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Shorts: Practical Strategy Tool
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Andrea Corney
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Jun 24, 2002 09:14 PDT
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Welcome to the combined May/June 2002 issue of Management Shorts
Written by Andrea Corney (ACor-@acorn-od.com)
Published by Acorn Consulting (www.acorn-od.com)
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IN THIS ISSUE
1. INTRO: Creating a Focus for Strategic Conversations
2. MANAGEMENT SHORT: The Business Idea
3. FOR THOSE WHO WANT MORE: Graphics & Source Books
4. FINAL THOUGHTS: The Business Idea is Dynamic
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1. INTRO: Creating a Focus for Strategic Conversations
Everyone talks about the importance of strategic thinking and strategic
planning, but in my experience many management teams spend very little time
at the strategic level. Tactical issues scream for attention, and strategic
issues are often so complex and multi-layered that managers don't know where
to start. I'm always on the look out for simple models and tools that will
give my clients a focus for strategic discussions. My goal is always on
creating a dialogue that is engaging for the participants and leads to a
shared understanding of where the company is going and what practical steps
need to be taken.
There is no perfect tool or model, just a range of things that are more or
less useful in helping a team focus. One of the tools I've found that meets
the usefulness test is a concept called The Business Idea. I've combined the
May and June issues of Management Shorts to create enough space to fully
describe the uses and benefits of The Business Idea.
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2. MANAGEMENT SHORT: The Business Idea
What It Is
For those of you familiar with systems thinking, the Business Idea is an
influence diagram that shows key elements of a business and how changes in
one element cause an increase or decrease in another element.
A simple example: Increasing investment in quality control leads to higher
customer satisfaction; higher customer satisfaction leads to more repeat
buys; more repeat buys leads to increased profits; increased profits leads to
more investment in quality control; more investment in quality control
further increases customer satisfaction, etc. The more elements that
reinforce each other, the harder it is for competitors to copy you!
A graphical depiction of this example and the others in this newsletter is
available in Adobe Acrobat format from my web site at:
www.acorn-od.com/business_idea.html
Sound too simple (or too complex) to be useful to you? My experience with
clients proves the old adage: "There is nothing more practical than a good
theory." The underlying idea is that you and your management team need a
shared, realistic view of why you are (or will be) successful and where to
focus your efforts for the biggest returns.
The Business Idea is more than just a business model that shows how a company
makes money. The Business Idea is a graphical way of capturing the customer
value created, the company's distinctive competencies, how these competencies
combine to create competitive advantage, and how they reinforce each other to
drive growth. As one client said, "I thought the Business Idea concept was
brilliant. It gave a holistic feel for everything that we do and showed the
leverage points that we could use."
A Classic Example
As some of you know, I regularly volunteer as a facilitator for a class at
Stanford Business School called "Interpersonal Dynamics" (the students refer
to it as "Touchy-Feely"). Unlike most classes at the school, Interpersonal
Dynamics is experiential, with students organized into groups of 12 with 2
facilitators. The course was created 30 years ago and has proven to be
enormously popular with the students - demand often exceeds to number of
spots available. The course has persisted all these years in spite of the
fact that it is more expensive to offer than other courses and encounters
some opposition from faculty who think it is lacking in academic rigor. And
yet the class has become an institution. Why? The "Business Idea" for this
class has several reinforcing loops. We'll look at one loop as an example.
The facilitators are a critical part of the course. They have more contact
with the students than the professor and can have a significant impact on the
quality of the student experience. For many years it was difficult to meet
student demand for the course because of the difficulty in recruiting
facilitators. The time demands are high (7 to10 hours a week for 10 weeks,
plus a weekend retreat) and the pay is a mere honorarium. There have always
been facilitators who volunteer because they enjoy the process, but each
quarter there is a scramble to find enough facilitators. In 1990 the
professor who created the course started a parallel training program for
facilitators. The training program is intense, high quality, and very low
cost. Graduates of the program rave about the enormous personal and
professional growth they experience as well as the deep bonds they form with
the other trainees. Over the years the program has grown in reputation among
organization development consultants, therapists, and academics. Competition
for spots in the program increases every year. This means that the quality
of the applicant pool increases every year leading to a greater consistency
in facilitator skill and hence a greater consistency in the experience that
students have in their groups. It is no accident that student demand for the
course has dramatically increased in recent years.
Graduates of the facilitator training program enjoyed the experience so much,
they devised ways to create ongoing opportunities for learning and
interaction including an e-mail list, discussion groups and social events.
They also invited some of the faculty to teach one-day workshops. The
faculty found the workshops so rewarding that they have pro-actively offered
more learning opportunities. This increases the value experienced by the
facilitators in being active in the facilitator community and encourages them
to volunteer more often to facilitate the student groups. You can picture a
reinforcing loop with the following elements: number and quality of
applicants for training program, experience of personal and professional
growth, pool of trained facilitators, activity in the facilitator community,
facilitator skill, facilitator commitment to course, positive student
experience, demand for course, and support from the school (they recently
doubled the honorarium!).
To see the picture, go to www.acorn-od.com/business_idea.html
This is just one loop in the Business Idea of the course. There are other
elements that feed into the student experience and create "competitive
advantage" to the extent that many students now consider the course to be an
essential element of their business school experience. We've all heard of
the "vicious cycle"; this is an example of the "virtuous cycle".
