Learn market analysis with me
Week 1 is about market definition
Right now, I’m in a five week class called Divinations Market Analysis Workshop offered by the business strategy writer and founder of my favorite new media company, Every. I’ve mentioned Nathan Baschez and his company enough times in this newsletter that you’d be forgiven for assuming I’m on their marketing team. I’m just a superfan. I love how clearly they explain things and how consistently they publish stuff I’m interested in.
I’ll be writing about the Divinations Market Analysis Workshop for the next few weeks. Subscribe to make sure you don’t miss an installment.
Nathan Baschez is teaching a 30 person cohort of founders and VCs how to evaluate a market using techniques created by pioneering business strategists Michael Porter, Clay Christensen, and Hamilton Helmer. In the first week of the class, we spent time learning a technique created by Clay Christensen (love that last name) to first define a market by describing the “Jobs to be Done” in that market.
To learn the “Jobs to be Done” in a specific market, you do something called a Jobs to be Done interview, and in that interview, you ask a bunch of questions to someone who’s bought a product in that market. You’re looking for their motivations, habits and patterns that led them to the choice they made. If you’re an entrepreneur, you might learn something from their circumstances and the way they arrived at their decision that will help you create a well differentiated product that can become dominant in the same market.
If you’re familiar with Customer Development as the method that was invented by Steve Blank who launched the Lean Startup movement, then the Jobs to be Done interviews might sound exactly like the customer interviews you do when you’re testing a new product idea.
(By the way, I don’t know my audience super well, but I assume that you already know the basics of Lean Startup. Let me know if you want me to write about it.)
To an extent Customer Development interviews are similar to Jobs to be Done interviews, but the difference is that in a Jobs to be Done interview you’re looking for intrinsic motivators and circumstances and in a Customer Development interview you’re trying to figure out product features that a customer claims to need and would be willing to pay for. In a Customer Development interview, you might even show mockups of a product to gauge reactions, but in a Jobs to be Done interview, you just ask questions.
Here’s a 45 second Tik Tok that unintentionally gets at the core idea of a Job to be Done.
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Now for my own, more in depth example, let’s look at a specific piece of the fintech market. Kelsus is focusing its software development service offerings on fintech, so I have payments and banking on my mind quite a bit lately.
Imagine you’re trying to understand the Buy Now Pay Later (BNPL) market. These are companies that offer small loans against a single purchase so that customers can pay for the purchase in a few installments. Intuitively, this is a service that would appeal to people living paycheck to paycheck who either don’t want to take on more credit card debt or don’t have it available to them.
Say you’re doing a Jobs to be Done interview with someone named Dennis from Colorado that bought a mountain bike with a BNPL service. Early on, you learn from Dennis that he doesn’t have an issue with credit card debt and that his family have lots of disposable income. This interview already doesn’t match your intuition about the likely circumstances of a person that would use the service.
You continue asking questions, and you learn that Dennis really likes biking, and he goes for a ride, always posted to Strava, nearly every day of the week for seven months of the year. You also discover that he spends a fair amount of time reading Pink Bike and knows exactly which new bikes are getting good reviews.
Dennis admits that he also got a bike last year, and that his wife gives him a hard time for having too many toys. He sounds sheepish as he says that the bike he got last year is great for difficult technical riding, but that he wanted something a little lighter that will help him venture further from home during the window of time he has to ride.
The bike he paid for with BNPL, he had configured and put into his cart 5 times before finally buying it. Then the truth comes out. He used BNPL because by spreading the payment out over 8 installments, he could keep each installment low enough that it wouldn’t trigger a difficult conversation with his wife about buying another bike.
Unexpectedly, the Job to be Done wasn’t to make a way for Dennis to buy something he couldn’t immediately afford, it was to make a way for Dennis to secretly buy a bike. He got a black one so that she wouldn’t even notice it among the other black bikes in the garage. This realization opens a whole new set of possibilities for payments services (albeit possibilities that aren’t in the best interests of happy families). What types of payments services can we invent to keep our secret purchases secret? Terrible, yes, but instructive.
If that example didn’t quite do the trick for you, have a look at Clay Christensen himself talking through Jobs to be Done interviews on people that bought McDonald’s shakes. His terminology is a little distracting because he refers to the shake purchaser as “hiring a product” to do the job of keeping them full until 10 in the morning, but we can forgive him for being esoteric.
With this Jobs to be Done theory, you can discover a way to do marketplace differentiation that actually works. It’s entrepreneurial steroids.
If you want to try it yourself, you should probably study a bit more than what I’ve written here. You can listen to an actual, real life Jobs to be Done interview with a guy that seemingly impulse bought a mattress during a 45 minute family run to Costco. Nathan shared this with the class, and it’s really instructive for the types of interruptions and questions that work to get at the heart of how people make purchasing decisions.
This week I have another installment of my market analysis class, so I’ll likely write about it again next week. Doing this writing is helping me solidify what I’m learning, and hopefully it’s useful to you too.
Thanks for reading!