Customer Job To Be Done Growth Matrix

There is a very simple way to think about how to grow business. It requires us to think in terms of markets and products.

Markets – Current market segment you play in and new markets you do not serve yet
Products – Your existing products and new products you have not built yet (and are outside of your current product line)

That gives us four ways to grow any business

1. Sell more of what you make now in markets you already play
2. Sell something new – not just product extension, something outside your product line – in markets you already play
3. Enter new markets with your current products
4. Enter new markets with something new - not just product extension, something outside your product line

It is more popularly known as Ansoff Growth Matrix.

The matrix tells us it is easier to do 1 and gets progressively difficult to do steps 2, 3 and 4.

Loyalty proponents believe in staying with 1 and may be add a bit of 2. Product proponents get bored with 1 and want to build new and great (facebook phone). Those who believe buying growth spend more time and resources on 2 and 3 by acquiring businesses that sell in new markets or acquiring companies outside their core (eBay/Microsoft acquiring Skype)

There is a problem with this matrix. It is product driven as opposed to being customer needs (jobs to be done)  driven. When you look through the lens of your current products and new products you end up with approaches like unnecessary M&A and Facebook phone that are not aligned with how customer needs and how those needs are changing.

Let us redraw the matrix but now with Customers (customer segments) and Jobs as the two axes. If you are not aware of the “jobs to be done metaphor“, please see here before reading further.

Briefly, the metaphor asks us to think about customer needs as jobs to be done. Customers hire products among many alternatives to fulfill those jobs.

Now it is not anymore the question of how to sell more of same products or build new products but a question of what are the current jobs we are addressing and what new customers and new jobs provide us opportunities for growth with our core competence.

Here is the recommended strategy for each quadrant

1. Existing Customers and Jobs: Continue product evolution that cements your product as the best candidate for the job.  
2. Existing Customers and New Jobs: The new jobs could arise because of trends impacting customers or simply adjacent jobs you never positioned your product for. Remember positioning is telling customers which job your product is applying for. Instead of going after jobs that are outside your core competence you are better off investing your limited resources on evolving customer jobs and related jobs that can be served by product pivots vs. completely new products (facebook phone)
3. New Customers and Jobs you currently address with Existing Customers: Here the invariant is the jobs – two different segments have the same job to be done but you chose one segment over other and now considering serving the second segment. Understand the reasons why you did not choose that segment in the first place – is it the challenges in reaching them?, is it their willingness to pay? etc.
   Understand that different customer segments have different alternatives for the same job and hence different reference price. Choosing to serve lower willingness to pay segment should not come at the expense of price erosion in higher willingness to pay segment.
   My recommendations are to focus on packaging and pricing innovations that help protect current profits and add net new profits from new segments. It is not revenue growth at the expense of overall profit drop.
4. New Customers and New Jobs: You still have the option of better product positioning to help capture new markets. But most times you are looking at completely new jobs that require product innovations and business model innovations.
   But the advantage is your focus on customer jobs and not on products – your innovations are aligned with customer jobs. While this step once again proves to be most resource intensive with most uncertainty, taking the jobs approach helps you ease into this without taking big risks, pie in the sky product innovation or expensive acquisitions.

There you have it, your recipe for growth derived from customer job to be done.

Because multiple options are better than just one – Product Management Series

In my last article on defining and evaluating Influence Skills of product managers  (reminder – Influence Skills was rated as the most important quality in a survey) I mentioned the book Influence by Robert Cialdini. The book, in my opinion, is about influence tactics and not about building a longer lasting working relation based on trust and mutual value in a multi-encounter environment.

The book does present many tactics you can put to use when you are trying to break in or get what you want in some zero-sum games. In my opinion it does not help build an end to end process for win-win in outcomes in situations where you meet the same people over and over.

For instance using asking for a small act and then relying on escalation of commitment to get more and more of what you want does not sound to me like a mutual value-creation and fair value-share arrangement. As I wrote before, Influence is based on trust, mutual value-add and effective communication.

But that is just that, my opinion.

There are two invaluable tactics from the book that I recommend you use without compromising on mutual value and trust.

Because, Because, Because

The Influence book tells us about the effect of using the word ‘because’ in asking for an action from anyone. When asking for a favor/task  from others, a Harvard study found, you will have greater success if you explain the reason for your ask,

People simply like to have reasons for what they do.

For example,

“would you help me get the SKUs created in two weeks because of product launch”

In fact the study went a step further and tested just the use of the word ‘because’ even with illogical reasons and found that it had better effect than giving reason without using ‘because’.

