Agile Strategy Institute

What are the "elephants in the room" for your leadership team?

You know how sometimes you have an idea or a conversation, and then that idea unexpectedly  pops up again, more than once, so that it becomes a kind of theme? That happened in our work with company leadership teams over just the past few weeks. The recurring theme: what are the "elephants in the room" for your leadership team? 

Good problem definition is a critical foundation in agile strategy, as unless you define the problem correctly, its unlikely you will get the right solution. This is particularly important with respect to business, company and market design issues, where the impact of correct problem definition can be profound. As a result, we spend a lot of time working with leadership teams to surface, properly define and prioritize their key issues.

In many cases, individual interviews with leadership team members, or group brainstorming with the leadership team as a whole, reveal a rich list of issues that need to be analyzed and synthesized to get to a well defined set of priority issues. In some cases, however, the leadership team is unwilling or even unable to articulate some of the issues they are facing.

Perhaps the issue is to do with the CEO, founder or other influential stakeholder, the increasingly obvious lack of success of a key initiative, or fundamental market discontuities that threaten the core of the company. Perhaps there are issues that fall between current organizational responsibilities, so "no-one" and "everyone" is responsible for them. There may be issues that the team believes the founders, shareholders or board will never agree to address. Or they may even be issues that exist because of a prevailing mental model that is never challenged - for example, the requirement to make a certain gross margin.   

Whatever it is, the issue is not being discussed - even though many leadership team members may recognize the issue and even know that it urgently needs to be addressed. This can be a major challenge for leadership teams, as these "elephant in the room" issues go unaddressed, in some cases for years, potentially severely hampering company performance.   

In such cases, the first step it to recognize that there are unexpressed or even unidentified issues, some of which may be having a significant impact. With that recognition, your leadership team can then do a short exercise to take a step back and really think deeply about the critical challenges you face as a company. It is often most effective to do this through a combination of confidentail individual intervioews and group sessions. 

Doing this in a properly facilitated process ensures an optimal result that will reveal the actual, often deep, issues facing the company, engage each participant in a positive way and really advance the team's thinking. Done properly, with a genuine commitment to address all the elephants in the room, it can unleash powerful new insights and real excitement amongst your leadership team.    

Innovative business and platform models for component manufacturers

We were recently asked how a company that appears to be in a pretty simple business - providing an electronic component to original equipment manufacturers (OEMs) - can apply agile strategy thinking, and particularly the idea of creating and leveraging a platform for a variety of internal and external business models.

Though it may not be immediately apparent, even simple component providers have many options to develop innovative business and platform models. For example: 

• providing a range of component solutions for different applications based on a common product or technology architecture
• understanding and helping OEMs solve problems around the component and how it integrates into the rest of the system / device
• aggregating adjacent components to their core component to provide subassemblies which make life easier for OEMs
• enabling others to provide subassemblies to OEMs
• assembling and quarterbacking a network of complementary component providers to evolve a common approach (technical and / or process) that streamlines the ecosystem for the OEM
• creating end customer brand awareness and demand (an "Intel inside" model) 
• through some or all of the above, creating or helping to create industry standards.

Each of these options offers rich food for thought to component manfacturers seeking to develop innovative company models. No doubt there are many other ideas - what can you suggest? 

 

Applying agile strategy thinking to career development

This is a good article by Tom Friedman that reflects a lot of agile strategy themes, applied to college grads. Tom discusses how the challenges facing today's professionals require an entirely new mind-set and skill set to compete, including: 

- always experimenting and adapting based on what you learn

- using your network to pull in information and intelligence about where the growth opportunities are

- investing in yourself to build skills that will allow you to take advantage of those opportunities

- finding a way to add value in a way no one else can

- strengthening the muscles of resilience (persistence).
http://www.nytimes.com/2011/07/13/opinion/13friedman.html?_r=1&ref=opinion

Blue Mine Group becomes Agile Strategy Institute and launches Agile Strategy Alliance

We are delighted to announce that from June 1, 2011, Blue Mine Group will become the Agile Strategy Institute (www.AgileStrategyInstitute.com), a new corporate name that better matches our mission of helping companies maximize value through learning and implementing agile strategy. We are also excited to launch the Agile Strategy Alliance, a network of business executives, board members and strategy professionals focused on advancing the state of the art in strategy thinking and practice through the principles, frameworks and tools of agile strategy. Finally, we are honored to welcome our new Advisory Board Neville Billimoria, Rick Cooper, Stephen Flaim, Henk Hanselaar, Richard Lawrence and Pertti Visuri.

