This is part two of a five part series. If you haven’t already, start with the Introduction to Priority Mapping.
I love the simplicity of the Squares grid. I find it’s such an easy way to visualize what we want and don’t want.
Too bad life isn’t so simple. The 2×2 view gets you in the right ballpark but leaves too much room for uncertainty. If you want to align your team on your strategy, you need to be specific and for that we need a better language.
Where do you have an unfair advantage?
By 2017, Uber was the clear leader in the market, with Lyft a distant second. Who would have thought there was room for not one, but two new unicorns to be created?
Hello Lime and Bird.
Turns out the sweet spot for Uber was between 1 and 100 kilometers. Anything more, you’re better off owning or renting a car. Anything less and you were better off walking. This opened up the opportunity for Lime and Bird to look at the market through a different lens where their on-demand scooters had an unfair advantage.
Squares are more than just verticals and demographics
When companies think about segmentation, most think along a single dimension like industry vertical or customer demographics. Lime and Bird found their market by segmenting based on distance.
You can start defining your Squares with 3 simple questions:
- Who are your customers?
- What do you help them do?
- How do they do that today?
Who, What and How also just happen to define the specifics of your vision. Who are your customers? What do you help them do? How do they do that today? describe your customer segments, the customer problems you’re solving and their current solutions.
Introducing Lenses and Filters – we needed a new language to describe the different ways to define Squares
The goal is to break your overall market down into smaller Squares to better align your team. Lenses are a way to view your market. Filters are the optional views to reduce the size of your market and are the building blocks of Squares.
Each Lens represents one hundred percent of the market. Each Filter only represents a portion of the market. And if you add up all of the Filters, you get one hundred percent of the market when looking through that Lens.
Squares are defined by multiple Lenses & Filters
On the surface, big markets look uniform and all competitors look the same. But we all know that’s not true. That’s because markets can be looked at through multiple Lenses.
The markets for Uber, Lime and Bird can all be defined through the same lenses of geography, income and distance. And all Lenses, with all Filters represents the entire market.
It’s the Filters that create opportunities for different competitors. In 2017, Uber’s distance Filter was between 1 and 100 kilometers while Lime and Bird focused on the zero to 1 kilometer Filter.
Turning Filters on and off lets you describe your Squares in more and more details to better align your team.
Who are your customers?
This is where most companies start when segmenting their market. Your answers generally describe geography, industry, demographic or psychographic attributes.
You might describe geography attributes as country, city or population. Industry as vertical, company size or number of employees. Demographics as age, gender or income. Psychographic as lifestyle, interests or beliefs.
But that’s just the start. There’s no one answer, only that multiple Lenses apply at the same time. When Uber launched, you could describe their customers as the tech community in San Francisco that goes to tech events and loves finding new tools to improve their lives.
What do you help them do?
This is where Lime and Bird found their advantage. When describing the problem, your answers generally describe the situations, motivations, actions or expected outcomes.
You might describe situations as an event or the emotional, social and functional context of the problem. You might describe the motivations as desires or expectations of the customer. You might describe actions as before, during or after progress steps and the expected outcomes in terms of money, time or quality. But like above, that’s just the start.
Lime and Bird described the problem by being specific about the distance situation, but the geographic, demographic and psychographic Lenses were also applicable.
How do they do that today?
Faster horses aren’t the problem. Ford in 1903 and Tesla today are solving the same problem, just with different solutions. Your customers are already doing something about their problems today. Your answers generally describe environments, behaviours or other, competing solutions.
You might describe the physical or technical environment the customer has. You might describe the customer’s usage frequency, habits or other behaviours. Or you might describe the other solutions your customers are using to solve their problems today.
In 2008, one of the best ways to find short term rentals was Craigslist and those listings were a major part of how Airbnb defined their initial market.
Uber didn’t launch their Android app until late 2010. That means we can describe their initial market as the tech community in San Francisco that goes to tech events and loves finding new tools to improve their lives, who take taxis between 1 and 100 kilometers and have an iPhone.
Over time you’ll learn about more Lenses & Filters
Those three simple questions will get you started. but you don’t have to worry about finding all your Lenses and Filters right away. You’ll keep adding more over time as you talk to customers, run experiments, analyze data and generally learn more about your market.
Like Squares, Filters can be thought of in 3 simple states
You can have Filters that work, Filters that kind of work and Filters that don’t work yet. Understanding how well you’re doing in each will help you define your Squares.
Also like Squares, Filters can be nearby or far away
It was easier for Uber to take their black cars from San Francisco to Chicago, instead of expanding to the rest of SF with UberX.
What we’re really saying is that looking through the city Lens, the Chicago Filter is closer to the San Francisco Filter and easier to make work.
But if we look through the disposable income Lens, the ‘rest of SF’ Filter is further away from those with ‘lots of disposable income’ and harder to make work since Uber had to launch a whole new product.
Same with the distance Lens. The ‘zero to 1 kilometer‘ Filter is further away than ‘1 to 100 kilometers‘ and also harder to make work since it’s a completely different solution space.
The order of your Lenses tell your growth story
If we looked at Uber only through two Lenses, country and city density, how does the order change their story?
Country first then city density says we want to make all big cities, medium cities and small cities work before entering a new country.
City density first says we want to make big cities work around the world before tackling medium and smaller cities. This is obviously the path Uber chose expanding from SF to Chicago, NY, Paris and Toronto rather than staying in the US and expanding city by city.
So how do you define what works?
Lenses and Filters give you the language to be specific when defining your Squares and describing your strategy from the markets perspective. Now you need to look internally and define what works from your own perspective. You need to define your goals.
Let’s explore Part 3 – How to break down your Goals with Squares.