In this episode, we look at how to use Jobs-to-be-Done innovation methods to beat Microsoft. Specifically, we will look at how to use JTBD to beat Microsoft Word. Word is one of the most successful products in history and as part of Office, it has helped fueled Microsoft's success for decades. Imagine you are on a product team and your mission is to beat Microsoft Word. How would you do it? How would you create product roadmap to generate revenue and profitability growth?
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Key moments from today's topic on how you would beat Microsoft with Jobs-to-be-Done:
00:00 Jay Haynes and Jared Ranere give a brief overview of Microsoft - specifically Microsoft Office and it's 25-30 billion dollars in value.
02:22 Jay and Jared discuss the six main questions to ask when trying to beat a large competitor.
02:36 Jay and Jared outline how to discover your customer's goal.
08:09 Jay covers the dangers of defining your market too broadly.
15:21 Jay and Jared talk about segmenting once you've narrowed your market.
22:41 Jay and Jared discuss the value of meeting unmet needs in your segmented market.
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Learn more about JTBD: https://www.thrv.com/jobs-to-be-done
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Follow Jared Ranere on Twitter: https://twitter.com/jaredran
Welcome to our podcast. How would you beat? In each episode we pick a company and talk about how you could use jobs-to-be-done innovation methods to beat that company's product. We'll discuss innovation theory and explain the methods so you can put the theory into practice at your company. I'm Jay Haynes, the founder and CEO of thrv, that's thrv without the vowels thrv.com. We help product marketing and sales teams use jobs-to-be-done innovation methods to build market and sell great products. I'm here with my colleague, Jared Ranere, this week, how would you beat Microsoft? Specifically, we'll look at one of their dominant products Microsoft Word, how would you create a product strategy to beat Microsoft Word? Microsoft of course is a dominant company. Their market cap hovers around a trillion dollars in office consumers is about a $4 billion business and it looks like office commercials about a $20 -$25 billion business. So, in total $25-$30 billion business just in office. So how would you beat Microsoft?Jared Ranere :
Unbelievable. It's interesting to work look at Word as a product that you would have to overtake in order to beat Microsoft Office, right? Because it's hard to envision a world with where you don't have word processors, you know, but 40 years ago, it was hard to envision a world without typewriters. And that happened. And so, the question becomes, how will technology in markets evolve to eliminate Word and word processing applications in general? It's really hard to see that.Jay Haynes :
Yeah, just to review a little bit of innovation, the way that we'll take a look at this and trying to envision a future without Microsoft Word. The foundation of jobs-to-be-done innovation theory is that customers aren't buying products, like typewriters or word processors, what they're doing is they're hiring them to get a job done. So, it may seem like the job is to create documents. But is that really the customer's job? Is that their end goal? Are they just looking to create documents? So, what are we going to do in order to figure out what job the customer is actually hiring a word processor to do? And how can that lead us to conclusions about a product strategy would likely beat Microsoft Word?Jared Ranere :
Right? And understanding the job is just one step and how you formulate a product strategy. So, if we wanted to look at how we could be Microsoft Word, the market or the job is just one question we need to AnswerJay Haynes :
Yeah, that's right. So, in jobs theory, we really want to answer six main questions. So, imagine we're a product team and we're thinking okay, we want to attack Microsoft Word. We think there's an opportunity there. So, what how are we going to do it? The first question, of course, is who is the actual customer? Who's the customer we're going to serve? And you don't want to just broadly say its consumers or business as professionals, you've got to get more specific about what who the customer actually is? And what are they trying to accomplish? That's the market that is the underlying jobs-to-be-done. So, the second question is, what is the market you're going to target? And then third, of course, critically is how big is that market? If you're going to look at an opportunity, your revenue is a direct function of how big the market is. So how do we size markets using jobs-to-be-done? Then, of course, within there, you want to find a segment, the reason you want to segment is, are there a group of customers out there that are really struggling more than other customers? Because those are the ones that are more likely to actually purchase the product, especially when you launch something new. So we want to segment what segment or where do you target? That's the fourth question. And the fifth question, of course, incredibly importantly, is what are the actual unmet customer needs, you're going to serve that you're going to satisfy better than competitors in the market. Because, of course, the whole reason companies exist and the reason that new products get adopted is because you're satisfied unmet customer needs better than competitors in the market. So we'll look at that we need to figure out what are the unmet needs. And then finally, of course, what is the product idea? And how much value is it going to create for the customer? What is customer value? So if your team is thinking about beating a big competitor like Microsoft, you would want to have a really good answer to these six questions.Jared Ranere :
