How big is the iPod market? Trick question. There is no iPod market. Customers don’t want iPods, CDs, or cassettes. They want to listen to music. When looking at market sizing techniques through a jobs-to-be-done lens, we see that the market is dependent on the number of people who execute the job and what they would pay to get the job done perfectly. When we correctly size the market from this perspective, we are able to find hidden growth opportunities in existing markets.
Companies often size the market they are interested in 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 in time 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.
Trying to size the market around a product or technology leads to highly inaccurate results and poor market selection decisions. Companies may conclude that a market is huge (like Microsoft did when it invested in the Zune), when it fact it is falling off a cliff. Or they may conclude that a market is too small and fail to invest in a market with tremendous potential (a peril that Pandora avoided, when they invested in their product).
When we look at market sizing techniques through a jobs-to-be-done lens, we see that the size of a market can be calculated based on the number of potential job executors, the frequency with which they execute the job, and their willingness to pay to get the job done better. An attractive market is one that consists of a large number of underserved executors who have a high willingness to pay to get the job done better. This forms an effective market sizing calculation.
What distinguishes our approach is that a customer’s willingness to pay is not focused on what they would pay for any given product, which is the case for nearly all traditional market sizing techniques. Instead, it is focused on what they would pay to get the job done better.
For example, a patron may be paying $50 every time she visits the hair salon, but she may be willing to pay $100 if she could find a salon that would deliver the perfect results. If that were the case across the population, the size of the market would be twice what would be calculated using traditional methods. Ironically, using traditional market sizing methods, a company could conclude that the market had no growth potential and was a bad investment risk, when in fact the opposite was true.
We size the market in a new way, bringing needed insight and ensuring investments are only made in high-growth markets. This is part of our innovation process, Outcome-Driven Innovation (ODI). Learn more about our growth strategy consulting services.
Giving Customers a Fair Hearing
In this provocative article in MIT Sloan Management Review, Tony Ulwick and Lance Bettencourt reveal how a customer need must be defined within the jobs-to-be-done framework to become a useful input into your innovation process. This article introduces timeless standards that define the types of customer needs that exist and how we use them to create customer value.
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Outcome-Based Market Segmentation
Our outcome-based market segmentation methodology, described here by Strategyn founder Tony Ulwick, offers a better way to segment markets and formulate growth strategies. Using customer desired outcomes (needs) as the basis for market segmentation, we discover unique segments of opportunity and gather the information needed to size the market.
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What is Outcome-Driven Innovation?
Outcome-Driven Innovation (ODI) is the most effective innovation process in existence today. This white paper by Strategyn founder and ODI inventor Tony Ulwick explains why innovation has historically been an ineffective process, the discoveries he made that led to ODI, and how it enables us to size the market accurately and accelerate company growth.
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Silence the Voice of the Customer
This white paper by Strategyn founder Tony Ulwick highlights the business advantages of using our ODI methods to capture and prioritize customer needs. It explains why traditional voice-of-the-customer (VOC) practices continue to fail and makes a solid case for retiring VOC as a method for understanding customer needs.
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What Customers Want
What Customers Want, the best seller by innovation thought leader Tony Ulwick, explains what Outcome-Driven Innovation (ODI) is and why it works. Ulwick, who pioneered jobs-to-be-done thinking and invented ODI, details how ODI transforms jobs-to-be-done theory into a practical method to size the market and an effective process for innovation and growth.
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Tony is the pioneer of Jobs-to-be-Done Theory, inventor of the Outcome-Driven Innovation® (ODI) process, and founder and CEO of Strategyn. Philip Kotler calls Tony “the Deming of innovation” and Clayton Christensen credits him with “bringing predictability to innovation.” Published in Harvard Business Review and MIT Sloan Management Review, Tony is also the author of 2 best sellers: What Customers Want and JOBS TO BE DONE: Theory to Practice.
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