Disrupt Low Margins with Consumption Jobs
We are all unique, or we think we are, with this problem: our products are becoming more and more like commodities. You know, gasoline, steel, top soil. Our superior product dreams are trampled under the heavy feet of commoditization.
Wouldn’t it be so much more fun to tout the amazing technical wizardry in the annual report. To have that product demo leaving customers amazed and with cash in hand. To inspire high fives between marketing, sales, and engineering. Happiness and bliss, made possible with our high margin, amazing products.
But alas, something is wrong with this fantasy. It’s that commoditization thing. As a result, our product looks just like the competitor’s product. Margins are small and getting smaller. Bigger marketing budgets aren’t helping. Our high-priced consultants aren’t helping. Nothing is helping. Around the water cooler, we say, “Our products are just becoming more commoditized.” As if this was our lot in life. We have no option now, but to watch the profits evaporate while we furiously cut costs to keep our factories open. It feels powerless and depressing.
Let’s not give up quite yet. When things are bad, they are seldom as bad as they seem. When things are good, they’re seldom as good as they seem either.
There is a way out, a way up. Clayton Christensen taught us that when one part of our offering becomes good enough, something else becomes not good enough. Within our commodity hell, the product has become good enough and as a result, it’s difficult to distinguish it from the rest of the market. Fine. It’s time to look beyond – to find that something else that is not good enough. But where do we look ?
A great place to search is within your customers’ consumption jobs. These “consumption jobs” are the “jobs to be done” that a customer must execute to “consume” a product. Let’s look at a well-known example of consumption job innovation. Consider the airline industry and their primary product, the flight. Airlines have tried to differentiate themselves within the flight experience itself, with little success. Midwest Express offered all customers the equivalent of first-class seats, along with chocolate-chip cookies. The Concorde offered faster flights. But neither of these exist any longer. Why? They just didn’t compete well enough with the normal flight, which was good enough. Nearly all carriers have economy and first class, membership programs, and basically offer similar levels of comfort. By and large, the flight experience changes little from one carrier to another.
So, here we are, commoditization land
From this dismal location, where was value created? The most significant advance was within the consumption job of “Book a flight.” American airlines and IBM created immense value when they developed the SABRE reservations system. This didn’t change anything about the flight experience. It didn’t make the planes fly faster, become more comfortable, or even provide any chocolate chip cookies. It didn’t impact the “product” of a flight at all. Instead, it improved the ability of a customer to Book a flight.
It might be tempting to imagine this example as something fanciful. An aberration of technology. A one-time event. Au contraire. The implementation of SABRE reflects a classical innovation pattern: Once a product becomes “good enough,” something else becomes not good enough.The product of the flight was fine, but customers could benefit from an easier process of booking a flight.
Let’s look at another example. Consider a common product, the home mortgage. Could anything be more commodity-like than a loan? It’s so simple, we pay interest in exchange for getting cash. It’s purely a financial transaction. But companies such as Rocket Mortgage are innovating purely around the consumption job of “Apply for a mortgage.” Letting customers apply on their smart phones removes much of the hassle from the process. Consumption jobs, then, are all the jobs that we must execute in order to “consume” a product. Here’s a common list:
- Purchase the product
- Receive the product
- Learn to use the product
- Use the product
- Upgrade the product
- Dispose the product
Consumption jobs are distinct from the core “job to be done” of the product itself. The core “job to be done” of a home mortgage is to “Finance a home.” A different job than the consumption job of “Apply for a mortgage.”
It often doesn’t seem as exciting to improve a customer’s ability to purchase a product, to upgrade a product, or even to dispose of a product than it does to improve the product itself. But of course, it’s that type of culture, and that type of thinking that got us into this commodity fix in the first place.Innovating along consumption jobs will make our products stickier with more loyalty. Innovating along consumption jobs creates an alchemy, where we can increase both profit margins and share together.
Instead of being fearful and depressed by a product market with shrinking margins, embrace the situation. Broaden the way you think about innovation, beyond the product itself – to the list of consumption jobs that customers must execute to consume your product.
How do we determine which consumption job to attack?
Of course, there is one question left unanswered: How do we determine which consumption job to attack? I’d say the best approach is a Voice of the Customer process. One that begins with divergent, qualitative customer interviews. A process that continues with convergent, preference research to determine which of these consumption jobs might represent the most significant opportunity. If you’re in a market with decreasing margins, and are interested in such a process, drop me a line at [email protected], I have just the system for you!