Like saying

“would you help me get the SKUs created in two weeks because I am in a hurry”

I am not going to make a recommendation that you use ‘because’ with illogical reasons but stop with their primary finding about people like to have reasons for what they do and give a valid reason after ‘because’.  In fact this fits perfectly with my recommendation about showing mutual value and effective communication. Using ‘because’  helps us get the value message across effectively.

Options over Ultimatum

The second tactic that helps is giving your peers/customers/bosses multiple options and asking them to pick one over presenting them a single option and making it a ultimatum. Presenting multiple options changes the decision from saying yes or not to a single option to picking the best among the multiple options you present.

Here is a real life case study from the world of politics,

The WSJ article on  President Obama won the Health Care vote describes how he changed the conversation:

Mr. Obama’s most effective move may have been calling for a bipartisan summit on health care, shifting the conversation away from Democratic paralysis. Aides knew there was little chance they would reach a bipartisan agreement, but it forced Republicans to put ideas on the table, framing the choice as between two sets of ideas, rather than simply a referendum on one.

 It is easier for the people you work with to compare the merits of different options vs. deciding merits of picking or not picking the only available path you present.

I recommend you go one step further and present three options and invariably you will get the middle option.

Present multiple options because it turns a yes or no decision into informed choice among multiple options based on relative value.

Influence Skills – The Most Important Quality in a Product Manager -Product Management Series

Last time I wrote about the top 5 qualities to look for in hiring a product manager for your organization- enterprise or startup. The rankings are based on a survey of practitioners and recruiters, posed as a resource allocation question. The beauty of that question type is it requires them to make trade-offs, take a pick among many qualities when only limited points are available and also state how important each quality is relative to others.  Here is the quick summary of the rankings

1. Influence Skills
2. Strategic Thinking
3. Hustle – Getting things done
4. Analytical Skills
5. Attention to Details

In this article let me discuss influence skills and how you can evaluate that in the people you are hiring for a product manager position.

First what influence is not.

It is not a parlor game, not charm effect, not magnetic personality, not salesmanship, not smooth talking, not big presence, not about greasing wheels etc.  Influence is not a one sided winner takes all zero-sum game and definitely not a single encounter game.

You may have read the book Influence by Bob Cialdini. It is a good book but it is a set of tactics that can come in handy but not foundation of Influence. For instance, you may ease into a new working relation if you were to show them your connection to them but not succeed repeatedly if you ignore the three main skills I list below.

Consider this for a moment – in any organization, why should anyone drop what they are doing and add your ask and prioritize it ahead of others? And do it not just once but over and over in multiple encounters? How does your ask align with their priorities and incentives? Why should they trust you?

You will recognize that strong influence skill starts with trust. If you are applying parlor games to get what you want you sure will win once but it is a multiple encounter game. Only if trust exist can you even communicate effectively the common value proposition and get them to see their share of the value created.

Influence is about showing others the mutual value  if they were to work with you and deliver what you are asking for. You have to show them how big the pie is without them, how big it will grow with them being part of the effort and most importantly what is their share of the bigger pie.

What is implied here is how effectively you can communicate that value and getting them to see for themselves. It is also important that you communicate their value realization after their task is completed -

• show them mutual value,
• work with them to realize it,
• show them again what you two accomplished.

Evaluating Influence Skills

When evaluating influence skills you need to explore their understanding of what influence means. Anything that signals their view of this as one-sided game is a red flag. For instance if they use negative words to describe others they influenced that is an indication of seeing this as zero-sum game.

I would recommend starting the conversation not as a quiz but as a story telling session, asking them to pick a recent engagement and explain how they met a business objective working across boundaries and with multiple teams.

Here are things to evaluate in their story

1. How big the impact was for the business? This needs no further explanation.
2. Length of engagement – you do not want to hear a minor one-act play where they used tricks from Cialdini’s book to get someone to say yes. You want to hear a longer engagement based on trust and mutual value
3. How detailed the story is  - after they start with a summary of Situation-Action-Result? One way to weed out canned stories is to dig deeper for details by asking, “How are he players?”, “What are their priorities?”, “What exactly was their push-back?”, “What exactly did you say to them?”

From the story you are looking to evaluate if their understanding of influence comes through, they show trust as key factor and see the need for effective communication.

Anything less, you know where they stand among the pool of candidates you have.

Do you still believe freemium has not run its course?