Yeah, that's great. And so, I think we need to start with the customers, right? That's question number one, who are the customers that we're going to look at. And Word is, is kind of impressive because you can't think of a time when you haven't received a Word document. And you've never talked to anybody who doesn't use Word right? Maybe there are some people who say like, Oh, I don't like it, but they definitely use it from time to time because it's incredibly difficult to get away from people sending you Word documents. And so you could say, well, the customer is everybody. But can we break that down? Right, who are the different kinds of people who use Word If you just say let's target everybody, it's hard to know what their goals are and what jobs are trying to get done. So, let's try to create this list. Well, attorneys use Word right? If you work in a business setting, you're constantly getting red lines from attorneys on Microsoft Word. But you also have authors, people writing books, people writing magazine articles there, they often use Microsoft Word. You've got marketing professionals and business professionals in general people writing memos and other things. Screen writers, consumers just writing letters, financial professionals who need to write letters or documents related to any calculations they do or accounting they do or analysis they do. There are lots of different people who use Microsoft Word. And so, what is the job they're trying to do, right? You've got all these different people. Are they doing the same job? Well, you could say they're trying to create documents, that would be one really high-level job, you could even say they're trying to collaborate on them. And is that a helpful way to look at this market? Should we say, Well, we've got different kinds of people, and they're trying to create documents and collaborate on.Jay Haynes :
Yeah. And I think that's an important point to recognize that when you're trying to figure out your customers goals, you really want it to be independent of any product or service. So, creating a document is really a solution to some goal. Now, sometimes the document really is you're an author, and you're writing a book. But even when writing a book, your goal is to convey some idea. And if you're an attorney, the goal is not to create legal documents. The best attorneys in the world help you resolve disputes and in cases of litigation, so what they're really trying to do is resolve a dispute and an author is trying to convey an idea. And you know, screenwriters are obviously trying to write a screenplay, which is a version of a document so they're trying to create this screenplay but even in screenwriting, what you're trying to do is you know, it capture an audience, you know, get people emotionally invested in the narrative that you're trying to convey. So those underlying goals are a great way to look at the markets. And when we look at markets, we can break them down into first, the core functional job, you know, attorneys trying to resolve a dispute, an author trying to convey an idea. Those are what we call functional jobs. Those are very, very important because those really are the goal you're trying to achieve whether or not using a word processor or a typewriter. And the second is emotional jobs. Emotional jobs are key because we're all humans, and we want to feel positive. We want to feel confident, we don't want to feel anxious, and we want to be perceived in certain ways, by everybody around us, whether it's our family, friends, or colleagues or whoever. So those emotional jobs are extremely important. And then finally, there's the consumption jobs, which are just like how do you use a product? How do you interface with it? How do you learn to use it? How do you install it, maintain And repair it, you know those kind of things. So, but the market online it really is the core job that that the customers trying to get done.Jared Ranere :
Right. And so, I think at that point you made that a document is really a solution to some other goal. It's an important point. Because you can see that there are a lot of teams that try to help you collaborate on a document, right? Google Docs has a bunch of tools to help you collaborate on a document, Dropbox is developing paper that help you collaborate on some kind of document. And the idea there, I think that from their point of view is that if you describe that goal, generally then you can target as many people as possible and you can get a lot of users. But Jay what's the risk of including that solution in your customer goal statement in your job and looking at the market that way?Jay Haynes :
