On what business you’re in

A question of life and death for your company

tl;dr: The conflict between the concepts of “jobs to be done” und “core competencies” can be resolved by conceiving of the former as a subset of the latter. This way, core competencies are the dominant determinant of what business a company is in. Based on this concept companies have a much better strategic foundation to achieve survival in the face of change.

What business are you in? Easy question? Not really.

To put it another way: Do you know how to balance customer-orientation and core competencies? Have you ever thought about it? I find that to be quite a hard question.

It started with Theodore Levitt’s article in the Harvard Business Review: “Marketing Myopia”. In this article he argued that companies are too focused on their products and on themselves in general.

Here’s a quote about the myopic thinking of petrol companies that reads quite recent, even though it is from 1960:

“We are now seeing extraordinary new developments in fuel systems specifically designed to power automobiles. Not only are these developments concentrated in firms outside the petroleum industry, but petroleum is almost systematically ignoring them, securely content in its wedded bliss to oil. It is the story of the kerosene lamp versus the incandescent lamp all over again. Oil is trying to improve hydrocarbon fuels rather than develop any fuels best suited to the needs of their users, whether or not made in different ways and with different raw materials from oil.”

Marketing Myopia is a story about change. How industries change and how companies can adapt to this change. The recommendation is to regard oneself to be not in the business of producing a certain kind of product but of delivering a certain kind of service.

To say it in Clayton Christensen’s terms: What is the job to be done (JTBD)? What are the jobs people hire your products to do?

Another quote from Levitt is spot on and can be directly applied to the current state of the traditional automobile industry:

“The classic example of this is the buggy whip industry. No amount of product improvement could stave off its death sentence. But had the industry defined itself as being in the transportation business rather than in the buggy whip business, it might have survived.”

The lesson to be learned: be customer-oriented. Embrace change as new ways to do the jobs your customers hire you for. Don’t focus on the materials, processes, or knowledge you currently have. Don’t look from the inside of the company outwards. Take an outside-in perspective.

But! There’s always a but. Why does it make intuitively so much sense to rely on one’s actual competencies? Are companies completely diluted when they try to leverage their strengths, their differentiating materials, processes, and knowledge?

C.K. Prahalad and Gary Hamel argue in their 1990 article in the Harvard Business Review “The core competence of the corporation” that, when it comes to the question in which business or businesses a corporation is in, a company should first look inwards and find its core competencies. They say:

“The diversified corporation is a large tree. The trunk and major limbs are core products, the smaller branches are business units; the leaves, flowers, and fruit are end products. The root system that provides nourishment, sustenance, and stability is the core competence. You can miss the strength of competitors by looking only at their end products, in the same way you miss the strength of a tree if you look only at its leaves.”

This time the focal-point is rather on diversification than on change, but the underlying questions stays the same: What business are you in? The authors argue that the answer can’t be found by looking at their different end-products as distinct business-units but to concentrate on the common strengths that can be leveraged across all markets.

Such a perspective made it possible for a company like 3M to compete in many different markets like office supplies, photography, and tools & equipment:?

?“Consider 3M’s competence with sticky tape. In dreaming up businesses as diverse as ′Postit` notes, magnetic tape, photographic film, pressure-sensitive tapes, and coated abrasives, the company has brought to bear widely shared competencies in substrates, coatings, and adhesives and devised various ways to combine them.”

So, what business is 3M in? In the adhesives and coatings business? Or in the stationery, photography, and carpentry business? Following the outside-in perspective, 3Ms should start thinking about digital collaboration tools like Mural or Miro which may supersede paper Post-its and whiteboards.

Yet, this seems to make no sense to a company like 3M. I as a consumer wouldn’t really be comfortable if the post-it company came round to making software for digital collaboration. I wouldn’t believe they had the competence to do so.

This, I believe, is the crucial question to answer, if you want to know, what business you are in. Where do have the most competence – in the eyes of the consumer. Are you an authority when it comes to a job to be done? For example, when it comes to collaboration in the workplace? I wouldn’t regard 3M to be an authority here, but probably Ideo, the design-thinking company. If they came out with a collaboration software, I would believe that it can do the job.

If you are not an authority on jobs to be done, you should at least be an authority on your core competencies. If you manufacture the best adhesives, that’s good enough. Make adhesives for all kinds of jobs to be done. For offices, for handymen, for industrial application etc.

So far, the question seems to boil down to an either-or decision. But is that really so?

I want to posit that market-competence or JTBD-competence is just one among all the possible core competencies. It may be the most important one for most companies. And it’s certainly a competence every company should have to a certain degree. But I see market-orientation as a possible subset of core competencies.

So, what about the petroleum companies and the buggy whip companies? Both are probably too much of an expert of their product and not authority enough regarding the jobs they are hired to do. Market-orientation or customer-orientation were not their core competencies. That doesn’t mean, though, their death is or was inevitable. Maybe the core competence of a petroleum company is drilling in the ground, logistics of liquids, chemical refinement of substances. And maybe there are many relevant jobs to be done, for which those services could be hired.

Something similar holds for the buggy whip. The individual whip manufacturer didn’t have to pivot into automobile part manufacturing to survive. It suffices that he specializes in the best whips and conquers other markets than transportation. Leisure horse-back riding, for example. Fun fact, that’s exactly what happened, according to a New York Times article from 2010:

“Westfield, Mass., still known as “Whip City,” once had more than 40 businesses that made whips, tools and carriage parts. Today, only Westfield Whip Manufacturing, founded in 1884, remains. Although it produces buggy whips now called carriage whips most of its whips and crops, called “bats,” are for equestrian activities like dressage and jumping.”

To wrap this up: Based on this reconciliation of “jobs to be done” and “core competencies” the car manufacturers of today don’t necessarily have to invest in other transportation solutions or into autonomous driving. For BMW for example it may make sense to invest, instead, in race-tracks. Their core competence is, presumably, “sheer driving pleasure”. It’s neither alternative energy solutions, nor artificial intelligence, nor anything in that spectrum. I wouldn’t buy an electric autonomous car from BMW. I’d rather buy it from Tesla or Google. But if BMW offered me an automotive theme park, that would be something I’d buy.

Would you?