Six Strategic Machines

We are overwhelmed with the proliferation of management, innovation and strategy frameworks in business.  Is it time to step back and generalise, creating a “stack” for business thinking?

Over the past few years working in strategic consulting I’ve become a firm believer in the benefit of thinking apparatus and tools when developing strategies for organisations.  However, most of the strategy tools we come across are in some way or another “propriety” or branded, we analyse industries with Porter’s five forces or Kim and Mauborgne’s blue ocean framework, we might look at our company’s value chain, we’ll measure performance with a Balanced Scorecard™, or look at innovation with a StageGate innovation system.

While understanding these frameworks is an incredibly important skill for the strategist (and particularly the consultant) as they are usually backed up by years of research and development and practical application through consulting, but the danger with following these frameworks is that they can encourage a  lazy way of thinking about problems and they don’t encourage strategists to develop primary problem-solving skills.

What strategists need is  a toolkit to develop strategy that doesn’t tie them into one proprietry view of their organisation.  I’ve spent a bit of time unsuccessfully looking at whether anyone out there has developed an alternative to off the shelf frameworks but I couldn’t find one.  So I propose a prototype strategy stack (in analogy to the Linux, Apache, MySQL, PHP “LAMP” stack) providing the neccessary machinery for strategists to explore strategy.  This prototype stack comprises of 6 strategic machines, namely:

  • Portfolios
  • Prisms
  • Funnels
  • Cycles
  • Networks
  • Differentials

The Six Strategic Machines

The concept is that when you are looking at a strategic problem within the environment, a corporation, or some sub-section of an organisation you can use these tools individually or in some combination to frame your thinking, explore and develop options, make decisions or develop strategy. In this way, we bypass the rote thinking that is encouraged by proprietary frameworks and develop customised tools for the problem at hand.  Bear in mind this is very much an alpha test of this idea which I’m pretty excited about developing further and I’d love some comments.

I’ll go through each of these components in a little more detail.

Portfolios

The Portfolio: Manage limited resources

One of the primary questions that strategist have to answer is deciding what an organisation is going to do with the limited resources it has at hand.  For example, a corporation will have to choose between operating a number of businesses (and/or developing new ones), developing or maintaining a number of products, and running a suite of potential internal projects.

The portfolio looks at a number of options (businesses, projects or anything) and provides a framework for systematically evaluating these options in relation to each other.  It may be a simple metric such as NPV or IRR that is used, or portfolios may be developed that compare products on multiple dimensions (BCG Matrix is an example here).  The advantage of portfolio thinking is that it encourages businesses to think objectively about multiple options simulteneously, care must obviously be taken to ensure that you are comparing like for like.

Examples. The easiest way to find the fundamental portfolios in an organisation is to look at it from different levels (macro to micro), some examples are:

  • The business portfolio – what businesses does your corporation want to be involved in.
  • The product portfolio – what products do we want to provide in each market
  • More proprietry portfolio models are the BCG Matrix and the GE/McKinsey Grid

Prisms

The Prism: Bring multiple perspectives

The prism machine looks at an issue from a number of set perspectives to improve understanding of the whole, break a problem down, force opposing views and/or deal with compromise.  The classic BCG consulting trick of breaking a problem down to a 2×2 matrix is the beginning of many useful strategic analyses, and many management  and strategy frameworks look at the world through multiple perspectives and can be classified as prisms.

Examples. Some classic prisms are:

  • The Strategy Diamond or Integrated Choices framework looks at strategic options from an arenas, differentiators, vehicles, timing and economic logic perspective
  • The Performance Prism (surprise surprise) looks at performance from a stakeholder satisfaction, stakeholder contribution, strategies, processes and capabilities perspective.
  • SWOT analysis is something of a two layer prism, looking at internal and external perspectives simulteneously with positive and negative attributes developing SWOT (strengths, weaknesses, opportunities, threats)

Funnels

The Funnel: Reduce, filter, prioritise

The funnel machine represents the reduction of some quantity, for example people, products or prospects over some other dimension usually time.  The funnel thinks about these problems in discrete stages, which may mirror some internal process, have some barriers or “gates” that need to be qualified before the quantity in the previous stage makes it to the next.  The great advantages of thinking using a funnel metaphor is that it encourages you to think systematically and process like about things which are probabilistic in nature (although be aware in radical innovation plays) and encourages you to invest in developing a funnel infrastructure that will allow you to get whatever you want out of the end (products, customers, good staff) in a consistent manner.

