Dan Paikowsky
Urban Co living An Innovation Success Story New Markets Insights


Between 2008 and 2018, average rents across the US rose by 34%, roughly four and a half times the 7.4% growth in median income. America’s larger coastal cities have been affected disproportionately, with rental prices driven upwards by an influx of college graduates choosing to forgo life in the suburbs in favor of urban centers and their attendant amenities. In response to the rising rents, we are witnessing a renaissance in the utilization of urban space, exemplified by the explosion in popularity of co-working spaces.

A similar phenomenon, driven by demand for a new model of living space and cropping up in cities around the globe, is the co-living community. The largest of these is a company based in New York named Common. By leveraging three key principles of innovation, Common has built a rapidly expanding business, realizing both higher income per square foot than traditional properties and upwards of 99% occupancy rates — a holy grail for developers and property managers. While Common’s success was in the real estate sector, companies across industries would do well to pay attention to Common’s success and apply these same strategies to innovation efforts in their own domain.

Breakthrough perspective

Finding a new solution to an old problem requires a view from a fresh perspective. For a significant demographic within the rental market, young professionals moving to a new city, the traditional housing model presents a number of unfulfilled customer Jobs to be Done — the underlying tasks that consumers are trying to accomplish. For the average urban renter, these jobs include tasks such as easily accessing public transit, or having flexibility within a lease agreement to allow for changing circumstances. By developing an understanding of customer jobs, Common was able to gain deep insight into what motivates their customers and drives their behavior, allowing them to solve key pain points by reinventing a long-existing product through a customer-centric lens.

Not only does Common fulfill its customers Jobs to be Done, but it does so at an affordable price point, renting single rooms as part of a 12-room suite. While at first blush, living with 11 roommates may sound like a negative, in practice this aspect proves to be a strong selling point for millennial city dwellers. Why? Because on top of the functional jobs a powerful emotional job is fulfilled — a sense of communal belonging. This simple shift in perspective highlights how a deep understanding of what truly motivates customers and what they are trying to accomplish can result in the reimagination of a problem as an opportunity to serve unmet needs.

Laser focus on target customers

In order to successfully uncover customer jobs to be done, it’s first necessary to have a clear definition of your target customer. Making a conscious decision on which segments to pursue creates the ability to uncover and meet their needs, while providing a stalwart defense against scope creep and irrelevant opinions. While Common’s customer base finds their offering to hold a strong value proposition, many renters would be categorically uninterested in Common’s communal style living space. Had Common compromised its focus and tried to provide a solution that appealed to everyone, it likely wouldn’t have strayed too far from the traditional housing model. Successful innovation requires strategic decision-making, necessitating an equally clear choice on which parts of the market NOT to pursue.

In Common’s case, a laser focus on its target market allowed it to not only exceed customers’ expectations, but to do so while reducing prices. This highlights the value of a Jobs-focused approach to designing solutions around customer needs. By focusing on only what matters to your target customers and nothing more, expectations can be surpassed while offering what seems to be less to external parties. When it comes to Costovation, innovation that significantly compresses costs while still wowing customers, the needs of the few truly do outweigh the needs of the many.

Ground-up design

The next step, after clearly defining your target customers and the jobs to be done that are important to them, is the art of designing a solution that best meets their needs. While sometimes existing products or services can be tweaked slightly, or marketed differently, this type of approach rarely leads to market disrupting innovation. Fulfilling customer jobs in entirely new ways requires some thought, but a careful examination of the business, product, and operating environment, can provide clues on opportunities.

Common has designed both its living facilities and business model from the ground up in order to emphasize shared space over personal, allowing the company to realize higher revenues per square foot while its tenants pay less and receive more. The design of these units didn’t just stop at the physical facility however — it also extended to cleaning services, provision of basic household necessities, and Common’s community app. These facets may come across as “nice to haves” but are actually well thought out methods for minimizing points of friction between cohabitants. Every aspect of Common’s product was tailor made to facilitate its business model and meet the specific needs of its customers.

Summary

While the next few years will bear witness to whether Common’s style of living becomes truly commonplace, one thing is certain — there is nothing common about the results thus far. Those who wish to achieve similarly outsized success should think about how they can leverage these same three principles in their own efforts to deliver outstanding new products and exceed customer expectations.

1. Gain breakthrough perspective by taking a problem-solving approach

Gaining a deep understanding of your customers’ underlying Jobs to be Done can unearth unmet needs and provide fertile grounds for cultivating new ways to meet them.

2. Develop a laser focus on your target customers

Perhaps equally as important — determine to forgo pursuit of customers that are out of scope. An overly broad definition of a market can effectively be a failure to define one.

3. Design your offering from the ground up to deliver holistic value

Challenge traditional thinking around how to best configure your business, product, and customer experience in order to most effectively drive value to your customers.

Dan Paikowsky is a strategy and innovation consultant at New Markets Advisors. He helps companies understand customer needs, bring new products to market, and develop plans for growth.



Source link