(2023-06-04) Cohen Using The Needs Stack For Competitive Strategy

Jason Cohen: Using the Needs Stack for competitive business strategy. Charlie’s life ambition is not “to buy infrastructure.” In fact, it’s a means to and end. What Charlie really wants is to have a functioning WordPress-based website

Getting the infrastructure is a means to an end, rather than the end itself; in this sense, it’s a “need” but it’s lower in the “stack.”

This might sound like a verbose restatement of Jobs to be Done or Five Why’s, but there’s a strategic competitive insight lurking here, which companies often fail to appreciate, at their peril:

Charlie never wanted to set up infrastructure, and still doesn’t. Charlie wants a WordPress site. Therefore, a company who provides the higher-level need of “WordPress site” makes the lower-level need of “infrastructure” obsolete.

But you can’t stop there. That’s the trouble—you always want to stop when you’ve reached the level you operate on, but there’s always another level.

Instagram’s real product isn’t photos; it’s likes. —Alex Danco

It’s not Charlie’s life ambition to make a WordPress site; this is just a means to an end. What Charlie really wants is to have a personal website for content and self-promotion.

there are alternatives that target this higher-level need. Wix and Squarespace both let you create websites without WordPress

Does this mean WP Engine no longer has a business? No

These alternatives to WordPress certainly have advantages, but they are worse than WordPress for long-form content and for customizability. For this reason, they might not be right for Charlie. But they are competitors

The pattern here is the next insight: Up the stack, customers achieve their end-goal faster; down the stack, customers have more flexibility and customization.

But wait… once again “having a personal website” is not Charlie’s life ambition, but rather just a means to an end. Charlie really wants a a book deal.

The new layer brings new alternative solutions. There are companies like Substack

Substack doesn’t automatically win, because WordPress is better than Substack in many ways.

This again exemplifies the pattern that software at higher levels of the Needs Stack have fewer features and less customization than software lower on the Stack. In exchange for these limitations, their focus on the higher-level Need means it’s easier for the customer to achieve that Need.

while Charlie wants a book deal as a signifier of popularity and success, it’s not Charlie’s life ambition. Charlie really wants to become a famous speaker

Charlie’s plan isn’t bad, but what if it were possible to skip the website and years of writing and self-promotion and the book deal and the two years of labor creating the book and directly become the next Tony Robbins? It’s not impossible; there are speaker bureaus and online services like SpeakerMatch that help you find gigs and facilitate the transaction.

The moral of the story is: You need to understand the Needs Stack of your target customers

Already you can see how this will help you think about positioning and features; let’s see what else it helps you to do.

“Sell benefits, not features” marketers have told us

yet, does an Engineer looking for a database infrastructure solution really want to be told “saves time” or do they want to see specs and features? (A: Specs and features.)

Charlie is not constantly and consciously thinking “I gotta become Tony Robbins,” even though that’s the top of their Needs Stack. Charlie is thinking at some other level of the stack at any given moment, for example “I gotta get some content online.”

Google searches are a good proxy for “what level of the stack are potential customers operating at right now?”

If someone has in their head “get a WordPress site,” you want to meet them where they are

That’s the part where you talk about features.

However, benefits still have a role to play

So, you can sell the benefits that are one level higher on the stack.

if you’re Substack, you can’t say “customizable” because that’s not what the product is

but you can speak to the product “getting eyeballs.” So, that message could be “Grow your own audience with our turn-key newsletter platform.2”

Position lower levels as irrelevant

the idea is to make all levels below that irrelevant, by focusing only on your benefits:

If products targeted at one level disrupt the products below them, there’s an obvious strategic conclusion: You could disrupt yourself and your competitors by moving up the hierarchy.

There are huge barriers to accomplishing this. The barriers are so large, companies almost never overcome them

The next level is a different product, and a different business.

The next level isn’t possible. It’s not clear that one can build a product that fulfills the promise to get someone a substantial following

The next level targets a smaller market. Few people share Charlie’s Needs Stack exactly.

Since a full pivot is unlikely to succeed, there are other ways to build a strategy that partially climbs the hierarchy:

Create sub-brands / products. Keep the original business going, and launch “vertical” or “niche” products

Add features without fully committing to the next level. Perhaps you can’t completely pivot to a product that promises subscriber-growth, but you could create an add-on product that helps someone do that

Better marketing. Address the need with words instead of features. Without “promising” results, you can help, educate, and lead in that area.

Still, while this advice is good for most organizations who cannot completely move up the hierarchy, there are examples of fantastic businesses that succeeded exactly because they successfully made the transition

For example, all of the case studies given in the “Emotional vs Functional” chapter of Blue Ocean Strategy, such as Cemex selling “build an addition to your house, for your family” instead of just selling cement or Starbucks selling a lifestyle experience rather than B-grade coffee.

It’s strategic to measure further up the stack

Metrics at the level the customer is actively thinking about are useful to measure whether our Product is delivering on its direct promise

The perennial question: Which few key metrics measure whether the customer is deriving value from our product, and thus predict whether they’ll stay a customer? And beyond that, become a vocal advocate? The Needs Stack helps us uncover these more strategic metrics.

Metrics from the bottom of the Stack measure whether we’re operating well

the very next level up could be a critical way to measure value and to understand whether customers will be happy in the long run.

If a customer of Shopify successfully creates a store, the product of “have a store online” is succeeding

but what if no one buys their wares? That customer will probably churn (retention), even though the software delivered on its promise.

Indeed, Shopify has enormous cancellation rates that would sink most companies; they survive because the ones that stay, grow a lot. Because they have so many inbound new customers, they can manage around the fact that only 34% stick around for even one year.

this is an example where the next level up is vital, but Shopify cannot control it. However, they can measure it, and help

*Our direct goals are often simple: Sign up more customers, get them to activate on the product, reduce churn, reduce support tickets, reduce costs. All of that is important, but none of it creates a higher purpose.

What’s it all for? Why should we even bother?*

Many companies can’t answer the question

Purpose can be found in the higher levels of the Needs Stack.

Tell those stories. On the website and internally. Celebrate with your team when this actually happens for a customer, because that is what it’s all about. Those stories are why we should care.