Examples. There are a few classic examples of how funnels can help strategic thinking:

  • The Innovation Funnel, how products are selected, weaned, developed and commercialised
  • StageGate Product Development process is a proprietry innovation funnel that looks at NPD through a series of stages
  • The marketing funnel – how opportunities are selected, developed and capitalized upon.
  • The HR recruitment process can easily be thought of as a funnel.

I’m going to save talking about three horizons models for another day.

Cycles

The Cycle: Focus on awareness, process and speed

Businesses run to a number of internal and external cycles as they operate and understanding these cycles can be the basis of excellent strategy and operations.  Certain industries (notably construction/property and retail) have strong cyclical tendencies at different time frames and entire industries turn on a cycle of creative destruction.  Internal to organisations there are a number of controllable cycles, where modelling and understanding of these cycles can improve the performance of an organisation.

Examples. some of these examples will be a little operational:

  • The cash-to-cash cycle is one example of a bunch of organisational frameworks that are incredibly important for the profitability (and liquidity) of an organisation.  The inventory cycle is another.
  • Looking at business or economic cycles as a component of competitive and strategic analysis.
  • Porters Value Chain (I’m still unsure whether to put in “process” in this framework/stack as another machine)
  • The product development cycle
  • PDCA or Deming Cycles (Plan, Do, Check, Act)
  • The OODA (observe, orient, decide, and act) loop.  Made famous by fighter pilots and scenario planners alike.

Networks

The Network: Connect, analyse and direct

Networks are one of the primary keys to understanding strategy in the modern era.  The network metaphor has always been present within organisations in the form of hierarchies, and organisations need to learn how to shift past these simple structures to drive connectivity.  Taking the tools of graph theory and network analysis (or simply a whiteboard) the network can be used to discover, design and exploit connections and gaps within organisations, systems, markets and industries and can be effectively applied to many aspects of organisations.

Examples. Some applied strategic examples of a network based framework are:

  • Stephan Lindegaard’s Three Circles for Open Innovation.  Admittedly this one could also be looked at as a combination of a network and a prism (I’ll talk more about combinations at a later date).
  • 5th Gen Innovation actually looks at the evolution of the innovation network (though from a primarily prismatic perspective).
  • Causal Mapping, or in the case of the Balanced Scorecard community, Strategy Maps are a network of associated strategies (this could be combined with the differential below).

There are people out there who know a lot more about SNA and network mapping than I do, I’d love to learn about more network based frameworks.

Differentials

The Differential: Look for and understand tension

Many business problems are associated with tension between two or more states and looking for the most appropriate way of dealing with this tension  The simplest application of the differential is in the application of a gap analysis to a particular problem, resulting in a “we are at A, what is required to get to B”.

The differential, which may be the most challenging machine to use effectively, encourages bimodal or ambidextrous thinking about problems (if someone says cognitive dissonance I may throw something at them).

Examples. Some frameworks I’ve seen which I would classify as a differential are:

  • Marty Neumeier’s Knowing, Making, Doing (here the making is the differential)
  • Gap Analysis (as above)
  • Grenier Curve (crises of growth) could be thought of as a bunch of differentials in a row.
  • Porter’s Generic Strategies (which could also be thought of as a prism, but I think the tension between the three makes it an interesting differential example)

Conclusion

I hope this proposed strategic “stack” will allow a strategist to improve how they think about strategy, make interesting conclusions and perhaps break their dependence on proprietry frameworks.  I should point out that while each of these individual components is useful by itself, they really come into their own when combined together to examine complex problems.

I’m interested in developing this idea further (on this blog hopefully) so I’ll be adding to the framework with new ideas, more elaboration and examples.

So, do you think a strategy “stack” comprising these six machines is a useful tool for thinking strategically?


What’s wrong with digital magazines?

One of the things that I was really excited about when I purchased (well, was lovingly gifted) my iPad was the ability to tap into the new world of digital magazines which was soon to sweep over the tablet world. I checked out the economist, the atlantic, the new yorker and HBR and truthfully was pretty unimpressed by the experience. Really these new magazines haven’t moved any further than the hyperbooks that were bandied around in the early nineties when CD-ROMs first became standard. The only mag I’ve looked at so far that begins to touch on what a digital magazine so far is PROJECT from Virgin and Richard Branson (but that has some pretty big flaws).

