To understand a portfolio company's market, defining the customers is critical. Who are the company's target customers? How should we define them?

Many tech companies define the customer as a "user" i.e. the person who uses their product. This seems to make sense because that's who they design the user experience for--the person who will actually interact with the company's product.

Another way to define customers is to use the dictionary definition: a person who purchases a product or service. This also seems logical, since getting someone to purchase a product is how a portfolio company generates revenue.

But the person who uses the product may not be the person who purchases it.

For example, an ultrasound tech in a healthcare facility is the user of an ultrasound machine, but they don't decide to purchase it. The purchasing responsibility belongs to a hospital administrator. Meanwhile, were ultrasound machines invented so techs could be employed? Probably not. They were invented because doctors needed to better diagnose a patient's condition.

Is the key customer the ultrasound tech using the machine, the hospital administrator who decided to purchase it, the doctor who uses the ultrasound images to learn about the patient's condition, or the patient?

Knowing who the key customer is and understanding them in-depth is key to determining their Job-To-Be-Done and defining the target market.

The key customer in any market is the person who benefits from getting the job done. This is who we call the “job beneficiary.” The job beneficiary is the critical customer in a portfolio company's market because they have the most to gain from the job-to-be-done being satisfied by the company's product. The second customer to consider is the "job executor." This is the person who helps execute the job on behalf of the beneficiary. For example, IT managers help employees use business software. The third customer to consider is the purchase decision maker. For example, finance executives will often decide which software to purchase based on financial and budgeting considerations.

In consumer markets, the job beneficiary, executor, and purchase decision maker are frequently the same person. A consumer benefits from “getting to a destination on time.” They execute this job by driving themselves, and they make the decision to purchase products and services to get the job done.

Medical markets are the most extreme example of the differences between job beneficiaries, executors and purchasers. Every medical product and service is ultimately designed to help patients. This is why medical markets exist: because patients need to get medical jobs done including optimizing their health, curing a health condition, and diagnosing a health condition. But patients rarely execute their own medical procedures and rarely purchase them on their own because they use insurance. For example, in order to obtain a blood sample to diagnose their health a patient (the job beneficiary) goes to a phlebotomist (the job executor) to get a blood sample, and the procedure is paid for by the insurance company (the purchaser).

We identify the distinction between beneficiaries, executors, and purchasers when building a portfolio company's product roadmap because targeting the wrong customers puts the company at risk that a competitor takes market share.

For example, before software-as-a-solution products, IT departments installed CRM software for salespeople. Salespeople use CRM systems to get the job done of “acquiring new customers.” Salespeople are the job beneficiaries in this market because they benefit from getting the job done with software. IT managers are the job executors who help salespeople acquire customers by installing and maintaining software. But once SaaS products were available, IT managers, the job executors, were unnecessary.

With our JTBD method, we map beneficiaries, executors, and purchasers in a portfolio company's market to ensure we target the right customers. This means that the job beneficiary and their needs decide what should be in the company's roadmap to create equity value.

Defining a portfolio company's market using their product is very common. In fact, this is how it is taught in business school textbooks. But history is full of examples of product-based market definitions leading companies to build failed product roadmaps. 

For example, Blackberry thought there was a market for keyboard devices and they built a product roadmap based on keyboards. Britannica thought there was a market for encyclopedias and built a product roadmap based on content for bound volumes of books. And Kodak thought there was a market for film and built a product roadmap based on improving the quality of film. At first product-based market definitions seem to make sense, since people were buying a lot of mobile keyboard devices, encyclopedias, and film. 

But here is the flaw: products always change. This is a key concept in Jobs Theory: unlike products, the customer’s goal, their Job-to-be-Done, does not change. This is why we define a portfolio company's market and build their product roadmap using the customer’s job rather than their product. Because a JTBD is a stable target to hit.

Defining a portfolio company's market using the customer's  Jobs-to-be-Done has profound implications for their product roadmap. Think of a product not as something a customer is buying, but as something that is helping them solve a problem or achieve a goal. In other words, a product helps them get their “job” done. This has been said in lots of different ways. 

Clay Christensen of Harvard Business School, has said that “customers are not buying a product, they are hiring it to get a job done.” Theodore Levitt, also of Harvard, was famous for saying “customer’s don’t want a quarter-inch drill, they want a quarter-inch hole.” Steve Jobs said, that teams should “start with the customer experience and work back toward the technology.” And Thomas Edison said, “Anything that won't sell, I don't want to invent. Its sale is proof of utility, and utility is success.” 

