Growth begins with market selection
The market selection process should result in a prioritized market portfolio; a prioritized list of markets worthy of investment and pursuit. The markets selected should hold the growth potential needed to achieve the desired revenue objectives. Unfortunately, the market selection process is fraught with problems. Most of which can be tied directly to the way markets are traditionally defined to begin with. When looking at markets through a jobs-to-be-done lens, we see that a market should be defined as a group of people who are trying to get the same job done. This insight has a significant impact on the market selection process and on the quality of the markets that we select for pursuit.
Myths that mislead
Companies often define their markets around the product or technology they are selling. We hear, for example, companies say they are in the MP3 market, the semiconductor market, or the toothpaste market. We see companies size their markets, and market opportunities, by determining the dollar volume of the products being sold. Using that calculation, they decide to invest or divest in a market based on trends in revenue growth.
But here is the problem, and the myth. A product is not a market. Every product will one day become a thing of the past. Vinyl records and cassettes gave way to CDs and MP3s, but those formats too will fade. But just because a technology or a product becomes obsolete doesn’t mean the market disappeared. It means that the market (the people who hired the product to get a job done) moved on to buy another product; one that helped them get the job done better.
Defining a market around a product or technology leads to highly inaccurate market-sizing calculations and poor market selection decisions. Companies end up selecting a market for pursuit that is falling off a cliff (as Microsoft did when they invested in the Zune), while missing out on the real opportunities for growth (such as the opportunities Pandora discovered with its online listening product).
We see markets through the customers’ eyes
We define a market the way customers do, as the combination of the people (job executors) trying to get a job done, and the job they are trying to perform. For example, carpenters (job executors) who are trying to cut a piece of wood in a straight line (the job) constitute a market. So do interventional cardiologists (jobs executors) who are trying to restore blood flow to an artery (the job). By defining a market as a customer and job, we end up with a stable unit of analysis upon which to base our market selection decisions.
Using this thinking, we can easily see that even though the market for iPods is now decreasing, the market for people listening to music continues to thrive and grow.
What job is the customer trying to get done?
When making market selection decisions, we must not only be able to correctly identify who the customer is (i.e., correctly identify the job executor), but we must also be able to correctly determine what job they are hiring products to perform. That is not always easy. Here are three insights we use to get the answer right:
1. We think about the job from the customer’s perspective, not the company’s. For example, a company that supplies herbicides to farmers may conclude that growers (the job executors) are trying to kill weeds, while the growers might say the job-to-be-done is to grow a crop.
2. We think big; to encompass the entire job. A narrow focus on market selection will hurt a company because customers are looking for products and services that help them get the entire job done better.
3. We define a market around a functional job, not the emotional goals that accompany it. A company that offers a product that “prevents people from getting lost when driving” would do themselves a disservice to conclude that their customers are hiring their product to “achieve peace of mind”. A focus on “peace of mind” will not deliver the insight that’s needed to better prevent people from getting lost. Knowing the customers’ accompanying emotional jobs is helpful, of course, but only when it comes to positioning and messaging.
At Strategyn, we know all the market selection pitfalls. With two decades of experience, we are the best in the world at defining the market at the right level of abstraction. It is part of our innovation process, Outcome-Driven Innovation (ODI). We bring markets into perfect focus by seeing them through the customers’ eyes. Learn more about our growth strategy consulting services.