How Would You Beat?

How Would You Beat Home Depot?

February 16, 2021 thrv Season 1 Episode 12
How Would You Beat?
How Would You Beat Home Depot?
Chapters
How Would You Beat?
How Would You Beat Home Depot?
Feb 16, 2021 Season 1 Episode 12
thrv

In this episode, we look at a few different elements of Jobs Theory using Home Depot. How would you beat a huge retailer like Home Depot? What job are they being hired by customers to do? Would product strategy would you use to beat Home Depot? Is there even a market opportunity to compete? 

Show Notes Transcript

In this episode, we look at a few different elements of Jobs Theory using Home Depot. How would you beat a huge retailer like Home Depot? What job are they being hired by customers to do? Would product strategy would you use to beat Home Depot? Is there even a market opportunity to compete? 

Jay Haynes  0:01  
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 t h r v 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. 

So today we're going to look at how would you beat Home Depot. And we like looking at large competitors. And certainly Home Depot would be one of those. They have a $290 billion market cap, almost $300 billion. They, of course, are one of the dominant companies in the home improvement market. They in Q3, they earned $33 billion in revenue just in the quarter, which was up 23% year over year. So that's a very interesting question. We're in the middle of this pandemic, and millions of people out of work. So why would they be growing? Why is Home Depot growing? And importantly can we use jobs-to-be-done? If you were to compete with Home Depot? If you were a new entrant coming into the market? If you were a startup? Or if you were an existing competitor? How would you compete with Home Depot using jobs-to-be-done? So what jobs are people hiring Home Depot to help with? 

Jared Ranere  1:47  
As you just said, they're in the home improvement market. So very simply, we could say there's a job, which is improve your home. And given that we're all in a lockdown right now and spending more time at home than ever, we start to see why Home Depot has been able to grow. If we're socializing at home, schooling at home, working at home, and just there more than we have ever been before, we're going to be inclined to improve it and to make it work for ourselves and these various situations. So how does Home Depot help you do that? How are they helping you get the improve your home job done? And even specifically, create a home office?

Jay Haynes  2:30  
Yeah, that's a great question. So, of course, I think that answers the question of why they're growing is that people are taking funds that they've allocated for other things like travel and vacation. They're not traveling or going on vacation that they probably are improving their homes. 

Now, home improvement, it's such an interesting way to look at the market. We always like to think if you're going to compete with Home Depot. If you're Lowe's, you're kind of in a direct head-to-head competition with Home Depot. So sure, you're going to be looking at what Home Depot is doing. And you're going to be making those kind of adjustments and saying, “Okay, do they have a product that we don't have in our inventory? Are they offering a service in their stores that we don't have.” And that's the kind of direct feature-to-feature competition. What we like to do is to use jobs-to-be-done and help companies think a little differently. 

If you're going to compete with Home Depot, how would you go through it? Well, we'd want to break down all the jobs that people are hiring Home Depot to do. And the way you can do that through a home is Jared, as you were just mentioning, is one home office. So how can you help people with home office? What are the jobs that people are doing in their home office? That's an interesting way to start with that. And then you go through basically your entire home. What are you doing in your kitchen, for example? Or what are you doing in the bathrooms and showers, your living room, etc. In other words, it's more than just improve your home.  Improving your home is almost a solution to all these other jobs. And one of them obviously, is to get a good night's sleep. You could look at that job in specific and try and figure out well, yes, I want my  bedroom to look nicer. But really, the core functional job there would be getting a good night's sleep. And that's true in every part of your house. Preparing a meal is a good example in your kitchen. And one way to do it is to go get a bunch of stuff from Home Depot. But are there other solutions out there that think about the competition in a totally different way than competing directly with Home Depot for preparing a meal, for example.

Jared Ranere  4:46  
If you look at that just high level job of improving your home as a domain. All Home Depot helps you with this gathering the materials. There are a bunch of other steps in that job. Everything from figure out how to improve it, design that improvement to actually executing it. I cannot tell you the number of things that I would like to improve about my home that I just don't have the time to do. Even if they're really simple. And this includes maintenance jobs too. 

Your home needs to provide shelter. And to do that, you need to keep water out of your home. You need to keep your HVAC system working appropriately and that requires maintenance. Unfortunately, none of the existing solutions for those things just last forever and work. And so that's a whole other domain. There's improvements to the current condition of your home. And then there's the ongoing maintenance of all these things. 

