What is an innovation strategy?

Innovation can be defined as the process of devising solutions that address unmet customer needs. An innovation strategy is the systematic identification of unmet customer needs in a given market—and selection of which unmet needs to target for growth.

Identifying and prioritizing unmet customer needs allows the business to grow market share or profits through reliably successful product and service innovation.

Jobs-to-be-Done offers the perfect lens to view innovation strategy because it allows you to uncover all of your customers’ unmet needs.

This article covers:

What questions should a good innovation strategy answer?

1. What is the most efficient path to growth?

A good innovation strategy lays out the most efficient path to growth. It helps a product team prioritize unmet needs that, when addressed, will have the greatest impact on the largest customer population.

For example, highly underserved needs across 100% of the customer population are prioritized ahead of outcomes that are moderately underserved across 50% of the population.

This prioritization method helps product teams accelerate their value creation efforts—and to stay out in front of competitors.

2. Are you creating a single, platform-level product or a product portfolio?

The innovation strategy also informs whether a product team is creating a single, platform-level product versus a product portfolio (several products targeted at different segments).

If you’re creating a single, platform-level product, you are optimizing the product to address the top unmet needs of a single customer segment. When your objective is a product portfolio, you’re targeting specific offerings at different segments. Each product is optimized to address the top unmet outcomes in each segment.

3. What kind of innovation strategy should you pursue?

With a strong innovation strategy, product teams know—with a high level of certainty—whether they should pursue disruptive, dominant, disruptive, discrete, or sustaining strategies. Knowing where to focus to create value, and which growth strategy to use puts product teams on the fast path to achieving product-market fit—with products that get a job done better.

Building an Innovation Strategy

Define Your Market

People buy products and services to get a job done. The first step to building a successful innovation strategy is defining your market around this job-to-be-done.

Unlike products and technologies that will one day be obsolete, the job provides your company with a stable focal point around which to align create value.

Using this lens, your market should be defined as follows:

A Market = A Group of People + The Job They’re Trying to Get Done

Learn More: Define Your Market

Uncover your customers’ outcomes

The second step of developing an innovation strategy you can count on is extracting the needs of the market.

Customers want to get their jobs done perfectly. We have discovered that customers consider between 50 and 150 metrics when assessing how well a product or service helps them to complete a given job. These metrics (or desired outcomes) are the customers’ needs — and the power behind this innovation process. They define what perfection means and instruct your company on how to deliver value.

You uncover these needs by conducting a series of highly-structured customer interviews, and you organize them by creating a job map.

Quantify your customer’s outcomes

It takes qualitative, quantitative, and analytical methods to provide the insights we need to formulate a robust and reliable innovation strategy — starting with quantifying each customer outcome.

Customers have underserved and overserved outcomes. Knowing with statistical certainty which outcomes should be the focus of value creation and cost reduction ensures efficient deployment of resources and greatly improves your odds of success in the market.

This step requires surveying customers on:

  • How important each outcome is
  • How well each outcome is currently met

Then, use … to analyze the results.

Discover hidden segments of opportunity

Most people segment their markets demographic, psychographic, behavioral, and/or attitudinal market segmentation schemes that squarely target their products and services at phantom targets—segment classifications that are imposed on customers but, in reality, do not exist.

Instead, the best way to segment customers is around unmet needs.

Different groups of people struggle differently when executing the job-to-be-done. Most markets also have one or more segments that are underserved, as well as segments that are overserved.

Knowing the size of each segment, what outcomes are unmet in each segment, and how much those in each segment are willing to pay to get the job done better is the secret to formulating an effective innovation strategy.

Learn More: Market Segmentation

Formulate an Innovation strategy

The insights that come out of the first four steps of this process are illuminating. Most companies have never had customer insights like this before, nor the decision-making advantages that come along with them.

Using the insights from this innovation process, you can determine which strategy is best, allowing you to make the winning move.

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Benefits of a reliable innovation strategy

A good innovation strategy comes with a lot of benefits, most of which center around getting your various teams on the same page to create value.

There is a clear link between innovation and value—for customers and for the business. In fact, historical data from BCG shows the correlation between value and innovation has grown even stronger over the last two decades.

All of the following benefits help a business achieve long-term success.

Misalignment is inherent in the design of product teams. Companies are organized into functions, each optimized to serve their particular purpose. Sales, marketing, product development, R&D—all have different goals, rely on different inputs to achieve those goals, and each has its own language for communicating how to create customer value.

When teams can’t agree on what actions will create value for the customer, it’s challenging at best to agree on a common path forward.

The solution to misalignment among organizational silos is to define value creation through the eyes of the customer and establish a shared understanding of customer needs across functions. When teams agree on the definition of a customer need, what their customers’ needs are, and which of these needs are unmet, it’s transformational for the organization.

Dive Deeper: Align Your Product Teams Around Value Creation

Are your customers cobbling together solutions to get the full job done? Typically, the answer is ‘yes.’ And yet, it’s the most complete products and services that help the customer get more of the job done that will win in the market.

An innovation strategy that outlines and prioritizes all of your customers’ needs makes it easy for you to see where the holes are in your portfolio—and work on filling them. This may mean creating new products on your own, or you may pursue a partnership, merger, or acquisition to quickly fill the gaps.

Cox Automotive, for example, used insights from their innovation strategy to continually inform M&A activity years after the initial research was complete.

Without a feature prioritization method anchored around a well-defined set of customer needs, you often end up with feature creep—more and different features than what you originally planned.

Then it’s not surprising when the product is late to market, costs more than planned, or incorporates features that your customers don’t really care about.

Once your teams are aligned around a shared understanding of customer needs, defining a clear product roadmap is easy.

Using ODI for product feature prioritization unifies the team around a single version of the truth. You have confidence that you’re solving the right problems, everyone is working toward solving the same specific set of problems, and everyone knows their role in the process. No one is distracted by side projects or arguing for a different set of features—because they’ve all bought into your quantified priorities.

Learn More: Product Feature Prioritization—How to Align on the Right List

Innovation doesn’t always have to be around the product itself—you can also innovate how you communicate about this product to the market.

An innovation strategy built on Jobs-to-be-Done allows you to create enviable positioning and messaging by:

  • Focusing on the exact benefits and value that matter to your customers.
  • Uncovering unmet needs that your competition has failed to address.
  • Discovering new ways to combine single products or point solutions in your messaging.

For example, Arm & Hammer Animal Nutrition saw immediate growth by focusing on the correct job executor and adjusting the messaging to match. Within a year, this new messaging strategy helped their customers see value in their products and services, resulting in a 30% increase in revenue.

Microsoft also doubled year-over-year revenue after repackaging existing solutions into a more cohesive offering that helped customers complete more of their job-to-be-done.

Learn More: How Marketing Teams Align Around Enviable Messaging

Today, many companies find themselves threatened by digital disruptors that are innovating around the broader customer experience. But focusing on the underlying reason your customer uses your product—rather than the product itself—allows you to build a disruption-proof advantage.

When you rally resources around getting the job done better, you look at all possible solutions as a natural part of your portfolio. Over the long term, you are continuously focused on completing more and more of the customer’s job. This helps you see and react to a broader competitive landscape, reducing the prospect of being blind-sided by a disruptive solution.

On the other hand, a company focused on technology is more likely to miss opportunities and face disruption.

Dive Deeper: Your Market is Bigger Than Your Product

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