Although the potential for these publishing platforms is amazing, but there’s a long way to go. I see three major areas where these electronic magazines need to improve for them to bring the concept of digital magazines in line with (my) expectations. They are: content; community; technology

Content

In today’s web connected world, we’ve become used to a constant flow of content, daily updates and live content yet all digital mazagines that I’ve used so far work purely on a basis of blocks of content, distributed in a periodic “issue” that directly mirrors the format of print.  Why have we translated this metaphor directly into the digital realm?  I do believe in the power of really well written content that by definition will be static (with the exception of comments), but surely there must be some way of incorporating into each issue some live content or topics rather than static reports and articles?

Community

With the exception of the commenting in PROJECT (which unfortunately requires you to jump artificially to another section with no feedback telling you if a comment even exists) none of the digital magazines I’ve played with have any concept of social or community (PROJECT doesn’t have a twitter account WTF!).  Surely, publishers can think about some interesting ways to engage their communities around their content.  I can think of a few ways they could make community important for a lot of content types that are currently static:

  • turn digital cosmopolitan’s surveys into digital ones with some stats to start with (actually do cosmo readers care about statistics?)
  • Product/film/music reviews could include reader stats and comments (I’m sure you could make some money from iTunes here too…)
  • “liking” articles, comments, starring.  You know, things blogs have had for a couple of years now?

Technology

Why does each issue of PROJECT require a 500MB download and take 15 minutes to install?  It’s quicker to walk to a newsagent and buy a copy of Wired than it is to get the digital issue?  If I have 20 issues of magazines in my iPad (assuming I have a 16GB one and some other stuff on there) I’m screwed, and to be honest I don’t really see that much digital whizzbangery and amazing video content.

Platforms like Zinio make it cheap and easy to make digital download apps, they also make it really easy to be lazy with your content technology.  Having a few touchy bits and some daggy embedded video isn’t really mindblowing (I remember seeing such stuff in PDFs about 8 years ago).

Content producers clearly need to start looking at their magazine platforms as true applications, and by putting time, effort and money into these platforms they are sure to see some advantage over their competitors (and maybe even onsell the tech for a tidy profit).  In the meantime though, where the hell is search?

In conclusion, wake up or I’m going back to analogue…

I’m a relatively heavy consumer of content in print, paid and free digital content, yet currently I get more pleasure from reading print magazines than digital. I think content, community and technology is key to making digital magazines work and that publishers need to see that their future is digital and investing in development and innovation on their publishing platforms is going to pay dividends into the future.


Ensparq is Attempting Post a Week in 2011

Over the past year and a bit, ensparq has been a great platform for me to ramble about businessy stuff and attempt to tune up my writing skills and although they are still shoddy I think I’m slowly developing a bit of a voice (whether it’s worth listening to is another story).  As you might know, wordpress has issued a challenge for bloggers to post every day/month for 2011 (possibly due to the falling popularity of blogging).

To cut a long story short, I’ll be taking up the weekly challenge.  I’ve already written the first one, and I’ll be working through my backlog of ideas to attempt to build up at least one post a week from now on.

Cheers,

Andrew


Localisation as Strategy in Australia

One of the unfortunate disadvantages of living in an isolated (yet otherwise wonderful) nation such as Australia is that occasionally concepts, businesses and products can take a little while to filter over from the US or Europe.  Things like touch-and-go bus passes only recently arrived (in Brisbane at least), we still don’t have either Netflix or Hulu (although iTunes, Foxtel and Telstra are partially filling that gap) and wearing American Apparel over here will either make you really trendy or get no reaction at all (dependent on the current scene).

But with this isolation comes an advantage to locally savvy businesses and entrepreneurs who have an external focus to bring these ideas, products and businesses to their local markets.  I don’t know how many BRW articles I’ve read showing some new startup which is doing something I’ve seen online in the states a couple of years back.  If you’re lucky enough to travel regularly spotting an international trend, business model, idea, strategy or simply a product that hasn’t made it to your local market can be, in itself, a great strategy.  Although large strategies like Virgin Blue are obvious translations, relatively innocuous things such as blogs can be successfully tweaked and localised in the form of Australianised (insert your local form here) content as has been seen here in Things Bogans Like which has been pretty successful if the reviews of the book I’ve spotted in GQ and the Australian are anything to go by,  is pretty clearly influenced by Stuff White People Like, a US based blog, and marketing juggernaut, which makes fun of “white america” (which seems to translate to hipsters and suburbanites).