It's really too broad and especially if you are a product team, or a marketing and sales team, working together to launch something You really want to be specific about what unmet need, you're going to target even before you come up with any ideas. So do we want to create a competitor, Microsoft, that is another version of a word processor? Would that be a good thing to do? Well, maybe not. If you look at the customers, and in this case, let's say you're looking at attorneys, and you said, Okay, what is this market that attorneys are creating documents for? And you can look at that and say, Well, there are a bunch of jobs there. One, of course, resolve a dispute. You know, you get sued by somebody, whether you're, you know, a company or a person, you have to resolve that dispute. You might agree on contract terms, you know, mitigating legal risk, protecting IP, all those are jobs that companies are hiring attorneys to do. And this is a key distinction that we want to distinguish between the job beneficiary and the job executor. And in a lot of markets, also the job purchaser. Those three people are different customers with different roles. And the reason that this is so critical is a lot of times and a lot of the companies we work with our targeting job actually caters in a market and a job executor you can think of as someone who's part of the solution. And the reason it's important to identify the job beneficiary as opposed to the job executor is the real market, the market that's going to stay over time and not change is a job beneficiary getting a job done, whether you're a business executive who needs to resolve a legal dispute, whether you're a parent getting a baby to sleep through the night, whether you're a surgeon trying to repair a dislocated shoulder, you know, the beneficiaries are always the key customer to look at. So, in this case, if we were to look at the beneficiary of an attorney resolving a dispute, the attorney is the executor they're helping the business, who's the beneficiary of resolving this dispute. So, it's a business executive who's involved and in charge of this dispute, they're hiring the attorney, they literally are hiring the attorney. But in jobs theory, you know, the concept is your customers are not buying your product. They're hiring it. And in this case, they're hiring an attorney actually are hiring it. But they’re really using that as a solution to resolve a dispute. So is there a way to look at that market? resolving a dispute that how big is it? And if you came up with a solution where you didn't need a word processor, would that be a big enough market to generate revenue and profitability?Jared Ranere :
Right, so it sounds like there's two key risks here that we're trying to sort out. One is that by putting a solution in our job saving by understanding our market through the lens of a solution, it could change and go away and now we're trying to hit a moving target right. So, if we say that collaborate on a document is the solution and now suddenly people can achieve some their goals without document Well, now we're out of business because we've been creating this collaboration on documents per product, and now it's gone. The other risk is that we define our customer as a job executor, that's not necessary anymore. So, if we're focused on helping attorneys collaborate on documents, and suddenly business executives don't need attorneys to resolve their disputes anymore, and they especially don't need those attorneys to write documents. Well, now we're out on two fronts, right? We've been we've been innovating against something that no longer is necessary in the market, because the job executor has evolved away, because the job beneficiary can get the job done for themselves or has some other solution, get the job done for them. So, it's that trying to create that stable target that we can innovate on over time, right? Yeah, that's great. And let me give you a couple examples that I love where the job executor literally gone away, no one's using the job executor. The first in the business context are IT Managers. You used to have these IT managers and like you could not access corporate data without going through the IT manager and they went away because you now can use cloud applications and you just log in yourself into some SAS application. There's no need to have you know, this IT manager who's controlling your Microsoft Exchange Server. And that's true of so many different markets, all markets will evolve to get rid of the future because they're part of the solution. In a consumer market. I love the example of Nest and thermostats that can the entire thermostat industry sold to contractors and contractors would install those thermostats that you hated. You couldn't figure out how to program that terrible interface, because they were targeting job executors. The thermostat makers sold those to contractors. Well, the beneficiary the market there is to achieve comfort in your home, of course, and the homeowner is actually the beneficiary. They're not looking for contractors. They're looking for achieving comfort of their home and ness targeted the beneficiary at a price that was only almost times more than the average price of about 30 bucks for, you know, one of those horrible thermostats and NASA was like, we're going to charge $250. So, the incumbent said, Oh, no one's ever going to buy a nest thermostat that's cost almost 10 times as much as our thermostat. How can we not win? Well, turns out there were unmet needs, homeowners really did one on chief comfort, you know, faster and more accurately. And Nest even included a screwdriver with a thermostat. So, you didn't have to go find a thermostat, find a screwdriver, you didn't have to call a contractor. You could just have instructions, you could wire the thing yourself, and you're off to the races. So, I love those examples. But if we're going to then the define the market this way, then we got to figure out how to size the market. So how big is the market for a beneficiary trying to get a functional job done. Right and that's a really important question, because if you raise this idea, let's say you work for Microsoft Word or you're a product manager at Google Docs, which is competitor for Microsoft Word or Dropbox, which is also competing with Microsoft Word. And you said, hey, let's just go after business executives who are trying to resolve a dispute. It would be very easy for anybody on your team to say, that's a way smaller audience, why would we want to target them when we can target everybody who creates a document? Right? So, it's a smaller number of people. But is the market actually smaller?Jay Haynes :