These exciting transitions reflect the rapidly growing interest amongst company leaders in agile strategy, a powerful new approach to designing companies for maximum value in today’s open markets. "By implementing agile strategy in The Ken Blanchard Companies, we have created a powerful foundation for increasing the value we deliver to our customers, employees, partners and other stakeholders. Building a portfolio of business models enabled by central platforms will enable us to better meet the needs of our diverse customer groups, and will improve both our short-term performance and long-term organizational vitality" said Tom McKee, Chief Executive Officer of The Ken Blanchard Companies, a global leadership development organization headquartered in Escondido, California.

Shoshana Zuboff's article "Creating value in the age of distributed capitalism" gives a good overview of the transition from the industrial age to today's information age. She provides a great case example in the nursing home industry, Elder Power. The traditional nursing home business is high cost and provides variable care to many patients. Elder Power is innovating a new business model, which includes web technology, a volunteer social network, collaboration amongst local service providers, and leveraging unused local resources (spare bedrooms, school cafeteria, etc.). A great example of agile strategy in practice.

Understand granular customer groups

Today’s open and connected world throws into sharp relief the true number and diversity of customer groups in every market. In truth, this diversity has always existed – it was just hidden because of industrial age market structures. These customer groups vary greatly with regard to their needs and their willingness and ability to pay to satisfy those needs. And they are continually morphing, changing and evolving. As a result, it is very important to identify each viable customer group, and to continually search for changes in existing groups as well as the emergence of new groups.

In order to do so, we need to disaggregate 20th century market definitions into a much more granular understanding of existing and potential customer groups. In practice, this usually means breaking down traditional market definitions into a great many different types of customer groups, based on differences in needs. Since markets today should be defined in global terms, traditional market definitions may camouflage hundreds or even thousands of niche customer groups that are each large enough globally to be an attractive market for the right business model.

Recent research by McKinsey & Company, Inc. (see Viguerie, Smit and Baghai’s The Granularity of Growth) indicates that, in order to truly understand market demand and competition, rather than defining markets at the level of billions of dollars in annual revenue, companies need to think of defining markets at the level of perhaps $50 - $200 million in annual revenue – for the entire global market. This level of granularity is a major change in thinking for most companies. A useful tool in this respect is IndustryBuildingBlocks.com, which offers data on over 12,000 markets, compared with around 1,800 markets in the US government’s official North American Industry Classification System (NAICS) system.

This market fragmentation has created enormous opportunities for companies, both in existing traditional markets and in completely new markets. In existing traditional markets, there are many groups of customers who are either only partially satisfied by existing offerings, or are not buying at all, because the “good enough” mentality of the 20th century, when customers had to settle for a limited range of choices, has disappeared. Today’s customers demand complete satisfaction of all of their needs – extending beyond features and price to branding, customer experience and more. This means that in any existing traditional market there are large numbers of customers willing to switch, or willing to become first time buyers, as soon as an offering comes into existence that more closely meets their needs and price points.

In addition, there are today a whole range of new customer groups and customer needs associated with recent innovations that never before existed. For example, in the past five years innovations in mobile devices, therapeutics and energy storage have created thousands of brand new customer groups demanding a wide range of new types of products and services.

Of course this has always been true of innovation - before air travel in the 20th century, there was no need for airplanes, airports, airlines and the myriad different customer groups and needs associated with each of these. The difference today is that the rate of global innovation is creating new potential markets literally every month. A recent example as of this writing is the launch of Apple’s iPad, which has unleashed demand for a wide range of products and services that were only partially understood previously, and that most people didn’t even consider until seven months ago.

In summary, if you think at the right level of granularity, there are today endless high potential customer groups whose needs are not currently being met by current offerings – and who could be your company’s route to greatness.

