first principles

“We don’t sell saddles here” (The job to be done framework)

jitha 2 Comments
[Note: I shared this mental model with my email subscribers on Dec 4, 2016. If you want to receive a new mental model every week, join the club.]

 

At the beach, I saw a guy who sells fishing tackle. I asked him, “My God, they’re purple and green. Do fish really take these lures?” He said, “Mister, I don’t sell to fish.” – Charlie Munger, Poor Charlie’s Almanack

What it is:

Selling is a huge part of what we do in our lives. Whether convincing our teams to do a particular task, convincing customers to buy our new products, or even convincing our children to do their chores. We’re selling every day.

But all-too-often, we misunderstand the fundamental truth about selling: We’re not selling what we have. The buyer is buying what she needs.

“People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!” – Theodore Levitt, Harvard Business School

Every customer “hires” your product for a “job to be done”. The customer wants a hole in the wall. So she buys a drill. And when you buy a Rolex, it’s not because you want to tell the time.

And why do you think people buy a milkshake every morning en route to work? As McDonald’s found out, it’s not for the taste. It’s to make their boring work commutes more interesting.

Stewart Butterfield (Founder, Slack) captures the essence of this in his 2013 memo to his team – “We don’t sell saddles here”. You’re not selling a feature. You’re delivering a benefit to the customer.

Subtle difference, huge implications.

job to be done

We don’t sell saddles here. We sell a better way to ride. That’s the job to be done.

Examples in business:

  • When selling, we focus too much on talking about our product’s cool features. Instead, listen first. Understand what the customer needs.
  • “Solution looking for a problem”. Another instance of the “hammer looking for a nail” tendency we spoke about last week. We start with a product idea, rather than first seeing what customers need.
  • We define our competitors too narrowly. We see others who offer the same solution as our rivals. But that’s upside down. Our competitors are others who solve the same problem. Even if their solutions are different.

Who does McDonald’s milkshake compete with? Not just Burger King’s milkshakes. Not just other breakfast items. Given the job that customers have hired it to do (make boring commutes interesting), it also competes with FM radio!

Apple is a great example of the power of this framework. The job-to-be-done is quite clear with the iPod, the iPhone, and the iPad. But Apple is struggling to find jobs for the Apple Watch and Apple Pay.

 

Rules to follow:

  1. Start with the customer. Even before you build your product, get out of the building. Talk to customers. Identify what jobs they need done. How you can help?
  2. When selling, focus on benefits, not on features. Remember – you’re not selling saddles. Your customer is buying a better way to ride.
  3. Always think from your customer’s point of view. You’re not selling to her. You’re working with her, helping her solve a problem. You’re on the same team.
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Further Reading:

 

Filed Under: Sales & Marketing

The Map is not the Territory

jitha 3 Comments
[Note: I shared this mental model with my email subscribers on Nov 20, 2016. If you want to receive a new mental model every week, join the club.]

"This isn't on the map!"

What it is:

We use maps, principles, mental models, learnings from experience, etc. to help us navigate the world around us. But it’s important to remind ourselves – the map is not the territory.

  • The map doesn’t include every feature of the territory. Even a very detailed map of London won’t include every thin street.
  • The territory is different: Sounds banal, but a map of London won’t help at all, if you’re in Mumbai.
  • The territory may have changed. An 1850 map of London won’t help you in 2016 London.

This sounds trite, but we often forget this, as we see in the following examples.

 

Examples in business:

  • Just because there’s a formula for something doesn’t mean the formula is perfect. The Black-Scholes option pricing equation bankrupted Scholes’ hedge fund. And, as Taleb says, the misplaced concreteness of Value-at-Risk has caused a lot of financial crashes.

When you hear someone say, “This is how we did it in my previous company.”, tread carefully.

 

Rules to follow:

  1. Start from first principles. Always begin with, “What do we know to be absolutely true?”
  2. Beware of false rigor. Just because something is described concretely doesn’t mean it is concrete.
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Further reading:

 

Linked to: First principles thinking

Filed Under: Decision-making

Google’s mistake, and the importance of thinking from first principles

jitha 1 Comment
[Note: I shared this mental model with my email subscribers on Oct 23, 2016. If you want to receive a new mental model every week, join the club.]

 

Who do you think will win the war between Google and Apple?

That was a trick question. There really doesn’t need to be a war between the two companies.

 

Apple makes money when people buy its products, while Google makes money when people use its services. Apple is a vertical company, while Google is a horizontal player.

But don’t feel bad for missing the trick. Google missed it too, when they framed the fight as Google vs. iPhone. When it was really Samsung vs. iPhone.

 

Why did they make this mistake? Why did they, for example, release turn-by-turn navigation on Maps only for Android, and give Apple a reason to launch its own Maps?

Start with first principles.

Didn’t think from first principles

As Ben Thompson explains in Google and the Limits of Strategy, they got too caught up in the Android-iPhone us-them framing, without realizing that they’re fundamentally different companies, with no need to compete!

Mike McCue (CEO, Flipboard) highlights the importance of such first-principles thinking from his own experience, in The Most Powerful Lesson in Business.

Elon Musk used this thinking tool too, to reduce the cost of building a rocket. By 98%!!

 

Key Learning:

When making an important decision, examine your beliefs first. Start with a simple question: “What do we know to be absolutely true?”

[fancy_box id=5][content_upgrade id=606]Want to get new mental models straight to your inbox? The next one arrives this Sunday – don’t miss it![/content_upgrade][/fancy_box] [Aside: First-principles thinking is useful when raising capital for your startup too, as I mention in Fundraising Mistake #7: Describing your startup as “Uber of X”]

 

Linked to: The Map is not the Territory

Filed Under: Decision-making