Archive for May, 2017

“Competing Against Luck” – a book I read

May 6, 2017

I have not done book reviews, this is more like a cheat sheet or notes rather than an actual book review.

The author of this book is the famed prof. Clayton Christensen of HBS. He is a pioneer in innovation management and it is not an overstatement to say, he has dedicated his life towards this. He shot to fame earlier with the term “Disruptive Innovation” in the book “Innovator’s Dilemma”. He has been researching on the theory of “Job to be done” as the basis of successful innovation for the past two decades. He has been carefully building this theory based on collected data inductively.

The core premise of this theory is that customers are “hiring” a product / service to make a progress in their life situation and that they are not buying a product or service.  If they don’t like it, they “fire” the product. If an organization understands this, then the entire culture can be built towards this and there is less and less friction and things get done. The author points to numerous examples, but the two that standout are GM’s OnStar and Intuit’s TurboTax. The story of TurboTax is something we all (folks in Information Technology) can easily appreciate. In case of TurboTax, historically the software used to ask a whole bunch of questions in a wizard approach so it can prepare the tax form. The folks kept asking for what other questions can we ask to make your (customer’s) life easier and that they were getting so much feedback. The team was happy and set out to implement all these new questions in the wizard. However, when they started thinking what is that the user of the TurboTax want? He/She hates the tax preparation process (like everyone) and wants to get it done quick and correctly. They would be happy if they were not asked any questions! Thus they started working towards minimizing the number of questions, starting with automatic pulling of W-2 from payroll processors. Thus one should focus on “why the customers want to use your product?”. He quotes Ted Levitt “they want a quarter inch hole and not quarter inch drill”. If you understand that then you can build a product / service that results in a quarter inch hole.

According to the author, majority of the start-ups begin with the laser sharp focus on “the job to be done”, but they lose focus as they start growing. They lose sight of why the customer wanted them in the first place and starts focusing on the customer (demographics etc), the sales (geography, kind of stores, seasonal) and many more metrics that are getting collected. One very good perspective he reminded in this book on data analytics is that you (the management) decides on which data to collect and thus your results are skewed by analyzing the collected data as you don’t know anything about stuff on which data is not collected.

The book goes on to state how to identify the jobs to be done. Here are the broad five categories

  1. Finding a job close to home – Look at yourself (eg. Reed Hastings of Netflix)
  2. Competing with Nothing – Look at “non consumption”- people choose to continue the statusquo in the absence of a product / solution. – Airbnb – people would chose not to go when hotel space is not available.
  3. Workarounds and compensating behavior – Look out how people are accomplishing a task using different products. – Kimberly Clark created “Silhouettes” based on this approach.
  4. Look for what people don’t want to do – CVS created Minute-Clinics based on the observation that people don’t want to wait to see a doctor.
  5. Unusual Uses – Look out how people are using products that are not meant for that specific job. Arm & Hammer created so many products based on the observation how customers were using their “Baking Soda”.

Once you identify the “job to be done”, the book also explains how to convert that into a product that people want. Once you created the product, the book talks about how you can stay focused on it by discussing the “Fallacies of Innovation Data”.

  1. The fallacy of active vs. passive data
  2. The fallacy of surface growth
  3. The fallacy of conforming data

I want to end this entry with a couple of thoughts.  I always thought about the impulse purchase with a suspect. I’m not denying that someone buys a product on impulse, but most of the purchases are not impulse. The seed for that is sown a while back. This is explained in a very live fashion in this book as well on an interview documentary on a person’s mattress purchase in Costco. Those who frequent to Costco can truly appreciate this section (page 107 – 115). These pages has brought Costco live in my mind, written up so wonderful. This shows how you should analyze  why people buy your products, need to get to the root of it.

Having written on “Disruptive Innovation” and “Jobs to be done”, I would love to read or be involved in a research work on what is the optimal point to introduce new products without killing an existing product prematurely. In other words, what is the optimal way to cannibalize a product.