Insight generating questions that brings science to the art of strategy

One thing that's bothered me in many strategy discussions is that you very easily end up in locked positions throwing oral hand grenades at each other. Even if it doesn't go that far, it's hard to get an open and curious strategy climate. I've seen top-level strategy discussions to contain much more energy and openness when moving from finding "What is the right answer" to looking for "What are the right questions".
Let's look at a set of questions that will help you find the right questions that, once answered, sets the direction and involves stakeholders in embracing the decision.
We'll go through the four most important questions: Inside-out; Outside-in; Far-outside-in; Opportunity evaluation. Note the openness in the reasoning. We're not looking for the answer, we're looking for opportunities and choices.

Inside-out: Start with your assets: activities, resources, brands, partnerships, etc and then reason outward. What are we especially good at that some segments of the market might value and that might produce a superior wedge between buyer value and our costs?

Outside-in: Start with looking at markets. What are the under served needs, which needs do customers have a hard time to express and which gaps have competitors left?

Far-outside-in: Start with analogues reasoning. What would it take to be Google, Apple, P&G or another successful organizations in your industry and context?

Opportunities generated. The result of asking these three types of questions: Inside-out, Outside-in, Far-outside-in, are a lot of questions that opens up for new opportunities once answered. Do any of them make you feel uncomfortable? If so then they posses the possibility for new opportunities that differs enough from the status quo.  Then it's time to evaluate and decide.

Opportunity evaluation: Evaluate each opportunity by asking the question "What must be true for the opportunity to be valid?". Don't ask "What is true" - that only causes heated head-on discussions - instead asking "What must be true" - you open for all sorts of opinions to be expressed.

Now you have generated a large set of opportunities and the conditions governing their validity. Once they are answered, you have gained a lot of new insights - regardless if the answer was true or false.

More to read:

• HBR September 2012: Bringing Science to the Art of Strategy

Enterprise Architecture creating the engine for network-based business models

In a world where the network-based organizations are creating the new business models, Enterprise Architecture play the key role in making it all happen.
Value chains represent all activities performed to create the value experienced by a customer. Michael Porter has described this in his 5 Forces where the relative strength of each participant is reflected in the amount of profit they can extract from the value chain.
The business model is the engine in a firm's network-based strategy in how to cooperate with others to create value. The business model therefore plays a crucial role in determining how much profit a single firm can extract from the value chain.
In a value chain there are four sources of value creation; Novelty, Lock-In, Complementaries, and Efficiency.

Two questions that struck me are:

• How can a single firm control and steer its business model in a network-based value chain? 
• How can Enterprise Architecture enable the business model to become the engine through leveraging the four sources of value creation?

I think the answer to both questions can be found in using Enterprise Architecture, EA, to guide and steer successful execution enabling the four sources of value creation. Most transactions and interactions, if not most of the value, are created through IT systems. Enterprise Architecture will enable an organization to identify the most crucial parts of its IT system that creates the four sources of value creation. Once identified the organization can through Enterprise Architecture focus its effort on each of the four sources:

• Efficiency
• Integration with other partners done quickly and with no effort. Finding the best suited product with low search costs. Reliable lead-times and costs.
• EA focuses on the business processes and information exchanged. Thus it is possible to remove bottlenecks and based on which levels of efficiency creates the most value put the efforts there.
• Complementaries
• Flexibility in terms of vertical and horizontal integration. Offer additional services and products that complement the product. 
• EA will based on which types of vertical integration is available enable fast and smooth integration. Information necessary to provide data about available complementaries, especially those that change over time, is identified through EA.
• Lock-in
• Raising the switching costs through efficient loyalty activities. Recognizing me as a customer. Not just discounts but more importantly access to improved information, priority, customization, etc.
• EA identifies which information and business processes that drive the most customer loyalty. Providing that information through the different processes and through the value chain enables larger shares of profit to be extracted.
• Novelty
• Enable flexibility in terms of transaction structure, transaction content, offerings through network of partners and complementaries.
• EA does not only focus on the current state of affairs, but more importantly where the organization is heading. Areas where Novelty are important will be identified and necessary information, business process and IT system support is created.

I think you should ask yourself: What is you position within the value chain? How are we utilizing the four sources of value creation within our current business model? Which IT system support is needed?

Further reading:

• The Network Challenge: Strategy, Profit and Risk in an Interlinked World by Paul R. Kleindorfer
• TOGAF 9 A Pocket Guide by Andrew Josey

Organizational rust and cholesterol

Organizational rust and cholesterol develops in every successful organization over time. In the book "In search for excellence" Peters and Waterman identified the 43 most successful companies in the US in 1980. Out of those 48 companies that were outperforming all other US companies only three would make the list today. What happened to the others?

It's an easy question to ask and much harder to answer. The background issues can quite easily be identified, the cure is much harder to prescribe.
A successful organization develops over time one or more of the following:

• Misuse of resources. The once successful departments get the majority of resources out of old habits.
• Misaligned strategy. What was once a great strategy and market position is today just stubborn actions.
• Leadership dissonance. Blame and backstabbing is spreading throughout the leadership team on different levels.
• Organizational immobility. Misalignment and inability within the different organizational units to move forward. It's one step here and one step there but never synchronized and at the right time.

How can this situation be fixed or even avoided?

In a recent HBR article on the theme "Change for Change's Sake" the authors argument that organizations should practice small and larger regular changes to practice the change organizational muscle. They propose a questionnaire that can easily help identify when it is time to initiate a small or larger change in order to avoid rust and cholesterol. 

An interesting thought is to measure the number of ongoing changes in an organization. How well are we at actually change? Do we have an ongoing readiness for change? What different types of changes do we have ready to apply if and when we need them?

What level of rust do you have in your organization and which changes of different size can you make use of?

Missionaries in Change

"Everything changes" is a well used saying. We believe that it is only today that everything changes and that the speed has increased. Looking back in history one can see that there has been no period of time when nothing changed and everything stood still. Roman empire was changing all the time, from internal initiated change and from external pressure. I think that the reason we talk and experience so much change today is that the media and information is much more available today. Thus we get to hear about new and different things all the time. This creates a pressure for change just because we hear so much about how others have done it. The other influencing factor for faster change is competitive pressure. Since competition is much more fierce today people, organizations and countries have to change to stay ahead of competition.

Why am I writing this? Because today I read an ad from the Swedish IT and Management consultancy company Connecta who claimed to be Missionaries in Change. Interesting that organizations see themselves as missionaries in general and in change specifically. Since everything has changed all the time in history, why do we need missionaries in change? Do I sound like an old fashioned uncle now? Of course we need to change, we have always done it and it is an integral part of human mindset. Why then missionaries in change?

The picture they used to illustrate their change mission was with a consultant holding a bee-frame where bees were flying around in the air. And then saying "When it seems impossible". I think they want you to get the picture of it being impossible to handle a lot of bees flying around. But for a trained bee keeper it is an everyday task you do without much thought. So why is it impossible? Doesn't it depend on the persons mindset, expectation and experience?

My take on this is that change is inevitable, it has always happened, goes faster today because media is reporting it, and it depends on your mindset, expectation and experience.