Why do most new products fail? According to Clayton Christensen, the author of Competing Against Luck: The Story of Innovation and Customer Choice, it’s because companies focus on a product’s features instead of the job the customer wants it do to. In this piece, [email protected] reviews the book’s assertions and highlights how they were put to practical use in various industries.

In 2008, Chris Anderson (then the editor of Wired magazine) wrote a provocative article called “The End of Theory.” Anderson insisted that the era of Big Data had rendered the scientific method — developing a hypothetical model first, and then testing it with data — increasingly obsolete. Google and other companies were generating a “data deluge” that could no longer be contained or explained by models, by theory. “With enough data, the numbers speak for themselves,” Anderson wrote. “We can stop looking for models.”

Competing Against Luck Product Innovations

Competing Against Luck: The Story of Innovation and Customer Choice

Product Innovations

Three years earlier, Clayton Christensen (along with co-authors Taddy Hall, and Scott Cook of Intuit) had written a piece for the Harvard Business Review called “Marketing Malpractice.” He argued that American companies had lost their way by becoming preoccupied with segmenting markets by ever smaller slices. They collected data to measure the needs of those slices, and then used more data to gauge their progress in meeting those needs.

But because they were asking the wrong questions, companies were often solving “the wrong problems, improving their products in ways … irrelevant to their customers’ needs.” What was needed, he concluded, was a new model: a new lens for asking the right questions, and for measuring progress toward the goals that emerged from those questions.

[drizzle]That article laid the groundwork for Christensen’s new book, Competing Against Luck: The Story of Innovation and Customer Choice, written with Hall and two co-authors. It is a direct critique of Anderson’s data-driven view, and a vigorous defense of the importance of theoretical models. Solid theory, he says, tells us what data to look at, and how to look at it — transforming innovation from a hit-and-miss process to a deliberate one guided by purpose, and a clear vision of a job to be done.

Hit-and-miss Innovation

Christensen (a professor at Harvard Business School, and the author of nine previous books) has been wrestling with the elusive goal of innovation for a while. A recent McKinsey poll of global executives finds that the vast majority value innovation as “extremely important” to their growth strategies, “yet a staggering 94% were unsatisfied with their own innovation performance.” This shortfall comes depite the fact that “businesses have never known more about their customers,” and appear to have “structured and disciplined” systems in place for putting all that data to good use.

“The only important question a company should ask about a given product or service is this: What job is the customer ‘hiring’ it to do?”

Going back to his days with the Boston Consulting Group, Christensen was puzzled by why so many “once-great” companies seemed to go stagnant and stale, particularly in the face of competition from upstart rivals. He pursued the question as he returned to Harvard for his doctorate, research that led to a theory of “disruptive innovation” and to his first book, The Innovator’s Dilemma.

Since then, disruption has become a popular buzzword — one “misapplied so broadly as to mean anything that’s clever and new.” But more to the point, it only explains the past, and in retrospect. It offers no clues as to where to look for new innovation. Meanwhile, companies are “awash” in data that is also retrospective and focused on buying patterns, customer satisfaction with current products, and similar metrics.

The end result? “Companies are spending exponentially more to achieve only modest incremental innovations while completely missing the mark on the breakthrough innovations critical to long-term, sustainable growth.” 

Process, Not Product 

Noted economist Theodore Levitt was fond of telling his students, “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole.” The quote is widely cited, but not, according to Christensen, properly taken to heart. Marketers and would-be innovators tend to measure past performance and set future benchmarks based on the “features and functions” of the drill, and not the customer’s experience of trying to get the right hole.

The focus on product is understandable, because it so easily translates into quantifiable data. It also implies agreement with Chris Anderson’s assertion that “correlation is enough,” because what a lot of the number-crunching companies do involves inferring connections between the characteristics of customers and the products or services they buy. The patterns this data seems to reveal may be “seductive,” yet Christensen said that unless companies understand why customers make the choices they make, all that data is unlikely to lead to consistent innovation.

The author’s insistence that correlation is not enough, and that the key is causality, has prompted him to supplement his previous theory of disruptive innovation with what he called the ‘Theory of Jobs to Be Done’ (or Jobs Theory for short). The only important question a company should ask about a given product or service is this: What job is the customer “hiring” it to do?

It’s a question that is deceptively simple in the asking yet turns out to be nuanced and layered when applying in practice. Data can be helpful. But Christensen’s call for a ruthless focus on the “causal mechanism of customer behavior” yields an approach that is almost sociological in nature — and involves a holistic analysis of the experience of choosing, and then using, a given product or service. And it is in the shaping of that experience that companies will find the potential for innovation and sustainable competitive advantage.

The “Hiring” Process

The moniker of “theory” may seem too lofty for a method built around such a simple question, but Christensen was adamant in his defense of the term. He called its use “essential for effective management practice” and “the most powerful tool I can offer my students.”

Yet his brand of theory is not academic or abstract; it is “quite the opposite,” concerned as it is with “the supremely practical question of what causes what.” He is advocating for an almost granular understanding of the customer in his or her “moment of struggle” as they try to move toward a particular objective under very particular circumstances.

In the end, the ‘Jobs Theory’ is a kind of lens for the author, and he means that almost literally. He suggested a thought exercise in which you imagine “filming a mini-documentary of a person struggling to make progress in a specific circumstance.” What is the customer trying to achieve? What is the social context of the decision? What obstacles or trade-offs are involved?

“The traditional focus on customer needs is insufficient in explaining actual decisions in the real world.”

Christensen’s emphasis on the specific circumstance of the “hiring” decision stands in contrast to the typical focus on things like product attributes and customer characteristics. Yes, features and functions are important; but purchase decisions have a social and emotional dimension as well. And the traditional focus on customer needs is insufficient in explaining actual decisions in the real

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