imgres1This is a simple, but profound question.  It’s often a helpful question to ask when thinking about value and pricing for an existing or new offering.  If you’re in a business that has historically sold products and is technically orientated, many people will answer that question by saying “we sell widgets.” They can often go into great detail about the features of those widgets and how the features are better than the features of competing widgets.

In business-to-business, the customer doesn’t buy a widget. In the words of Clay Christensen, they are “hiring” your widget or offering to get a “job” done for them. He defines value or value proposition as “a product or service that helps customers do more effectively, conveniently and affordably a job they’ve been trying to do.” I think this is also a helpful way to think about value and pricing. At a high-level, the jobs businesses are trying to get done are simple. These jobs are usually centered on reducing costs, growing revenue, saving time, improving quality, minimizing risk, or improving compliance to regulations or laws.

Take the example of a hospital bed. When a hospital buys a bed, what “jobs” are they “hiring” the hospital bed to do. Obviously, the basic job is to provide a safe and comfortable place for patients to recover. Hill Rom, a manufacturer of hospital beds, took a variety of approaches to study what “jobs” hospital beds are hired or could be hired to do. The result was observations that nurses spend an inordinate amount of time on non-value added activities not related to direct patient care. This included picking up things, adjusting the bed, changing the TV channel, etc. The company differentiated its bed by building in many functions that allow hospitals to free up nurses’ time. Since nursing costs represent a significant portion of hospital costs, the company was able to position the bed as a productivity tool to save time and money. If you’ve seen one of these new beds recently, I’m sure you would agree that they are amazing technology.

The reason companies often make mistakes in pricing, value, and innovation is that they fail to understand the real “job” the customer is trying to get done and what it is worth to solve that “job” for the customer. When value and pricing are viewed through a “product lens” as opposed to a “job lens”, there’s often missed opportunities. Viewing value and pricing through a “product lens” can also result in under or over-valuing the offering. So, next time you’re trying to think through a pricing or value problem, ask yourself, what business are we really in and what “jobs” are our customers trying to get done?