Although there are a million and one ways of localising I’ve built a table below that has a few examples that I’ve identified (this misses obvious ones such as simple products).

Localisation Form Example
Corporate Strategy Virgin Blue copying the low-cost carrier form proven with Southwest Airlines 

Big W taking the store concept from Walmart in the US (although not taking the small town component of the strategy)

Business Model Internet –  Catch of the Day (catchoftheday.com.au) localising Woot! (www.woot.com)
Content Strategy Localisation of TV shows (Biggest Loser etc.). 

Localisation of publishing style – Chaser in Australia copying The Onion in the states (yes, shock horror, the chaser originated as a pretty lame localisation of a massively funny US comedy publisher).

Humor and/or websites (Things White People Like becomes Things Bogans Like)

Personally, I actually think the best example of a market that would respond well to this strategy is a westernised, yet slightly isolated nation such as Australia – it might translate to other cultures but I haven’t thought about that yet.  As per usual, use your brain when localising, cultures and economies are not completely compatible.

I actually think this is a pretty interesting topic (particularly for Australia) and I’m sure there are way more examples of this and I’m going to set up a collaborative list when I figure out the best platform.


Do Your Employees Understand Strategy At All?

When expecting your staff to execute strategy, are you sure that they understand what you are talking about?

I’ve been thinking about mechanisms to improve the execution of strategy.  If nothing else, this involves communication of the strategy (posters, emails, the occasional management seminar) and linking to KPIs (and the associated dashboards).  The idea is that employees will be motivated by the KPIs to achieve the organisations grand strategy (this is a gross simplification and totally disregards structure and culture).  But, if this doesn’t work, where do the problems lie?

Poor strategy execution usually ends with blaming the KPIs, or the managers for poor communication, or structure, culture, environment, but I think something is missing, which is a basic understanding of strategy constructs and strategic planning for all employees who are tasked with its implementation (therefore pretty well everyone).  My reasoning is simple:

We wouldn’t dream of letting an employee drive a forklift without training on its operation, yet staff are expected to drive strategy without any training at all.

Without the great majority of decision making staff possessing an understanding of strategic planning principles, I don’t see how any organisation is going to really achieve breakout results. Communication of strategy is I think the #1 goal of strategic leadership, yet strategy is almost always communicated in notoriously subjective strategy parlance.  Tools like strategy maps aren’t saviours either, I love strategy maps, but the first step in training a business database user is not to show them a table schema diagram.

So, when you have a strategy to communicate, and you want your staff to understand, what do you do?  Training

Have your strategy savvy staff, MBA trained managers or even the CEO (Andy Grove held a phenominal amount of training sessions at Intel) take your staff through some short courses on strategy, here are some good ideas to start:

  • Buy a good entry level book on strategy (Financial Times guide to strategy by Richard Koch is am awesome example) and convert it into a short course to run over a few afternoons.
  • If you use a mainstream framework that is published (balanced scorecard/strategy maps, integrated choices), have a series of training sessions where you discuss the original paper or book that this comes from (great case material abounds, like your company!).
  • If you have someone who is up to it, a history of corporate strategy session is always useful to get people thinking about strategy.
  • Finally, strategy has its own technical language, which to complicate things nobody follows in the exact same way.  Construct a taxonomy of strategy terms for your organisation and train your staff in it.  Include it as a glossary to ALL strategic plans.

Most universities and professional bodies (like the AIM in Australia) will have short courses or executive training on strategic planning which is another great source way of getting your baseline training up, although I’m really a big fan of branded corporate training.  It makes the teachers clarify their thoughts, allows you to create materials that reflect your organisation, and admittedly can be a bit cheaper (but remember opportunity costs!).


Why I think enterprise microblogging is a good idea

Sadly, I haven’t come across a company that uses enterprise microblogging?  I really think this is a technology that hasn’t quite found its feet yet has some great benefits and is worth a second look.