A High Tech Example - FastGro
FastGro is a high tech company that sells its product to other technology
companies. The customer's engineers have many technical and support
requirements that must be met. The main competitor offers a lower priced
product and yet FastGro has been able to stake out a leadership position in
the market. How did this happen and how can FastGro stay ahead of the
competition?
I asked the FastGro management team to start with the story of how the
company was founded. The two founders talked about an unmet need they saw in
the market and how they started putting together the pieces to meet that
need. What they came up with was a core value proposition of "solving the
engineer's problem completely". Over the years their ability to deliver on
this promise has increased. Essential competencies include a cultural
element of commitment to the customer as well as the ability to integrate 4
different technical disciplines. On a practical level this meant targeted
investments in: rewards for support people that encourage working with the
customer even when the problem is created by another vendor; IT
infrastructure to allow improved communication between the 4 engineering
groups; and strengthening one of the 4 technical disciplines in which the
company was a little weak.
Using the Business Idea
As a growing company in a relatively new market niche, FastGro has more
opportunities than it can realistically pursue. The Business Idea becomes an
excellent sorting tool. Does this new opportunity or direction leverage off
of an existing capability? (An excellent question for avoiding what I call
"Strategy by wishful thinking.") Will it strengthen or undermine any of the
loops? Does it reinforce our value proposition? At budget time the Business
Idea helps set priorities - any proposed investment has to have a positive
impact on the Business Idea.
The Business Idea is also a good reminder of the fundamentals that must be
sustained and developed. If part of our value proposition is that we solve
our customer's problems completely, then we have to pay attention to our
culture of customer service and make sure that as we grow we don't do things
to undermine that culture - like reward customer service people for reducing
the amount of time they spend at the customer site! In the early years new
employees at FastGro absorbed this cultural mindset through daily interaction
with the founders. As the company grows, they will need more formal
processes for socializing new employees and reinforcing a value that is so
central to the company's bottom line results.
Benefits of the Process
At least half the value of the Business Idea is in the richness of the
dialogue that occurs within the senior team as they develop and articulate
the business idea. Like all the best strategic planning tools it creates a
shared vision and language about the company and the larger market place. It
is a great way to get everyone's assumptions on the table so they can be
thoroughly hashed out. Discussing your Business Idea is a focused approach
to building alignment on the management team.
A well-done Business Idea is also an excellent communication tool. One
client team presented their Business Idea to their Board. The crabbiest of
the Board members (isn't it their job to be crabby?) responded with, "That's
the clearest statement of your value proposition that I've ever heard!"
Getting Started
You can start the way FastGro did by telling the story of how your company
was founded. Another approach is to start with a discussion of your
competitive advantage. What does the customer value and how do you deliver
that value? What are the elements that allow you to deliver a unique value
proposition? (These are the distinctive competencies and assets of your
company.) Are these competencies and assets growing or shrinking? What
elements feed that growth? Where do investment dollars have the greatest
impact on the value delivered?
As you develop these elements, look for the connections between them. Does
an increase in one cause a corresponding change in another? Do the
connections create a complete story? Why is it difficult for competitors to
imitate your success formula?
The FastGro team resisted this exercise. It seemed too simple and not a good
use of their time. Much to their surprise, they found the process both more
difficult and more engaging than they thought. More importantly, it provided
a solid foundation for strategic planning.
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3. FOR THOSE WHO WANT MORE: Graphics & Source Book
Graphical depictions of all the examples in this newsletter are available in
Adobe Acrobat format from my web site at:
www.acorn-od.com/business_idea.html
"Scenarios: The Art of Strategic Conversation" by Kees Van Der Heijden.
This is the best book I've found on scenario planning as well as the most
complete and useful description of the Business iIdea. Chapter 8 provides a
detailed process for developing a Business Idea. It is available from Amazon
at the link below:
http://www.amazon.com/exec/obidos/ASIN/0471966398/acornconsulti-20
If you want to learn more about systems thinking, take a look at "The Fifth
Discipline Fieldbook" by Peter Senge, et. al. It is available from Amazon at
the link below:
www.amazon.com/exec/obidos/ASIN/0385472560/acornconsulti-20
Another great resource on all things systems thinking is Pegasus
Communications. Books, newsletters, tapes, conferences and more. You can
find them on the web at
www.pegasuscom.com
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4. FINAL THOUGHTS: The Business Idea is Dynamic
Like most strategic planning efforts, the Business Idea is not something done
once and then put away forever. The Business Idea is dynamic and if it
doesn't change over time that is a sign that your competitive advantage is
eroding. FastGro's competition is catching up on the 4 technical
capabilities and FastGro is hard at work on the next step in enhancing the
value proposition.
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As always, I welcome feedback on this newsletter. Is it meeting the stated
value proposition of "practical and useful"?
Please forward this issue of Management Shorts to anyone you know who could
use a focused tool for revisiting core strategy.
Warm regards,
Andrea
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About Management Shorts
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Management Shorts is a free monthly newsletter for senior managers on
strategic planning, leadership, management and teamwork. Each issue brings
you a short and practical tool or idea that you can put into practice
immediately.
Copyright 2002, Acorn Consulting
Feel free to forward this newsletter to friends and colleagues. You may
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Acorn Consulting
"From Strategy to Execution: Helping Management Teams Get Traction on the
Critical Issues"
www.acorn-od.com
in-@acorn-od.com
(650) 329-8923
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