Yeah, that's what's interesting. So, of course, the way to figure this out is, what would in our example here, we've got our customer who's the business executive, we got the market, which is to resolve a dispute not to create a Word document. And so how big is that resolving dispute market? And what you use is what are they willing to pay? What would executives be willing to pay to resolve disputes better than using an attorney in Microsoft Word? And it turns out that market is huge. The in the United States, the market for business dispute is about $200 billion a year. There are estimates that it's even a third of corporate profits in the United States are used towards litigation. So, obviously, there's a really high willingness to pay when the word processing market. If you look at it for Microsoft, and this is, you know, even internationally, it's probably a $15 to $20 billion market. I mean, it's hard to tell because, you know, it's buried within Office generally. But if you said, you know, word processors, how big is that market? It’s probably a fair assessment to say it's probably in the neighborhood $15 to $20 billion a year big market, but the resolving dispute market is literally 10 times bigger. So that's an example of where the markets big enough people are clearly willing to pay. Because if you can reduce those costs, and you can reduce the risks, right, because there's not just the cost that you're paying it, but if you lose the case and you lose, you know, a $500 million lawsuit that's significant hit to your business. Obviously. So, it's a very, very big market, if you look at it from the lens of what would people be willing to pay to get the job done? Not what how many products are being sold in the market today? Because that it doesn't seem to be that there's any really good resolve dispute products that aren't word processors and attorneys. So they're this is where you can think of it as a new market. Where there's a there clearly is a job to resolve disputes. There are clearly customers who are willing to pay to get it done, but there aren't really any elegant solutions yet.Jared Ranere :
Yeah. I mean, the attorneys like the best solution possible, right? You pay them by the hour, a lot of money to resolve this dispute for you. And so interestingly, when you're developing this new product, you have to think about your competitor as broadly. Right. So, the word processor is not your only competition. It's not the only way that business executives get this job done. They're not just sitting there typing and redlining each other's contracts. They're also hiring an attorney to do it. So, you have to compare whatever you do to that attorney, which is a fascinating thing to think about, you know, you started off being like, Can we beat a word processor? And now you have to say to yourself, Well, how do we actually beat attorneys?Jay Haynes :
Yeah, that's right. That's right. And, and it's not. It's not unusual. We see this all the time we look at jobs and every job is essentially a goal a customer is trying to achieve. And there's information inputs and outputs in decisions along the way. And it's not surprising that software is growing so fast. This is kind of Marc Andreessen software's eating the world. The reason software is eating the world is because we all have jobs to get done that involve information inputs and outputs and decision making. And that happens to be what computers are really, really good at. They can take information they can look at it and analyze and can help you make decisions. And so we know that this is a big enough market. So, let's just go through our questions we've got our customer targeting has the business executive, the jobs resolve disputes, the market size is clearly big enough. So, then we'd want to segment. So, the next thing is, is there a segment that we can go after of these job beneficiaries that are really, really, really, really struggling? Because that's what we want to differentiate. There might be people who are involved in resolving disputes. And they're like, Yeah, I just have to get these nuisance things. And they kind of call my attorney and they go away. And there's always like, kind of spats going on. But the really big, risky disputes are the ones who might be very underserved. And we won't get into too much detail about this. But there's quantitative ways you can judge these customers and whether or not they're really struggling and that they pop out of the population as being different. And even within here, let's say was 20% of the market that was really struggling in resolving disputes. And that still represents a huge willingness to pay and a large market. So, you'd want to focus on them because then you'd prioritize their unmet needs in order to build the product.Jared Ranere :