 

Selecting markets

Companies today face a bewildering range of market choices, each with hundreds of potential customer groups and thousands of suppliers competing and cooperating in complex ecosystems. Rather than focusing on winning in one market exclusively, companies need to continually:

- understand at a granular level the current and potential customer groups they could address
- learn the supplier ecosystems serving these customer groups with which they might compete or cooperate
- monitor the rapidly changing dynamics of these granular markets (customer groups and supplier ecosystems)
- continually renew their selection of granular market opportunities within a clear domain of focus.

The Innovator’s Dilemma by Clayton Christensen

In The Innovator’s Dilemma, Clayton Christensen explains why established companies are ill-suited to innovation, particularly disruptive innovation that undermines the core business. Christensen describes three categories of institutional capabilities: resources (people, assets, customer and supplier relationships, etc.), processes (how inputs are transformed into outputs) and values (what is important to the organization).

He explains that these capabilities are typically developed in that order over time. First, the company has some good resources, then it evolves efficient processes, and then it develops its core values. When a new business starts up within an established company, it needs to go through the same sequence, but it is now battling the established company’s values and processes. 

Christensen explains that established companies have three broad options to build innovative business units with the right resources, processes and values. These are:

• Acquire a new company and keep it as a standalone entity with its own processes and values.

• Create new capabilities internally, which he demonstrates is difficult to do because these violate the fundamental purpose and success formula of the established business.

• Create capabilities through a spin-out. The question then becomes how separate versus integrated does the spin-out need to be? Christensen offers a useful framework to determine the nature of the spin-out based on its fit with established company values and processes.

10 Rules for Strategic Innovators by Vijay Govindarajan and Chris Trimble

In 10 Rules for Strategic Innovators, Vijay Govindarajan and Chris Trimble describe the fundamental difference between the organizational DNA of the established company (which they refer to as CoreCo), and the new innovative business unit (NewCo). CoreCo is all about planning, leveraging core assets, meeting customer needs, efficient processes and clear growth and ROI metrics. NewCo is about creativity, experimentation, learning, adaptation, flexibility and rapid response. They describe a powerful framework for how NewCo can survive and thrive in this environment.

Govindarajan and Trimble explain: ”(NewCo) must address the three unique challenges that arise from the unnatural coexistence of a new and mature business within the same corporation: a forgetting challenge, a borrowing challenge, and a learning challenge. NewCo must forget some of what made CoreCo successful. It must borrow some of CoreCo’s assets – the greatest advantage that NewCo has over independent start-ups. And it must be prepared to learn how to succeed in an emerging and uncertain market.

Govindarajan and Trimble present the four elements of organizational DNA as staff, structure, systems and culture. They explain that each of these elements need to be carefully considered to decide which of them should “forgotten” by NewCo and which should be “borrowed”, in order to maximize NewCo’s ability to “learn”.

Govindarajan and Trimble conclude that NewCo should have a distinct approach in most respects, and leverage CoreCo’s strengths and assets in one or two key areas. “The NewCo organization must be built from scratch, with new choices in staffing, structure, systems and culture. This is the only way to defeat the powerful forces of institutional memory.”

Organizing for innovation

Established corporations introducing new products, technologies or lines of business need to think carefully about how best to organize to succeed.

Extensive practical experience as well as a rapidly growing body of research indicates
that the established organization is ill-
equipped to support the successful development and launch of new products
and businesses.

Executives at established companies must recognize that the new venture will require the careful creation and development of a discrete organizational structure with its own resources, processes and values in order to incubate, cultivate, and harvest the business opportunities of the budding innovative enterprise.

In this article, we will review some of the leading research into organizing for innovation, and then summarize key guidelines for executives.

The Design of New Organizational Forms
by Jennifer Herber, Jitendra V Singh and Michael Useem

In their excellent chapter “The Design of New Organizational Forms” in Wharton On Managing Emerging Technologies, Jennifer Herber, Jitendra V Singh and Michael Useem explain: “Dominant players often fail to adapt because it means dismantling the very organizations that have led to their success. Past adaptations become inertial constraints, leading to a kind of “competency trap”. The organizational architectures that companies have built to propel their success can become as outmoded as feudal kingdoms in an age of democracy”.

Herber, Singh and Useem discuss six emerging organizational forms. These include virtual organizations, network firms, spinouts, ambidextrous firms, front-back designs and sense-and-respond firms. These are all examples of dynamic, adaptable organizations well suited to innovation.