“The Path to Growth: The Opportunity Algorithm” – Anthony Ulwick
Tony Ulwick is the pioneer of jobs-to-be-done theory, the inventor of the Outcome-Driven Innovation® (ODI) process, and the founder of the strategy and innovation consulting firm Strategyn. He is the author of “JOBS TO BE DONE: Theory to Practice” (IDEA BITE PRESS) and “What Customers Want” (McGraw-Hill) and numerous articles in Harvard Business Review and Sloan Management Review.
Companies often define a market opportunity as a new product or technology they have created. They believe that finding a need that their technology or product offerings can address is the actual market opportunity, but that is a myth that misleads.
A market opportunity does not exist because a company has a certain competency or has created something; it exists because customers are struggling to get a job done.
Their struggles are the market opportunity: success comes from discovering what they are and helping them get the job done without the struggle.
We’ve discovered that customers consider between 50 and 150 metrics (their desired outcomes) when assessing how well a product or service enables them to successfully execute any job. These metrics are the customer’s needs. A customer need is unmet when it is important to the customer, but not well satisfied with the solutions currently available.
To discover which of these needs are important and unmet, we have devised a mathematical formula we call the opportunity algorithm, which says that market opportunity = (importance + max,0 (importance – satisfaction)). This formula reveals which customer needs are most important and least satisfied; the ones that represent the best opportunities for growth.
For instance, if circular saw users agree that minimizing the likelihood of the cut going off track is an important and unsatisfied need, then that need represents a market opportunity. The more important the need and the less satisfied the customer is, the greater the opportunity for value creation. We use sophisticated quantitative market research techniques to ensure the accuracy of our data, reducing the risk of failure and making sure we focus on the right opportunities for growth. It’s all about discovering unmet customer needs.
The Opportunity Landscape™
The Opportunity Landscape is an invaluable too to help us visualize the degree to which markets are over- and underserved.
The landscape is a snapshot of all the customers’ needs: each dot in the landscape represents the degree to which a specific need is important to the customer and the customer’s level of satisfaction. Each market opportunity is highlighted in the landscape. Knowing a market’s underlying structure is critical for formulating the right innovation strategy. We discover hidden opportunities for growth by revealing where customers need help most. These market opportunities are also used as inputs into the market segmentation process, revealing unique segments of opportunity.
The Underserved Market
This landscape reveals a market that is underserved and in need of a solution that will help customers get the job done better. Each market opportunity is revealed. The underserved outcomes represent opportunities for growth.
The Overserved Market
This landscape shows a market that is overserved and ripe for disruption. Knowing the market’s underlying structure is critical for formulating the right innovation strategy
Outcome-Based Segmentation™
Market segmentation (also referred to as customer segmentation) is the process of discovering groups of customers that have different unmet needs. An effective market segmentation solution forms the foundation for a winning market strategy as it reveals how and why customers are different and pinpoints what unmet needs customers are looking to satisfy with new products and services.
The Opportunity Landscape defines an outcome-based market segmentation methodology. By identifying underserved and overserved customer segments, we can then determine which needs are unmet in each segment, and determine the degree to which they are unmet.
Our methodology works because it is focused on understanding the “job” the customer is trying to get done and uses the customer’s unmet desired outcomes (a special type of need statement) as the basis for segmentation. The insights resulting from this approach make it possible to surgically formulate a market strategy in any market that will lead to growth.
An effective market segmentation strategy reveals the dynamics of a market. The Opportunity Landscape helps us visualize those dynamics and the degree to which market segments are over- and underserved. A landscape is a snapshot of all the customers outcomes in multiple segments. Each dot in the landscape represents the degree to which a specific outcome is important to the customer and the customer’s level of satisfaction. The different-color dots represent different segments. We discover unique segments of opportunity by segmenting markets around customer outcomes. Using these insights, a company is able to formulate a market segmentation strategy that will guide and inform its growth.
A Two-Segment Solution
This landscape reveals a market that consists of two segments: one that is underserved and one that is overserved. Each segment requires a different product strategy. The underserved outcomes represent opportunities for growth.
A Three-Segment Solution
This landscape reveals a market that consists of three segments. Knowing these segments exist is customer insight that competitors are unlikely to have.
The take-away? We can understand the “job” the customer is trying to get done and use the customer’s unmet desired outcomes (a special type of need statement) as the basis for segmentation. The insights resulting from this approach make it possible to surgically formulate a market strategy in any market that will lead to growth.
See also: jobs-to-be-done.com