These are all the same idea. A customer has a goal to achieve or a problem to be solved. We now call the customer’s goal/problem a “job-to-be-done” or JTBD. Customers “hire” a portfolio company's product to help them achieve the goal, solve the problem, and get the job done. There are big advantages to defining the market and building a portfolio company's product roadmap using the customers JTBD. First and foremost, the customer’s JTDB doesn’t change over time. Second, we can prioritize where the customer struggle the most to ensure we build and launch features that help customers overcome their struggle. And third, the portfolio company's team doesn’t have to use opinions about product ideas in the roadmap. Using the customer's JTBD, we objectively quantify how each idea helps the customers get their job done faster and more accurately.

Almost all traditional market sizing equations use the price of the product as a key variable. For example, the Total Addressable Market (“TAM”) is often defined as the number of buyers times the price of a product. Why is this a mistake? Because customers are not actually “buying” a product, they are “hiring” it to get a job done. As a result, the size of a portfolio company' market opportunity is based on the customer’s willingness to pay to get their job done better, regardless of the price of the product. This is why companies like BlackBerry, Britannica, and Kodak failed when they invested in the wrong product roadmaps. They sized their markets (and thus projected their revenue from their roadmaps) based on the price of their products. How much are you willing to pay for a roll of film or a set of 26 encyclopedias today? Probably $0 because these are both obsolete products that don't get the job done as fast and accurately as today's solutions.

The foundation of our JTBD method is that customers are not buying a product, they are hiring a product to get a job done. Every product in history has been replaced by a new product that got the customer’s job done better. A portfolio company's product will be too. Defining the market based on the customer's JTBD lowers the risk that a portfolio company's product roadmap fails to generate the revenue growth to create equity value.

To size a market opportunity, we don’t analyze the products currently in the market. Instead, we define the portfolio company's market as a goal customers are trying to achieve (a job-to-be-done). We identify the range of the customers’ willingness to pay to get their job done using a quantitative survey that asks the right market sizing questions. We plot this range of willingness-to-pay on a chart from low to high. We call this the Need Curve because it looks like a traditional economics demand curve, but instead of plotting price and quantity of product, it plots the number of customers willing to pay to get their job done. The area under the Need Curve is the size of the portfolio company's market.

By using our Jobs-to-be-Done method to size a. portfolio company's market, we justify investments in the product roadmap to ensure that we accelerate growth and create equity value through. product innovation. Instead of launching products into markets that are about to disappear, we focus on stable markets and where the portfolio company can win. And we increase the probability that the portfolio company's product roadmap investments will accelerate growth, generate multiple expansion, and create equity value.

Portfolio company teams almost never agree on how to define a customer need. Research has shown that 95% of all companies do not have an agreed-upon definition of a customer need. Without an agreement on customer needs, portfolio companies often ask customers about what products they want. This is a mistake. Why? Because customers can’t envision what great product should result from the company's roadmap. But they can absolutely explain what problem the product needs. In other words, customer's can explain how they struggle to get their job done.

For example, a portfolio company could ask 1,000 consumers what products they want and they would likely never come up with the microwave. Customers don’t have the technical expertise to understand what makes a microwave work. But they can tell you everything about preparing a meal (a JTBD) and how they struggle. This is true in every portfolio company's market too: the customers can explain their struggles, if they are asked the right questions.

In our JTBD method, a customer need is clearly defined. This enables a portfolio company to communicate in the same way, using the same language when creating and building the product roadmap to accelerate growth.

A customer JTBD is a goal they need to achieve, independent of any product. For example consumers don’t “want” records, cassettes, or iPods. They want to “create a mood with music.” This is the job-to-be-done. In every JTBD, there are a set of steps that a customer has to take in order to complete that job and achieve the goal. And within each job step, there are actions a customer has to take using variables in the job.

These actions and variables are the customer needs, and like the JTBD they are independent of any solutions. The customer actions in a need are defined by action verbs (e.g. determine, identify, gather, calculate, reduce, ensure, etc.) and the variables are defined by job. For example, in the job of “getting to a destination on time,” the variables include, arrival time, departure time, travel time, the route, alternative routes, traffic, weather, errands, stops along the way (e.g. errands or fuel), etc.

Most JTBDs have 10 to 20 steps and 50 to 100 customer needs. In other words, while the customer’s JTBD is complex, it is knowable. And because the JTBD and the customer needs are independent of any product or service, the customer’s needs are stable over time and will not change. This is the power of our JTBD method: when we create and build a portfolio company's product roadmap, we are aiming a stable customer target that does not change over time.