Let me start by reiterating my past objections about giving Apps away for free in the hope of getting attention now and monetization later. Call it by whatever portmanteau you wish – freemium etc. or use the justification that free is free marketing. It does not matter if customers are not hiring your App for a job they are willing to pay for and you do not take the time and effort to understand customer jobs and position your App for the right job.

The App economy tempts us all with billion customers – small percentage of a large number is still a large number. But trying to target billion customers is what SurveyGizmo CEO described as shotgun approach to marketing.

And guess what? You are not the only one with the same shotgun – the App ecosystem has made the same shotgun available to everyone. There are many just like you and their App just like yours with the same hope of converting the same 1-2% of users into paying customers.

With hundreds of thousands of games, productivity tools and other apps already on the market, and thousands more launched every week, many startups are finding that their ideas aren’t so unique after all. (source)

With all these thousands of look alike Apps, the small percentage of large number becomes small fraction of the small percentage of a large number. Which I assure you is a really small number.

The odds of striking gold in the apps business are quite long. While there are more than 800,000 mobile apps available in Apple Inc.’s App Store, only 80 of them generated more than $1 million in revenue during the fourth quarter, according to research firm Distimo

That is the chances of an App making $4 million a year is 1 in 10,000. And there is no point in trying to do expected value math here because the winner takes it all.

And it turns out Free is not even close to free marketing or to be precise marketing is not free even for free Apps. If you want any thing close to decent installs (let alone frequent usage) it takes considerable marketing resources.

In this environment, well-heeled companies with big marketing budgets hold sway.

It gets worse than Free – you end up paying users to install and tell others about the App as the App maker Mouthee found out

Mouthee ran promotions—giving out free iTunes gift cards or other gifts to users who signed up their friends—which would bring a spike in downloads, but the boost would taper off after a week or so,

Let us recap the App situation

1. There are hundreds if not thousands with App just like yours
2. They are free as well
3. Free isn’t free marketing and marketing isn’t free
4. Building passionate user base is a myth and the chances a newbie App maker without marketing resources will make it into Top 250 is less than 2%
5. Chances your freemium App will make $4 Million a year is 1 in 10,000

Finally even when you gain millions of installs, your users can stay on free version longer than your startup can stay solvent,

There are so many startups that die with a whimper

Do you still believe freemium has not run its course?

Cast aside these fads and start with the business first principles to go from plan to profit.

Start with the customers, not your App. The App could be new but the customer needs are not. Whether it is a “bits” product with zero marginal cost or “atoms” product with non-zero marginal cost, customer needs come first. In fact, it is not a product until you have identified a set of customers whose needs you meet and who want to pay you for that value.

Make your choice. Successful strategy involves making choices. You cannot treat billion users as customers. Getting 90 percent of customers to take free Hershey’s chocolates with the hope that they will pay more for extras or will upgrade later is not a strategy.

Get your fair share of the value created. Charging for the product is still the simplest of all business models. Product and platform innovation do not mean business model innovation like freemium (which should never be called a business model). If your product adds compelling value to customers, charging for it is simply getting your fair share of the value created. You do not have to be ashamed of making a profit.

How do you go from plan to profit?

Top 5 qualities to look for in hiring a Product Manager

I recently conducted a survey, asking product managers, hiring managers, recruiters and other startup founders to state the key qualities they look for in a product manager hire. It was posed as a resource allocation question – I gave them a limited number points to allocate among 13 different attributes.

Here is the list of Top 5 qualities that most look for based on their points allocation

1. Influence Skills – The most valued skill is the ability to influence others without any authority. This is a clear attestation that product manager touches many different groups – customers, sales, marketing, engineering, finance, operations, etc. While the product manager is the CEO of the product she does not run rest of the organization needed to make the product a success. So the key quality required in a product manager to meet all the sales and profit goals they have set for the product depends on their influence skills – getting others to adopt the product manager’s priorities and do things necessary to help the product succeed.
2.  Strategic Thinking – Despite what we hear about technical knowledge, domain expertise and obsession about product, in reality most recognize that the product managers bring in a set of skills that others do not bring to the table and these skills complement skills brought by engineers, marketing and project managers. Strategic thinking starts with asking the right questions. It is about understanding current market, where it going, competition, go to market, etc to define the right product and the roadmap. Netting it out, it is about making informed choices.

