't work because people weren't buying software based on the feature count, they were buying based on how effectively they felt the product would help them with the job they needed to get done. That traditional sort of thinking does often tend to lead companies down a path, and they do tend to chase their competitors. Real breakthroughs can comes when companies eliminate features and make it easier for customers to get the job done. This is not easy to do without JTBD, which is why we created thrv.


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Thanks for reading, we hope you found Jay's thoughts and insights worth thinking about. If you have any questions or comments, we'd love to hear them. You can leave a comment below, or engage us on Twitter @thrvapp. If you'd like to speak to us directly about thrv and our training program, you can get in touch with us here.


Posted by Jay Haynes , 0 comments

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