You Need More Than Market Segmentation Data

The tech industry is all about market segmentation. Unfortunately, this tendency often leads tech companies to miss a key measurement of success: whether the solution is actually accomplishing the tasks it is being used for.

Do you know what jobs customers are using your product or service for? Surprisingly, many companies don’t.

This article is based off a B2B Revealed episode.

You can listen to the episode or read the article below.

B2B Revealed – ON: iTunes, Stitcher, and Google Play

Tech companies focus heavily on figuring out the types of customers they have. Tech leaders obsess over how many customers are in the education sector, how many are in large or small businesses, how many have a hundred or more licenses, etc.

Still, many companies have a gaping hole in their knowledge. They don’t know the specific jobs customers are using the product or service for. That’s a huge problem.

Thankfully, Clayton Christensen’s latest book, “Competing Against Luck: The Story of Innovation and Customer Choice” gives hope. It spells out how understanding “jobs to be done” will keep products and services relevant. The theory also explains how to spot an area ripe for disruption.

It’s extremely important for corporate researchers to understand “jobs to be done” in order to conduct effective studies.

Insufficient Innovation

Early in the book, Christensen establishes that innovation today is troubled. He writes,

“In a recent McKinsey poll, 84 percent of global executives acknowledged that innovation is extremely important to their growth strategies, yet a staggering 94 percent were unsatisfied with their own innovation performance.”

Christensen connects his latest book with his famous work on Disruptive Innovation Theory. (For more info, check out “The Innovator’s Dilemma: The Revolutionary Book That Will Change the Way You Do Business.”)

He states,

“Despite the success and enduring utility of disruption as a model of competitive response, it does not tell you where to look for new opportunities.”

Disruptive Innovation Theory helps to illuminate companies ripe for disruption within an industry. However, Christensen admits that it doesn’t show how to find opportunities. “Competing Against Luck” does.

Does It Get The Job Done?

Jobs theory drives at the reasons for purchasing and using a product or service. It can be used to figure out why customers chose to:

Purchase a solution.
Go with a different solution.
Stay with the status quo and purchase no new solutions.
Continue to use a solution.
Stop using a solution.
Switch to another solution.

Christensen explains,

“We define a “job” as the progress that a person is trying to make in a particular circumstance.”

It’s important to figure out what job your solution is being used to accomplish. You also need to know whether your solution:

Makes the job easier.
Is the best solution for the job.
Justifies a purchase rather than doing nothing.

Got Data? The Right Data?

The core fallacies that prevent companies from understanding what is going on around them is a must-read section of “Competing Against Luck.”

“The Fallacy of Active Data Versus Passive Data” is a big one. Christensen writes,

“Instead of staying cognizant of and focused on the type of data that characterizes the rich complexity of the job (passive data), growing companies start to generate operations-related data (active data), which can seduce managers with its apparent objectivity and rigor but which tends to organize itself around products and customer characteristics, rather than Jobs to Be Done.”

We’ve seen this many times with our own client base. As a company grows, it becomes blinded by its data. Company leadership thinks current metrics of success are more important than continually revisiting the original assumptions that launched the company in the first place. The success of current endeavors is measured and over-measured while the validity of the company’s purpose remains assumed and unchecked.

Collecting market segmentation data on your customer base is great. You can’t stop there, though. It’s not enough. Gathering data on “jobs to be done” is just as important.

Change Is Expensive

When analyzing jobs, it’s critical to take switching costs into account.

You’ll have to look further than the mere cost of the new solution. Think of the cost of moving to a new house. What you end up paying isn’t just the price of your new home, but also the cost of the moving company, the technicians to install various appliances, painters, etc.

This is a frequent area of study for us. We often must ask, “What did you remove to make room for the new product or service? What will have to be integrated with the new solution?”

Typically, new products and services have to be integrated with the company’s existing systems via APIs or other means.