That's true for your landscaping. So I can go to Home Depot to buy a rake, or I can hire a landscaper. This brings up an interesting question about segmentation. Some people have time to do more of the job steps on their own. So they use Home Depot to gather materials. But I'm sure I'm not just speaking for myself when I say that when you have a family, and you have two people, two adults who work full time, that speed and accuracy is critical for the rest of that job. You do not have time to do all of the maintenance that a home requires. It almost makes you regret owning a home in the first place. This job is incredibly underserved. Even finding help to do it is incredibly time consuming.  I can't get a contractor to call me back for next to anything. There's so much opportunity in this in this domain, it blows my mind that Home Depot earns as much revenue as it does when this job is so underserved.

Jay Haynes  6:46  
That's a great question too.  What is the size of this market? So it's such an interesting way to think about it. And, sure, if you said, well, people are buying materials to improve their home on their own. There's that market. But is that really the market?  I think, Jared, the analysis you're doing there is a very good one, which is we have to think about it more broadly. Home Depot is serving multiple customers, as well as serving the homeowner who wants to go and build their own garden or do their own kitchen improvements or whatever. And they have services to help you with that and how do you do it.  

But they also do provide a bunch of stuff to contractors who are doing that for you. You just mentioned, kind of optimize your home, maintain your home, those kind of jobs We look at those type of things all the time. So you could break those down and say, “Well, Home Depot is actually going to be part of this solution because what we're going to build is this layer, that is the solution for the homeowner.” And in our classification in jobs-to-be-done the job beneficiaries is the reason the market always exists. This market doesn't exist because of contractor. It exists because homeowners have a home. So they're the job beneficiary. They're the core element. And contractors are helping them obviously. Homeowners are literally hiring contractors, but also in the jobs-to-be-done jobs theory framework, they're hiring contractors as part of the solution. 

You're right, you could layer in there and optimize my home subscription service. Whenever I have anything, go wrong, I just want to make one phone call. And some this service comes and takes care of it. Now that service might have to go to Home Depot to replace your shower head, or whatever. But you just have one service provider that takes care of it. Because as you said, you got two parents, everybody's busy, you're working really hard. Who has the time to go do this stuff. So that could be a big opportunity. And I think you see that evolving already. You can see different real estate models of people owning homes in different ways being part of a community where you're just already outsourcing all that maintenance and repair and optimizations.

Jared Ranere  9:07  
Right, like condos and co-ops are great examples of that. You pay a maintenance fee and somebody takes care of most of the infrastructure. They don't take care of the inside of your apartment and little nooks and crannies, but they make sure that the  HVAC system is working, the plumbing is working and that the roof  is not leaking. All those kinds of big important things.

Jay Haynes  9:28  
Yeah, and you even see this like for season homes. Hotels providing homes because people want to outsource everything. Obviously that's the high-end of the market. 

But I think if you were to going to compete with Home Depot using jobs theory . You would want to look at all these different, essentially markets that they're in. There isn't one market here. That's the key, as well.  Home Depot is providing all the stuff around your home. But when you're in your home, obviously, there  are a ton of jobs from preparing meals, to getting good night's sleep to whatever it is, your home office, etc, that you're using your home for. And you can see how there's a disconnect just by searching for stuff on Home Depot. A good example is if you use search on like home office, it brings up a whole bunch of ceiling fans. Well, okay, that relates to achieving comfort, but that doesn't address any of the jobs that you're trying to do with your home office.

Jared Ranere  10:34  
It might actually make my home office worse. It would be loud on calls and blow papers.

Jay Haynes  10:42  
It  might not be a good solution to get the job done. 

So this is the way you would do it if you were trying to attack Home Depot and take share by going through each of the true markets or the jobs while being productive when home. You're trying to prepare a meal. And actually, I love the  "to prepare a meal"  job because you could look at and say “okay, people want to renovate their kitchens.” So make sure there's a market for that, obviously. If you were coming up with something really innovative, you would come up with something like the microwave, for example. A microwave was a real change in the kitchen. Think of how much change with the microwave.  All this food and supply chain stuff that now was designed to be heated up by microwave. There's a new product which actually I think is really amazing called the Brava, which is a new oven.  It's another solution to prepare a meal that uses light instead of a microwave that heats water. It's really good, I have to say. They're not paying us anything, I just happen to like the product. 