3. Hustle – Get things done – It is the other side of influence coin. While there is the sexy part of strategic analysis and market sizing there is the day to day part of constantly moving forward to get from plan to profit. Getting things done does not mean playing all positions nor does it mean activities – it is about getting results by doing whatever it takes. Sometimes you get others to do it, other times you roll up your sleeves and get it done – be it writing the data-sheet or the pitch deck.
4. Analytical Skills – This is about making informed decisions based on data instead of instincts and gut feel. If strategic thinking starts with asking the right questions, analytical skills is about seeking the right data and analyzing it to make profitable product decisions. Sometimes there is no data other times there is Big Data – a product manager with great analytical skills should know the right methods to triangulate the answers to business strategy, product roadmap and pricing questions.
   I want to point out here a case often made for using instincts when there is no data. Andrew Mason said in his final letter to employees,

   “My biggest regrets are the moments that I let a lack of data override my intuition on what’s best for our customers.”

   My strong advice is to not pay any attention to this statement. Lack of dat does not say anything about how correct or wrong are your intuitions. Lack of data means you did not make testable hypothesis or you are not looking for proxies.

5. Attention to Details – It is lot more than ensuring rounded corners on your App icon or having drop shadows in you charts. It is about starting with customer experience from first contact to renewals, like  ensuring the sales team has the right sales plays and price lists and ensuring the support team knows how to resolve an error code the customer is calling about.

So what are missing from the top 5 skills? MBA,  Domain Expertise and engineering pedigree.

A final note about domain expertise, most insist on exact domain experience before even they talk to a product manager candidate. One entrepreneur from Austin told me how difficult it had been for them to find the right candidate and then they realized that by insisting on domain expertise they were hiring for skills that product managers can learn quickly on the job versus skills that cannot be taught or have no runway to learn once on the job. Once they removed domain expertise they found a pool of people with Strategic thinking, Influence Skills, Hustle, Analytical Skills and Attention to Details.

Next up, bottom 5 and how do you measure the top 5 skills while interviewing a product manager.

Doing the right thing costs more, do you pass those on to customers?

Milton Friedman wrote, “business of business is business”. Two companies seem to believe it is lot more than just making profit. They believe in doing the right thing, be it green manufacturing, sustainability, supply chain integrity, avoiding child labor or paying fair wages. They are Levi Strauss and Patagonia.

Their leaders recently participated in a Common Wealth Club Climate One forum for a discussion about their business and do-good principles. It is not that common for businesses to do the right thing for their customers, shareholders and employees but these two include doing the right thing for the world at large.

You should listen to full conversation (5th episode in the list) but here I want to point to two questions the moderator asked that are relevant to factors that drive us (marketers and product managers) – pricing and customer preference

When doing the right thing costs more or harder how do you manage that tension, pass that price on to consumers?

The moderator posed a open ended question but closed it right away with a question that requires a yes or no answer. Levi’s Strauss’ CEO made an excellent answer (applying all press training techniques),

“we fundamentally believe doing the right thing is ultimately good for the business. I truly believe what goes around comes around”

And he quickly pivoted to a story about terms of engagement they struck with their suppliers. (For sure we should learn his tactic on answering such pointed questions  - answer quickly albeit cryptically and bridge to something you want to convey. )  Yes doing the right thing costs more but that does not mean they are passing on those costs to customers as higher prices.

They are simply targeting those customer segments that value these non-product attributes and are willing to pay higher prices for a pair of jeans from a brand that is known to be doing good. Levi’s jeans don’t cost more because it costs them more to do the right thing but because their chosen customer segment values it enough to pay a higher price that is “ultimately more profitable for Levi’s”.

Next the moderator asked,

Do you think people who buy Levi’s jeans know and care about that?

Whether they do or don’t …. (he catches himself mid sentence)
Some do. And the one that do know and care about it, it is important to them.
Some don’t but as long as they are getting a good quality pair of jeans they are happy

Nicely summarizes his segmentation strategy but also illustrates a key point about what primary job were customers hiring Levi’s for. It is not for supporting a company that is doing the right thing. Customers are still buying a good pair of jeans, as an apparel, style statement etc. If Levi’s cannot fulfill that need better than other options then it does not matter how it is manufactured. Once they made the buy decision on the jeans they likely are willing to pay more than they would for another similar pair of jeans.

Customers hire your product for a basket of reasons but if it does not do the primary job it is hired to do then the rest does not matter.  Once the primary job is adequately met you can get them to pay more with the rest.

Do you know why your customers hire your products and what will drive them to pay more for your products?

Here is another company that got the primary job wrong and paid for its mistake: Sunchips Eco-friendly bags.