Portfolio companies often do market research to figure out what their customers want. These methods include NPS (net promoter scores), customer opinions about product features, or trends like emerging technologies (e.g blockchain or AI). But there are critical flaws in these methods: they don’t focus on the customer’s struggle to get their job done independent of any product, service, or technology. The iPod had very high NPS scores, but this didn’t help Microsoft launch a successful competitor because it didn’t show them where customers were struggling to “create a mood with music” (the JTBD).

If portfolio companies customers about products, they will give answers about products. This is what Henry Ford meant when he famously said “If I asked customers what they wanted, they would have said a faster horse.” Instead of asking customers about the portfolio company's product (or a competitor’s), we ask them about their struggle to get their job done. This is how we identify unmet customer needs, and segment customers based on their unmet needs. This is the key to creating equity value for a portfolio company through product innovation.

Our method of defining customer needs is powerful because it is quantifiable. Every customer need in a customer’s JTBD has an action and a variable that are independent of any product. For example, no one needs the “Add a stop” feature in Google Maps. What they need is to “determine the optimal sequence of stops.” In this example, “determine” is the action and “optimal sequence” is the variable. And in every JTBD, the customers want to get their job done as fast and as accurately as possible. As a result, we measure the speed of a customer’s action and the accuracy of the variable in every need.

In order to determine which customer needs are unmet, we conduct a customer survey and ask customers if it is difficult for them to satisfy the need today. For example, how difficult is it for consumers to determine the optimal sequence of stops in their day? If it is difficult, consumers will tell us in the survey. And if a high enough percentage of customers say the need is difficult to satisfy, then the need is an unmet customer need. This makes sense because customers who struggle (i.e. who say it is difficult to satisfy the need) are the ones most likely to buy the features we build in a portfolio company's product roadmap that satisfy the need faster and more accurately (i.e. with less customer effort). You can think of our survey results (i.e. the percentage of customers who struggle) as the probability that customers buy what we build in the portfolio company's product roadmap.

A product strategy is a plan for a portfolio company to beat competitors. How do companies create a strategy? In 1996, Harvard Business School Professor Michael Porter wrote a famous paper called “What is Strategy?” Companies often use Michael Porter's definition of strategy, since he was a pioneering academic in the field, famous for analyzing industries to determine competitive strategy. In Porter's view, “The essence of strategy is choosing to perform activities differently than rivals do.” Activities can include manufacturing, engineering, distribution, marketing, and selling.

What is missing from these “activities” is the customer. This is why Porter’s definition is outdated: he didn’t include the customer’s job-to-be-done in his definition of strategy. The customer’s needs, not the portfolio company's activities, are the focus of the product strategy we create for a portfolio company. Customer do not care about a company's activities. They care about getting their job done.

Creating a successful product strategy for a portfolio company includes making four choices.

First, which customer are we going to target? As we said explained above, markets evolve to remove job executors as customers when job beneficiaries can get more of the job done on their own. Targeting the job beneficiary with a product strategy is a stable, long-term choice. In some markets, job executors are still critical to getting the job done because the technology cannot yet get the job done without them. In this case, we might choose to target the job executor to create short-term growth. The key is to understand the risks of the target customer decision and to align the portfolio company's team with a clear target customer to create focus.     

Second, which job-to-be-done are we going to target? The customer’s job is the market. Choosing an underserved job that customers are willing to pay to get done better is the foundation of a product strategy to create equity value.

Third, which customer segment will the portfolio company focus on? We focus the company on a group of customers who struggle significantly with the job, have unmet needs we can satisfy, and are willing to pay enough to get the job done better that we can accelerate the company's growth by only focusing on this segment.

Fourth, which unmet needs will the company's product, marketing and sales teams focus on? Prioritizing the unmet needs in the target customer segment is the key to accelerated growth and faster equity value creation. 

In traditional competitive analysis, portfolio companies often compare their own product's features to a competitor's features. If Product A has all of the features of Product B plus a few more, then Product A has the advantage. In this traditional view, more features equals more competitive advantage.

Focusing on feature-to-feature comparison is the wrong way to think about competitive differentiation. Why? Because customers don’t want more features, they want a product to help them get their job done faster and more accurately. Microsoft’s Zune had more features than Apple’s iPod, yet it failed to take any meaningful share of the market because it didn’t get the job done faster or more accurately. Streaming services (like Pandora and Spotify) actually had fewer features, but they got the job of “creating a mood with music” done much faster. Pandora only had one end-user feature: click play to listen to music for the mood. Pandora’s algorithms did the rest for the customer.

