Issue: Confusing Operational Efficiency with Product Strategy
Choosing the right product strategy is critical to your success and your ability to create equity value for your company. But many companies do not have a clearly defined definition for a product strategy. People often confuse operational effectiveness with strategy, focusing on their internal goals like reduced costs or revenue growth. Creating a product strategy based on your company and not your customer can quickly create a misalignment among teams, causing higher costs and unending arguments.
Traditional Way: Company Focused, Not Customer Focused
The traditional way of defining a strategy is to focus more on what you are going to do for your company rather than saying what you are going to do for your customer. “Our strategy next year is to increase budget, hire a team, invest in a new marketing channel, etc.” None of that is what you will do for your customer.
In 1996, Harvard Business School Professor Michael Porter wrote a famous paper called “What is Strategy?” Companies often use Michael Porter's definition of strategy, since he was a pioneering academic in the field, famous for analyzing industries to determine competitive strategy.
In Porter's view, “the essence of strategy is choosing to perform activities differently than rivals do.” Activities companies perform include manufacturing, engineering, distribution, marketing, and selling. For example, mobile phone companies each perform these activities but they have had very different results.
In many financial reporting periods, Apple has had 98% of the profits in the industry and it isn't because Apple performs activities differently, as Michael Porter would predict. In fact, Apple uses Samsung to perform some of their manufacturing activities.
Apple has leading profit share because they satisfy customer needs differently than their competitors, enabling them to take leading profit share. Successful strategy satisfies needs differently than your competitors. So customer needs, not activities, should be the focus of your product strategy.
This is why Michael Porter is outdated.
Because in 1996, MP didn't have the customer's JTBD in his strategy toolkit. Performing different activities from your competitors is important, but anyone can copy activities using industry best practices. Satisfying your customers JTBD in a unique way is harder to copy.
Needs in your customer's job-to-be-done, not your activities, should be the foundation of your strategy because your customer's JTBD tells you what activities to perform to satisfy your customer better than your competitors.
JTBD Way: Choose a Customer and Focus on Their Unmet Needs
A product strategy is making three choices - identify which job beneficiary to target, select which job-to-be-done to fulfill, and determine which platform you are going to use to satisfy customer needs differently than your competitors.
Let's look at a well-known example to demonstrate why a JTBD-based product strategy definition is more useful. We all have executed the job of creating a mood with music. While the products have changed dramatically over time, the job is stable and has not changed. The needs in the job have not changed either.
For example, one need in creating a mood with music is to find a new song for the mood. This need follows the job-to-be-done structure with an action and a variable. So we can measure the speed and accuracy of different platforms satisfying this need.
Let's look at how satisfying this need has changed over time with the arrival of new platforms that led to different product strategies. In 1984 when the CD was released, finding a new song for the mood was time-consuming and often very inaccurate, because you often couldn't find a new song. The speed was slow and the accuracy was low because consumers were forced to buy entire albums.
Then, CD changers emerged to help with this need by enabling consumers to search their library for songs. But finding a new song for a mood was still time-consuming and not always accurate. The iPod of course, was a huge improvement because it reduced the steps and time significantly. Accuracy was improved with the introduction of the iTunes store, but you still might not be able to quickly find a song for the mood.
However, Microsoft was clearly not using customer needs in the job to create their product. In 2007, Microsoft’s Zune simply tried to copy what Apple was providing without making the experience faster or more accurate. This is an excellent example of why products succeed or fail with the right product strategy.
But Pandora launched with different product strategy using a new platform: streaming. Pandora's streaming and music taste algorithms satisfied this need faster and more accurately. When Pandora launched, it was signing up 90,000 new users per day because it satisfied unmet needs in the job faster and more accurately.
This is a great example of where product strategy can lead to success or failure. A company with enormous resources (Microsoft) chose the wrong product strategy (i.e. using a hard drive to satisfy needs in the same way as the iPod) and it led to failure. In contrast, Pandora chose a differentiated strategy to satisfy needs faster and more accurately and it took Apple an entire decade to launch a competing streaming service.
Benefit: Align your team around one central strategy
To recap, you create a product strategy by identifying a job beneficiary and job to target, and then choose a platform that will satisfy unmet customer needs faster and more accurately than your competitors.
Using Jobs-to-be-Done as the foundation for your product strategy means you will have a strategy that is unambiguous and easy to remember. Everybody is aligned and it gives you direction on what to do in your department to fulfill strategy. It mitigates risk because you know whether or not you're building the right platform or not.