The Power of Designing Products for Customers You Don’t Have Yet5 September, 2016 / Articles
When my daughters were little, each time one of them received a birthday or holiday card from their grandparents with a crisp $20 in it, I silently vowed that I would finally get around to opening a savings account for them at our local bank so they could start learning the virtues of saving and compounded interest. But routinely, months later, I’d stumble across the long-forgotten money, still in the card, that I’d stowed in a bag or a desk drawer. Opening an account for a child is a hassle. Minimum balances, virtually no interest accumulation. I wasn’t sure it was actually worth it.
For a brief while, my husband and I went to the extraordinary lengths of setting up a symbolic “Bank of Daddy” so we could at least demonstrate the power of compound interest. Every month we’d credit their allowance to the account and make a big show of calculating the interest they had accrued. But to make that point, we had to pay an interest rate far beyond what real banks paid. That got old quickly. And after a while, we stopped playing Bank of Daddy and did nothing.
It’s no surprise that many people have given up on savings accounts altogether. For decades, traditional banks had made it clear that the segment of “low net worth” individuals who wanted a simple savings accounts was undesirable. They were unprofitable in banks’ existing business models. So the banks did everything in their power to put them off: Requiring minimum balances, charging fees for every conceivable service and imposing penalties for any violation of the “rules.” Banks saw little upside in encouraging ordinary people to save.
Enter ING Direct, which looked at the market through a new lens. There were many people like me for whom saving money in small increments was not the primary reason for opening an account for the children. I wanted to feel like good parent by helping my children understand the power of saving toward goals. But without good options for doing that, I ended up doing nothing – what Harvard Business School professor Clayton Christensen calls “non consumption.” But as Christensen observes, finding pockets of non consumption is a ripe opportunity for innovation.
By focusing in on what people like me were trying to achieve with a savings account – the “job to be done” a concept Christensen explores in the September issue of HBR – ING Direct saw potential where other banks saw low profit margins. ING Direct created an incredibly simple offering: The bank offered a few savings accounts, a handful of certificates of deposit, and mutual funds. The savings accounts have no deposit minimums — you can open an account with a single dollar if you want. It’s fast, convenient, and more effective than jamming tens and twenties into a drawer and forgetting about them — or calculating outsized interest rates at the Bank of Daddy. But people like me “hired” the bank for a very specific job: To help us feel like good parents by demonstrating the power of saving to our children.
By creating offerings that address consumers’ jobs to be done, ING Direct swiftly became the fastest-growing bank in the United States. Traditional banks should have had all the tools to create new products for consumers who were frustrated with their options, but they focused instead on segmenting customers more or less into “wealthy” or “not worth it.” In 2012 ING Direct was sold to Capital One for $9 billion. My daughters, now teens, are both deft at managing their own savings in a Capital One account and I finally feel like I’ve completed the job to be done that I intended to do all those years ago.
Too often, organizations are myopic. They only look for growth in the customer base they already serve. But by looking for nonconsumers and exploring what they are trying to accomplish — rather than focusing on their personal characteristics, purchasing patterns, or product preferences — organizations can discover the potential for new growth.
Another example is found at Southern New Hampshire University, which is also explored in Christensen’s recent article (I’m one of the co-authors on the piece). SNHU president Paul Leblanc was charged with steering the university through the 2008 recession, when growth looked bleak. The seventy-year-old college was relatively unknown. Enrollment numbers hadn’t moved in decades. So where was this growth supposed to come from?
You can’t create growth out of nothing. Or can you?
When LeBlanc reframed his challenge from competing for the usual-suspect applicants (graduating teens) to attracting the millions of aspiring learners (online students looking to earn their degree or professionals looking to develop their credentials) who choose to do nothing, the landscape suddenly seemed far more fertile. Rather than fight the same old battle with long-established competitors, LeBlanc realized SNHU could appeal to a very different aspiring adult-learner segment with a distinct job to be done, and a woefully unmet need.
For SNHU, the key was to pivot from a traditional “product lines” view of the marketplace to a jobs-to-be-done perspective. That shift made all the difference. Instead of continuing the benign neglect of its distance-learning division, the university has nurtured and invested in it to support the goals of later-life students who want to earn their degree from the comfort of their kitchen table after the kids have gone to bed or early morning before heading out to a long day at work. That’s meant changing everything from how SNHU responds to queries of interest (the goal is to do so within minutes) to the speed with which it puts together financial packages and determines credits for previous work to the flexibility professors allow in completing assignments.
Getting innovation right doesn’t have to be a crap shoot. When you deeply explore what consumers are actually trying to achieve, opportunity may appear where none seemed possible. With that shift in perspective, you can often predict, confidently, what products or services consumers are likely to hire to accomplish their job to be done.