Portfolio company's often build roadmaps for feature catch-up to competitors. It's like bailing water out of a leaky boat: every time the company releases a feature and think their work is done, the competition releases something new, racing ahead yet again. The portfolio company will always be a step behind.

A portfolio company's customers are analyzing competitor products almost every day. When they struggle to get their job done, customer look for new competitive solutions to get their job done faster and more accurately. In our JTBD method, a competitor is any solution that helps get a job step done. This approach is how we identify competitors in each customer job step, as opposed to relying on industry-based competitors.

Competitive weakness is satisfying a need slowly or inaccurately. Since needs are structured with an action and a variable, we measure the speed of the action and the accuracy of the variable when customers use a competitor’s solution. We use our JTBD analysis to analyze not only the portfolio company's competition, but also the company's existing product in order to identify where it needs to be improved. As a result, we add those improvements to the portfolio company's roadmap before a competitor attacks and takes market share by getting the customer's job done faster and more accurately.

Portfolio companies often use traditional segmentation characteristics like demographics (age, zip code, gender, etc.), psychographics, purchase patterns, or industry verticals (in B2B markets). But this almost never works because characteristics like age and zip code do not determine if customers struggle to get a job done. In our JTBD segmentation method, we use the customer’s unmet needs to identify the most valuable segment, regardless of their characteristics.

For example, “getting to a destination on time” is a JTBD (it is a goal consumers need to achieve independent of any products). Could an urban woman with a Ph.D. struggle to get to a destination on time the same way a younger, rural man with a high school education? Yes, of course. And the reason they both struggle is not because of their demographics or characteristics, it is because they both struggle with something specific, like making frequent and unfamiliar stops.

The core idea in our JTBD method is that a customer’s struggle to get their job done is what causes them to make a purchase. The most valuable customer segment for a portfolio company to target is the group of customers who struggle the most and are willing to pay the most to get their job done better.

Customers buy new products because they struggle to get a job done at a price they are willing to pay, regardless of their characteristics like demographics, geography or psychographics. Our JTBD segmentation method identifies the group of customers in the portfolio company's market who struggle the most and who are willing to pay the most to get the job done better. This ensures that the company's product roadmap has a higher likelihood of success because it targets the customers who need it new product innovations most.

Most importantly, with our JTBD method we collect proprietary data for our customer segmentation. In a our JTBD surveys, we generate quantitative insights into which customer segments struggle the most, how many customers are in the segment, and how much they are willing to pay to get the job done. Using profiling questions, we segment customers by profiling characteristics as well. This most often reveals that the customer struggle is not different across profile-based segments. The good news is that because of our survey, we data that identifies the struggling customer segment, independent of their profiling characteristics.

To facilitate the generation of new ideas, portfolio companies often rely on brainstorming. And in those brainstorming sessions, there is often only one rule - there are no bad ideas. In other words, the company's team is not supposed to use any criteria to judge new ideas on the assumption that this will enhance creativity. 

Often new product ideas can come from customer requests, sales team requests, stakeholders, or new technologies. The possibilities are endless, which is the problem. The reason traditional brainstorming is inefficient is because there are no objective criteria to quickly and efficiently judge new product ideas. 

When generating product ideas for portfolio companies, we use the customer's unmet needs to quickly evaluate competing ideas using speed and accuracy. We start with the product strategy, which puts the key customer, the target segment, and the unmet needs in focus. We generate new ideas to satisfy the target unmet needs faster and more accurately than competitors in the market.

Once we have a need in focus, we assess the speed and accuracy of competitor solutions to set the benchmark the new product idea has to beat to get customers to switch from their current solution to the portfolio company's new solution.

We then assess the speed and accuracy with which the new product ideas will help customers satisfy the target needs. If a new idea is faster and more accurate in concept, we know it’s worth further examination. We assess the cost and risk and test working prototypes with customers to confirm they perceive the value the value of how the product idea gets their job done. 

In traditional methods, companies use Net Promoter Scores (NPS), satisfaction, and other metrics to help determine the customer value of the product. While NPS and satisfaction may give your team data about your customers’ view of your product, they don’t identify where your customer is currently struggling. In other words, because NPS are focused on your product, they don’t identify your customer’s unmet needs. The iPod, for example, had extremely high NPS and satisfaction scores, but that did not help identify the opportunity for streaming services, which now dominate the industry and ultimately killed the iPod as a platform for creating a mood with music (the job-to-be-done).

Traditional methods don’t give your team insight into why customers are dissatisfied or how you can add more value. In addition, if you’re launching a new product that hasn’t been used by customers, how can you determine if it will provide value to customers?