Integration can take months or even years to finalize. Since a long time span must be factored into integration, many potential customers may have only an estimate of what it would cost to switch to a new solution.

Post-Purchase Questions

Christensen also has a great section about what he calls the “Big Hire” and the “Little Hire.” The big hire is when the money is laid down and the purchase is made. The little hire happens again and again as the individual or business puts the product to use over time.

In our studies, we ask, “Which features were considered a key reason for purchase? Are you still using them?”

This line of inquiry is designed to surface the “little hires” of the product. After the customer has been using the product for a while, did the justification for the big hire diminish? Perhaps features that sold the customer on the purchase did not live up to expectations.

Another great question to ask is, “What features are you using more than expected?” This is another “little hire” question. The answer may surprise you. Perhaps a lesser known feature is driving strong customer loyalty.

The Jobs That Aren’t Getting Done

Christensen’s discussion of non-consumption is vital.

He says,

“You can learn as much about a Job to Be Done from people who aren’t hiring any product or service as you can from those who are. We call this “nonconsumption,” when consumers can’t find any solution that actually satisfies their job and they opt to do nothing instead.”

One of the best B2B market research questions is, “Are all current solutions in the marketplace lacking certain capabilities?” If the answer is “yes,” the stage is set for disruption. Someone is going to realize that there is a job that is not being satisfied.

Disruption Red Flags

There are many ways to complete a job. Many companies make the mistake of assuming that all solutions capable of completing the task will be similar. They’re not always.

Tech companies are often challenged by this. They invent the class of products and then struggle to imagine any other class of products that could meet the same need.

The battle between Yahoo and Google is a perfect example. Yahoo basically invented internet portals, but they took a card-catalog style approach to indexing the internet. Google built a powerful search engine based on the actual structure of the internet. It was much more efficient than Yahoo’s approach. This was one of the key drivers of Google’s triumph over Yahoo. Eventually, Google will be bested by someone who looks at the problem of surfacing information on the internet and finds a completely different way to do it. It’ll probably come from “a different class” of solutions as Christensen would say.

Here’s another B2B tech sector example. Going as far back as IT departments have existed, there has been a job called “create a server.” For the longest time, the fastest way to create a server was to buy one. Then you had to install an operating system on it, get a management agent, and work with the physical server over a number of years because changing and learning a new one would be an expensive hassle. Then, bam! Along comes VMware. With their virtualization stack, VMware had a whole new way of creating a server quickly. Then VMware got disrupted by players like Amazon Web Services, which had another way of creating a server quickly.

Your Solution Was Hired To Do a Job. Is It Doing It Well?

A purchase doesn’t guarantee that the customer is satisfied. Understanding whether your product or service is helping customers to accomplish specific jobs is critical to measuring success.

Market segmentation data is not enough. Post-purchase qualitative research is just as important.

Christensen explains,

“What job did you hire that product to do? The good news is that if you build your foundation on the pursuit of understanding your customers’ jobs, your strategy will no longer need to rely on luck. In fact, you’ll be competing against luck when others are still counting on it.”

“Jobs to be done” theory breaks us free from an almost obsessive focus on market segmentation across the corporate research industry. Instead of getting caught in the cycle of gathering endless data on “who,” we can also approach the more interesting question of “why.”

Christenson takes us back to a fundamental truth: all products and services are hired to do a job. Figure out what that job is. Do it better than anyone else. Watch your success reach new heights. You won’t need to rely on luck.

We highly recommend that B2B market research professionals and company leaders of all kinds read “Competing Against Luck.”

This podcast is brought to you by Cascade Insights, a hybrid B2B market research and marketing firm. We research the who, what, when, where, how, and why of B2B tech sector buyers and how best to message to them.

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Sean Campbell

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Sean Campbell is the CEO of Cascade Insights, a competitive intelligence and market research firm for B2B technology companies. A 20-year technology veteran, Sean oversees the health of the firm, drives the company’s thought leadership efforts and maintains relationships with key clients.