There are lots of other ways. The Blue Aprons and the Gobbles, and all these kind of prepared meals that show up. So that really is the same market because what you're trying to do in your kitchen, even though it doesn't seem like they're directly competing with Home Depot, but they really are. The end job that you're trying to get done. And the reason I think that's so interesting is one, it's a way to compete with Home Depot, that's very different. It doesn't look like a home improvement retailer. But the other is, it actually is a risk, it is a real risk to Home Depot. Because if you're using these other solutions, you might not have to renovate your old stove in the way that you traditionally would. And you might not even be motivated because now another solution involves in getting the job done better. 

Anybody who's listening to our podcast knows this is almost exactly analogous to where we even said before in the pandemic that the airline should be buying web conferencing companies. Because they're both targeting the same job. For example, salespeople who are acquiring customers with very, very, very different platforms. And that's true for Home Depot as well. Even though they're not in the business of making new innovative types of ovens. Those ovens really are helping people get the job done. So that's a way to say, “Okay, this is how this market or these markets, all the underlying jobs are really going to evolve.” I don't think it's as big a threat with these new ovens to Home Depot as, say zoom was to United Airlines, which I think is a real threat. But it's the same type of thinking if you're trying to compete with them. What are those underlying jobs? How can you, as they say, think outside the box, literally outside Home Depot store?

Jared Ranere  13:54  
It's interesting because that both is a risk to Home Depot strategy. And one of the reasons why retailers can last is because they can sell the Brava. Under their existing business model, any new appliance that's out there as an innovation to help you do something in your home, Home Depot can sell it and make some money off of it. They may miss out on big opportunities to innovate and get the whole job done. But they do seem firmly entrenched in that sort of preparation part of any of these jobs, where you have to make decisions about how you're going to get the job done, and then acquire whatever materials you might need to do that.  If you're going to prepare a meal at some point, you need to decide, how am I going to cook meals on a regular basis? Am I going to use a Bravo? Am I going to use a microwave? Am I'm going to use an oven? Am I going to use an induction range? How am I going to do this? And then you have to acquire those things. Now you don't do those steps all that frequently? And so that's a risk for Home Depot, that they're not in the part of the job that you do every single day. But it's a way that their model does kind of work, as major innovations come onto the scene. They can always be a part of the solution.

Jay Haynes  15:18  
Yeah, I think that's right. And that brings up an interesting question for the role of retailers. And I think in this home improvement job, Jared, as you and I have talked about. They're targeting really one of the steps. They're not targeting the whole job. And that's what I think is also very interesting. That gets to this question of preparing food, that's a good example. They're not actually helping you right now to make the meal or even choose which meals to eat. You can see clearly that with Brava and their business model. I would be incredibly surprised that they didn't start off by just sending you food. Because it's much more of a kind of subscription model. They're not just selling you the oven, they want to sell you everything you put in that oven. And that's kind of this recurring business. To your point, that preparing food is the job that people actually get every single day, that's a really big market, relative to the wants in occasional time retiling your kitchen. So, in other words, we're playing with huge markets here. 

We do not have a market sizing problem that I wanted to compete with Home Depot. I think that's right, also that they're not targeting the whole job. And that I think, is an opportunity. And this is where as we mentioned before, if you created a service, that was the maintenance, home optimization you don't have to worry about it if you're the homeowner.  Home Depot could be part of that but they really are just getting one step done. And you can see how in the whole job, and this is why it's really, really important when anybody's looking at a competitor or market they want to enter to really go through all the different jobs steps. What does it really take to get the job done? Because you can see that you would want more predictive elements to say, “Hey, this is this is where you need to focus your maintenance, because we're seeing problems here.”  It's aware of what's going on in your house and your house obviously, it's stuff, it's flowing through it water, electricity, sewage. It's almost an organism.

Jared Ranere  17:33  
Entropy is real when you think about your house.

Jay Haynes  17:37  
Yeah.  So that's kind of predictive stuff that you want to do, you know, before it happens, and be aware of it. And, in that you need supplies and stuff and that's where you go to Home Depot. But, I think that’s a great way to look at how jobs-to- be-done could be applied specifically to home improvement. You can dissect that job, look at all the different job steps, see what would happen with it, and then you can go into these individual jobs as well.

