To Be Innovative, You Must Look into the Future

Definition of a market: “A market is a place where two parties can gather to facilitate the exchange of goods and services.” — Investopedia

Notice that this definition is based on existing products and services. It should be no surprise then that many executives try to size the market for new offerings according to the historical revenue of existing products and services. But this creates some challenges.

Historical revenue of current products may help you size a market if your new offering is an incremental improvement to current products. But what if your offering is new-to-the-world, and there is nothing like it on the market today?

For innovation, you don’t want to look backwards at the historical revenue of current products; you want to look forward into the future to size the market and determine the demand for your new offering, even though it doesn’t exist yet. Impossible? Not at all.

This was exactly the challenge that entrepreneur Curtis Crocker faced when he decided to partner with Ohio State University’s William Marras, Ph.D., and his team at Spine Research Institute. Marras and his team had developed a clinical lumbar motion monitoring device that prevents lower back injury and improves the efficacy of lower back treatments. There is nothing like it on the market.

To raise money to further develop and commercialize the product within his new company, SpineDynx, Curtis had to demonstrate to investors that there was a sufficient market for it. As Crocker said, “The challenge we faced was how to determine the size of the market and the potential demand for this new technology.”

Crocker approached me to help him with this challenge because he knew that, as a practitioner of the jobs-to-be-done (JTBD) innovation approach, I could offer a different way to size his market and determine demand.

The jobs-to-be-done innovation approach is based on the insight that people “hire” products and services to get jobs done. When we have a job that we want to do, we look around for a product or service to hire to help us do it. For example, CFOs hire public accountants to prepare taxes, doctors hire stethoscopes to listen to patients’ heart and lungs, and people hire online degree programs to advance their careers.

Companies don’t create customer jobs; they identify them, determine where customers struggle to get them done, and then help customers get them done better than existing offerings. Every successful new product nails an important unsatisfied job to be done.

When it comes to innovation, a better definition of a market is “A group of people who want to get the same job done.” This is a non-financial, non-product-oriented definition that enables companies to define markets from the customers’ point of view, and thereby look into the future to size markets and determine the demand for offerings that don’t even exist yet.

An attractive market is one in which:

• There are many people who want to execute the same job frequently
• They are dissatisfied with current solutions
• They will pay generously to get the job done perfectly

For SpineDynx, we redefined the market as “Healthcare practitioners who treat lower back disorders.” We found excellent information to size the market in The Bureau of Labor Statistics, such as:

• The type of healthcare providers who treat lower back disorders, e.g., physical therapists, general practitioners, rehab physicians, etc.
• The total number of such healthcare providers in the U.S.
• The average number of patients these providers treat each year
• The percentage of patients they treat with lower back disorders

This information, along with some assumptions about fees and use rates, enabled Crocker to demonstrate that the total addressable market for the device is over $10 billion even though there is nothing like it on the market today. As Crocker mentioned, “The jobs to be done approach gave us a different lens through which to size the market and demonstrate demand.” He got the $1,000,000 he was seeking.

Every entrepreneur should consider this JTBD approach for sizing the market and demand for new-to-the-world offerings. If your target market is large enough, and you can help your target customers get an important unsatisfied job done better than current solutions, you can be confident that customers will value your new offering, too.  

Are you wondering how to turn innovation and growth into a repeatable business process that consistently delivers results? Let’s talk.

(A version of this article was published in The Business Journals).