Microblogging (as in services like twitter) is a technology that has been getting increasingly mainstream and conservative press recently (if it’s getting mentions in the companydirectors magazine then I’d say it’s mainstream).  However most of what I’ve been seeing is about the social side of microblogging, connecting to communities on the internet to build engagement, improve responsiveness etc.  While a lot of the social, outward facing benefits of this technology have been overstated in my opinion (I am in the wrong market sector admittedly), I think that the internal benefits have not gotten anywhere near the attention they deserve.

There are a few providers in this market (yammer, and socialcast for more pure microblogging apps) and I think that organisations should pay them a little more attention – in particular if they want to build their internal social structures, or have an interesting, ubiquitous way of building an organisational knowledge base (more details below):

  • Building Social Structures - Social structures in an organisation traditionally will travel 2 or 3 steps away from someone at most.  You know everyone in your team, but you’ll only know a few people in other teams within your division, and nobody outside that.  What microblogs do is create opportunities to discover people in the organisation who they don’t know.  Sure some of this time might be wasted with social stuff “Hey who wants to go out to X for knock off drinks tonight!!!”, but a lot of the time, people will be asking questions, asking who knows about a certain industry, product or client.  This sort of information doesn’t freely propogate in an organisation, spending time creating digitally enhanced social structures is a good thing!
  • Developing Organisational Memory - Ever since Nonaka and Takeuchi published The Knowledge Creating Firm, managers have been looking for ways to take the tacit, difficult to communicate knowledge and put it into a format that organisations can build upon.  I think that microblogging’s mechanism of putting organisational conversations online, in a searchable, hashtaggable, asynchronous manner will provide an incredibly rich stream of data, experience and memory that other more formal social communication forms such as blogs or wikis cannot.  Where the difficulty arises is that organisations need to encourage people to move the behaviours that they normally restrict to email into the microblogging area (asking and answering questions in particular).  Organisations who can encourage the more social conversations rather than the one-on-one email based conversations.

The last new technology that I thought had a bunch of cool applications for enterprise was google wave, and admittedly, it worked out spectacularly badly (for google at least).  I would hope that organisations can see the potential, look beyond the marketing/social/community aspects, and see microblogging’s potential as a new knowledge and social platform.


The importance of creative leadership

I was just reading Tim Kastelle’s post “Our Job is to Invent the Future” on his great blog which reminded me about the primary need for anyone who is in business to be leaders rather followers.

Tim’s post was seemingly in opposition to another book I was looking through this afternoon called “Making Strategy Work (Making Strategy Work (Amazon Link)), a compilation of essays containing a section on “testing before doing” by Robert Sutton of Stanford U, which stated the need for evidence before action.  Now as my previous post stated I’m a big believer in scientific method or “evidence based management” (EBM) where it is needed, but I really think that people need to understand where you can measure something, and where you need to make a logical jump that no matter how much market research you do, will never come up in a focus group.

Robert Sutton’s example is of the CEO of 7-Eleven, upon walking into one of his stores and  receiving bad attitude from the clerk spending millions of dollars on an outstanding service program, including awarding one of the 7-Eleven franchisees who had perfect service ratings $1 Million dollars and another bunch of initiatives, but after the fact realising that customers of 7-Eleven didn’t really care about the interaction with the employees, rather they just wanted to shop as quickly as possible.  In this case, a really simple bit of market research such as a COMB analysis would’ve pointed out the misdirection of effort towards something that, while important, wasn’t really the greatest concern of the organisation.

Although analytical approaches such EBM are completely the right way to go when performing analysis in domains that aren’t new to the world (like customer service), when you’re playing a completely new game, you need to take some leadership rather than following.  Last night I was watching Mad Men season 3 where the inimitable Don Draper is faced by focus group market research which opposed his idea for an ad campaign for cold cream but he went with it anyway, stating that if someone was to hold another focus group after his campaign ran for a year, it would back him up.  I really thought about the creative leadership that CEOs like Jobs with the iPad who created products, that on first view and market sentiment wouldn’t have passed traditional market research, but through focussed leadership were given the go, and found success (admittedly this paragraph is begging for a post on ethnography and its importance in new product development and research).

Breakout successes that construct or reinvent market segments like the iPad, or Netflix, or Zipcar will never come out of market research or focus groups.  These products require creative leadership, someone who sees a market need before anyone else does, even consumers.  Solely following market whims (for it is an incredibly useful skill) usually results in firms who won’t ever be outstanding innovators.  For companies to get really successful they need to understand when to be research and market driven, and when to let creativity rule.


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