I think the interesting thing here is that it would be fairly easy to hypothesize, who might be struggling the most to resolve disputes, and you could look at fortune 500, maybe they had the most at stake, maybe they're spending the most today. You could assume that small businesses don't have a willingness to pay or they're not struggling to get this done. Or, you know, you could look at the number of litigation suits that somebody has to a business has to deal with year over year and assume you could segment your market that way. And I think the key to looking at this through a jobs lens is to you can have those hypotheses, but hold them for a second, don't assume that the size of the business or the size of the spend is the cause of the struggle, right the key idea behind jobs segmentation is that the demographics or firmographics of your customer do not cause the purchase the struggle with the job causes the purchase. And so, you want to go into your segmentation really having an understanding of what is that struggle? And how is a segment struggling in common? What causes them to struggle much more than anybody else in the market, and now you have people who are hungry to adopt a new solution. And so, to do that, we had to figure out the unmet needs. Right. And so, what are the unmet needs? And what is a what isn't a menu to start with?Jay Haynes :
Yeah, that's great. And one more comment on segmentation, because I do think this is great. We should talk more about it. But this is very typical. And we've seen this a ton, of course, that if you were to segment this market, you would you would take company size as a way to figure out who's underserved who has unmet needs. And, and that's a very typical characteristic kind of demographic segmentation and people do this companies do this with personas all the time, are you male, female, older, younger, rural, urban, you know, etc. and the right question to be answered asking is not what are the demographics of our customers are the characteristics? It's who struggles the most. So, in this example, in this business market, it might be the fortune 500 companies, some will, of course struggle to resolve disputes and have unmet needs. But also, it could be that it's the threat to your business. It's the litigations threat to your business, how much of a threat is it to your business that causes you to really struggle, it might not be like the size of your company. And that means that there's probably much bigger opportunity. If you look at companies that aren't in the fortune 500 there's way more companies are in the fortune 500. And they could still be struggling to resolve this.Jared Ranere :
By definition. There are only 500 companies in the fortune 500.Jay Haynes :
Yes, by definition. So, if we look at the unmet needs, the key is figuring out what are all the variables to get the job done. In other words, if you're trying to resolve a dispute, what kind of variables are there that's how we like to define customer needs, because those variables are independent of any solution and you know people we've worked with know we use the example of getting to a destination on time all the time which is the job that people hire an Apple Maps to do and in that case the variables things like optimal sequence departure time whether traffic delays, different routes, you know, alternative routes, etc. There are hundreds of them. And in this case, you would want to look at resolving a dispute as well and the needs are variables they read the relevant law relevant information, IP precedents, probability of the success with the suit, the history of the judges and their decisions, timing cost, etc. So, these would all form the customer needs, for example, determine the relevant law, you know, calculate the cost gather the relevant information, you know, determine the probability of success with the suits, those are all the needs. And, you know, today executives hire attorneys to do this, but the executives are the beneficiaries. The attorneys are the executors. So, they're using Word and they're using their knowledge. And they're using their brains to go look up legal precedents and determine probabilities. But will they do it using a word processor until the end of time? Or are there going to be new solutions that help get this job done?Jared Ranere :
Yeah. And I think, to think about unmet needs a little bit more, you can look at them as they're the variables that can cause the job to go super well, if you take care of them very well if you have certainty around what the variables are if you take action on them appropriately, but they can also cause the job to go way off track if you don't take care of them. So for example, if you look at the probability of success, if you go to trial, if you don't understand that, well, you could end up spending way more money resolving the dispute than you really want to, and you could end up hiring an attorney that takes a lot of your money and then you lose and you spend even more money. So that probability of success is incredibly important to a business executive to understand what kind of decisions do they need to make in order for this dispute resolution to go well, right for them to decrease the amount of money they spend on it, and for them to decrease the risk that this dispute might occur again, right? There are a lot of output variables that happened on the other end. And it's interesting when you look at it this way, because then you can ask yourself, okay, how effectively does Microsoft Word tell us the probability of success in this suit? Right, how would you actually do that, Jay, how would you use Microsoft Word to figure that out?Jay Haynes :