Jared Ranere  18:04  
Yeah, and I think something you brought up earlier, relates to segmentation based on the willingness to pay, because you talked about the sort of hotel type homes where they have a lot of services that do this whole thing for you. And it's just basically plug and play. That serves the high-end of the market, who's willing to pay a lot to get that job done.  Consistently spend money on services to stay on top of this. And then you could think about the "Do It Yourself" end the market as the lower end of the market. People who aren't willing to pay nearly as much to get this job done. They'd rather just notice it themselves, not spend money on somebody who's monitoring the situation for them, and then actually executing the solution. They just want to spend money on materials they need. But then there's probably a middle, meaty middle of this market, where they can't, they aren't willing to spend as much to get the whole thing done for them with one service. But they're certainly willing to know they're short on time, and they're willing to spend more than just the cost of materials. 

It brings up something we don't talk about a lot  because this is sort of the innovation is when you're creating this service, you need to create a solution that's profitable. Part of this is how can you create a service that's almost as good as what the high-end is getting but at a more economical price point that's still profitable for your business.  Where there is  a business model innovation, opportunity, as much as a product innovation opportunity. You may use technology to scale whatever the solution is, but it's not a totally brand new invented solution because it's already in the market.  The high-end’s using it you just need to figure out how to make that cost effective for a different segment.

Jay Haynes  20:01  
Yeah, I think that's great. We should talk more about business model innovation. Because that is very interesting. How do you get into this market with essentially a service that can be technology enabled, that is at much lower costs? And, that can be business model innovation, as well.  Your home is likely also insured by somebody. So there are different players who want to help you get the job done of maintaining your home. In the extreme cases, a good example would be mold. If you have water leaking, and you don't know about it, and then your house becomes infected with mold, which I've had happen to friends with serious issues with black mold. They'll burn your house down. They just start over if there's enough mold. So your insurance company clearly wants to monitor that. That's just one example. 

Again, I think the key here is, if you're doing business model innovation, or product or service innovation, mapping out all those jobs is the first step, because they're never going to change. That's really the power of jobs theory, no matter what you're doing with your home. It was stuff people were doing with their home 100 years ago, and stuff people are going to do with their home 100 years from now, with a few exceptions. Obviously, you're connecting your home to a network that didn't exist 100 years ago. But you know, regardless of those big platform changes, that pretty much the jobs are the same. We're humans. We live in a home. That was true 100 years ago, it's going to be true a 100 years from now. So the first step, if you were in this home market, is to break down those jobs and really understand what they are even before you come up with your technology, innovation, your service innovation, your business model innovation, just getting a handle on what those jobs are, and how to think about them, I think is super important.

Jared Ranere  22:02  
Yeah, and in this case, especially the steps where everybody's doing bits and pieces of this job. And just one last note about what you mentioned about different payers I think is really interesting. Because if you look at Home Depot's jobs, for example, or any home improvement retailer's job, they're trying to grow sales. There's a service that identifies a home maintenance that people wouldn't be doing otherwise, it could increase sales of materials. And so now you're getting a job done for the retailers that they might be willing to pay for. If you can give them information about people who are willing to buy materials, and you give them the pole position to sell those materials to them, that's worth money for them. So that could be an interesting way to decrease the cost of delivering that service.

Jay Haynes  22:53  
Yeah, yeah, that's great. And that's true. I think that's a great example of what you sometimes referred to as co-opetition, where you're cooperating with competitors, because you're trying to shift the market. Jobs-to-be-done can be really helpful in that type of thinking, as well. Is Home Depot competitive if you're in this market? Are they a direct competitor? Are they a threat? Are they a cooperator or a partner? How do you think about that? And as you were mentioning, Jared, I think the first step for anybody getting into this is to map out those job steps. And when you really understand the job steps, then you can place the competitors in there, you can say, “Oh, wow! Home Depot is just helping with this step here and maybe a few needs and some other steps, etc.” But when you place all those competitors in there, you can say, “Okay, well, this is where we're going to differentiate because we're going to help with these jobs steps.” And then we're going to move in throughout the job steps into different ways to satisfy needs all the job stuff  by partnering with other companies. You can't do everything initially. And so you find different partners who help you along the way. And that's what I think is, is where we see every market evolves in that way. Where there's a company that gets into the market helps out with the job step. But ultimately, the end of the day, they want to help get the whole job done for the job beneficiary. And that's where markets always evolved.

Great. Well, thanks, everybody. We'll see you in the next episode. 

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