The ultimate goal for a portfolio company is to satisfy your customer’s needs better than competitors in the market. This is what accelerates growth and creates equity value. The customer’s struggle to get their job done (i.e. their struggle to achieve their goal independent of a product) is what causes them to purchase a new solution that generates portfolio company revenue. So customer value is providing customers with a solution to overcome their struggle faster and more accurately than competitors.

Customer value is created when a product helps customers get their job done with less effort. To mitigate the risk of product failure, we measure customer effort and customer value before investing a portfolio company's capital in product development. A product innovation creates customer value when it gets the job done faster and more accurately. And speed and accuracy are metrics we measure even before we invest in product development. If our new product idea is not significantly faster and more accurate, we keep iterating the idea. Once we have created product ideas with significant customer value, we prioritize these in a portfolio company's roadmap.

Traditionally portfolio companies aggregate feature ideas from the company’s customers and stakeholders. Prioritization of features can become a political battle between personalities on the company's team because there are no objective customer criteria to serve as the basis for the company's roadmap decisions. In short, the portfolio company should not prioritize it roadmap, the customers should. Blackberry failed because they did not understand the unmet customer needs in their market, and as a result, they prioritized their product ideas (about improving a keyboard-based device), rather than prioritizing feature ideas that would satisfy unmet customer needs faster and more accurately.

To prioritize a portfolio company's product roadmap, we first create the product strategy, making clear choices about:

• The target customer
• The job-to-be-done we will help the customer get done
• The underserved target customer segment
• The size of the customer segment
• The probability of generating the revenue growth to create equity value
• The unmet needs we will satisfy to get the job done better than competitors

Having the strategy in focus gives us objective criteria to judge the ideas on the portfolio company's roadmap.

Next, we assess everything on the company's roadmap in light of the product strategy.

We categorize backlog items as follows:

• Tech Debt
• Customer Commits
• Maintenance/Bug Fixes
• On Strategy Product Ideas
• Off Strategy Product Ideas

Different portfolio companies have different names for each of these categories but every roadmap has some version of them. The goal in our assessment is to determine what percentage of the company's resources are allocated to each category and if that allocation will achieve the growth goals and create equity value.

We ensure that a portfolio company's is allocating the necessary resources to On Strategy Product Ideas. To determine if an idea is on strategy, we answer the following questions related to the strategy:

• Does the idea help the target customer segment get the job done?
• Does the idea satisfy a need for a high priority job step in the strategy?

Customer Commits and On Strategy Product Ideas are not mutually exclusive. A customer request for a feature could fit well with the strategy.

But, we assess if the customer feature requests that are off strategy for they portfolio company. They can help the company get short-term revenue, but they can throw the company far from growth strategy and cause them to miss the biggest opportunities to create equity value in the market.

When portfolio companies create a positioning strategy, the often use traditional methods (for example as explained by Harvard’s Michael Porter). These methods define market position using cost or feature differentiation and broad or narrow customer focus. Accordingly, portfolio companies choose to be the low cost solution or a feature differentiated solution. If the company are focused on being the low cost solution, competitors can copy the company's operational effectiveness as best practices disseminate in the industry. If a company positions its product based on feature differentiation, it will supposedly help differentiate the product enough so that customers are more likely to buy it. However, what happens when a competitor comes along and highlights the same set of features and benefits? The company is then constantly be playing catch up, trying to compete with similar products.

It can be a struggle for a portfolio company to come up with a unique position in a crowded market. However, we use our JTBD method to create a positioning plan that connects with customers quickly. The key difference in our JTBD positioning is that we don't use the product features to position the brand or product. Instead, we look at the steps a customer takes to get a job done and focus on those steps that are the biggest struggle for customers. In other words, those steps that have unmet customer needs.

Comparing features and specs across competitors is everywhere. We’ve all seen the table that shows a bunch of features down the left and then checkmarks for each competitor who has each feature. More features is better, right? The problem is customers don’t know what features they want, but they know what problems they want to solve. As Henry Ford put it, “If I asked customers what they wanted, they would have said a faster horse.” The horse riders know they want to get to their destination faster but they don’t know what features and technologies will make it happen. This is also true today. For example, telling customers that a product has AI does not help them understand why that’s valuable.

We help portfolio company's generate empathetic messaging. Empathizing with customers means recognizing that customers don't want to use the company's product features, they want to get their job done so they can get back to their lives.

The trick is to include 3 elements:

In other words, we create messages that let customers know that we understand their problems and that show how product helps them solve it.

We have used our JTBD messaging method improve marketing effectiveness 10x over product and feature-based messaging.