Yeah, well, you're using Microsoft Word, but then you would actually use the brains of the attorneys. And that's what's really interesting is, not only would you use the brains of the attorneys, but the brains of your attorneys are actually highly variable. That's what pretty interesting. And are there ways that you could determine that probability using some other method? And what I what I find fascinating is, I was reading a book recently about the neuroscience of emotions. Fascinating book. But and one of the studies, that references is that judges, they know that judges actually make worse decisions. I think it was a parole example. So, you're less likely to get parole, if you meet the judge right before lunch when they're hungry. So, they're not just these objective rational beings that are making the decisions. And that's a that's true with attorneys. They're not always accurate by definition, on their assessment, their probabilities. So could a computer algorithm take information which is enormous amounts of information, you know, past precedents, you know, decisions by judges, all the information involved in the case, you know, the legal information, etc., and put it together and say, Hey, we're giving you a better probability of what's going to happen here. And what's interesting is over time, that system, you know, given machine learning and you know, advances in computer algorithms, it could get much better. It doesn't have to be 100% accurate, but it definitely could be better than most attorneys it very easily in, you know, today's world of advanced computing. So, if both sides of this dispute just start to agree that this probability calculation by this new solution we're building to compete with Microsoft Word, if it does a better job, if it's faster and more accurate, that would be then where people really start to adopt it. And I think that's what's really interesting is you could get that adoption by not even having to be 100% accurate, because the cost of this is so enormously high that you can get both sides to agree to resolve the dispute before, you know, years and years of litigation.Jared Ranere :
Right. And when you're using a computer algorithm to figure it to satisfy a need, it's going to be much less expensive than hiring an attorney to do it. And so, his is interesting because suddenly it changes that cost benefit equation for the business executive, right? If they can get it, why not get a really inexpensive estimate from a computer algorithm to help them inform whether to move forward with an attorney. And if that happens, you can imagine that attorneys are going to get less business, and they're going to be using Microsoft Word less. And business executives are going to be getting fewer red lines, fewer documents about these trials, right, because maybe they can settle ahead of time. And suddenly you are creeping up on Microsoft's business, right, a significant customer base for them attorneys without them ever noticing because you didn't go out and launch a word processor that sends their antennas up. Right and now they're focused on you, right? You're saying oh, we're building a database of legal information and AI to help people make decisions about whether or not to take a case to court, that why would Microsoft pay attention to that?Jay Haynes :
Yeah. Right. And you can think Microsoft is probably paying attention to someone like Scrivener. Scrivener is a word processor used by authors. And it actually gets the job done better. It's a very interesting application. I'm not an author, but I know some authors, and they use it. And it really is a different word processor, because it's a word processor combined with a database. It's not just how do you write things out and redline it and format it? It's really, let's collect all the data you're using to make an argument. So, if you're writing a book, because you're trying to convey an argument and convince people of your argument, let's collect all the data and then you can we can help you construct the book out of that. So, Scrivener really is an interesting direct competitor for authors for word processors, but if we were to pick this market of resolving dispute, just conclude and wrap things up here and how we created jobs today. On product strategy, again, it would be answering these six questions. So, we started with the customer. In this case, we target the business executive, the beneficiary, not the executor not the attorney, the market is to resolve a legal dispute, that's the jobs-to-be-done. The market size, of course, is hundreds of billions of dollars, there's likely a segment that as extreme risks to their business, where they really want to resolve these disputes in a much more fast and accurate way. There's clearly going to be unmet needs, the variables around probability of success, gathering the information, determine the relevant law and all that so we could prioritize those needs. And then our product would really ultimately help determine this probability of success for both sides, to bring both sides together to be able to resolve this dispute faster and more accurately, and importantly, at really, really much lower cost then, you know, $200 billion a year today. So that's how we would create a product strategy to beat Microsoft.Jared Ranere :
Right and that would go after the attorney resolve dispute market. But you can imagine using the same process for the other customer types that use Microsoft Word today, Jay mentioned screenwriters and you could go down the list figure out what their jobs are in actually is a word processor the best way to satisfy their needs and those jobs.Jay Haynes :
Thanks for listening to our How would you beat podcasts, visit us at thrv.com. That's thrv.com to get our free How To Guides and try our jobs-to-be-done software for free.