How Do We Test Our Winning Logic?

 

How do we test the winning logic underlying our strategy?  How do we avoid the Innovation Theatre & corporate kitsch I’ve described in earlier pieces – smart people going through the motions pretending they’re creating Value?  The Board & senior leader team are often at a disadvantage, lacking the day-to-day connection with the front line, suppliers and customers.

The Value Stick

The Stick is a rough & ready way of testing our winning logic. Ambidexterity is a prerequisite. Can we both protect the core business with OpEx/Lean, and ignite new Growth using Digital methods?

Here are the Stick’s key components:

·       Willingness to Pay - can we increase WtP by providing kick-ass offerings that wow the customer?

o   Can we find new customers, new undiscovered needs, satisfied by news offerings; new channels; new levels of customer understanding & connection that open up new markets – the proverbial Blue Ocean?

·       Price – can we provide so much value that the customer readily pays more?

o   Here, facility with both OpEx/Lean & Innovation methods is essential.

o   A tremendous manufacturer who continually improves the process will both reduce waste and also increase Value in the customer’s eyes. (‘I no longer have to worry about that…’)

o   Similarly, an adept innovator with a deep, intuitive understanding of the customer can identify invisible opportunities that cost little to address but utterly delight the customer.

·       Cost – this is the arena of OpEx/Lean. Most industry remains awash in waste, which represents a giant ‘hidden bank account.’ 

o   OpEx/Lean leaders know both how to find these, and as important, how to engage their people in harvesting the gains.

·       Quantity – means getting people to buy more, which is the wheelhouse of growth hacking & other innovation hacks.

o   Possible means: partner with simpatico companies, develop adroit pricing strategies, understand & access where customers hang out, reduce buying friction, remaining relevant and top-of-mind with funny, engaging just-right content in the right channels.

Caveat: be aware of the Innovator’s Dilemma.  The Value of a given innovation cannot in its early stages be measured by conventional accounting methods – all the standard Value metrics are zero.

Use these elements to test your winning logic. At the very least, you’ll generate a meaningful discussion. Is the Stick enough to validate your strategy? No, but it’s a great way of testing & validating our thinking.  Validating your Strategy entails a good deal more, a topic I’ll take up in upcoming pieces.

Best wishes,

Pascal Dennis         E: pascal.dennis@leansystems.org

 

Stratex Blockers – Where Are We Going?

 Who are we, and what do we believe in? Where are we going, and how will we get there? Such are the core questions of Purpose. How well we answer such questions – as people & organizations – determines clarity of Purpose – or lack thereof. So how do we answer them?

To define your Purpose is to look up toward a better future. Doing so is uplifting in that it pulls you out of your current quagmire and forces you to consider the entire chessboard, design space, or gestalt, if you will. Everything is connected and if you look closely enough, individual parts form meaningful patterns, which often are the key to strategy.

Who are we and what do we believe in?

Answering such questions requires an intuitive understanding of your history, formative experiences, victories & defeats, and their why & wherefore. A useful subordinate question is: Where do we come from? This is difficult for young companies and especially so for startups, which explains why such organizations often have dreadful, abusive cultures. Often the leaders of such companies cannot imagine anything different because there are no signs, no precedents. There is no Dave Hewlett or Bill Packard, no Charles Kimberly or John Clark history to guide them. And no sages to whisper, ‘What would Dave & Bill have done?’

I’ve been lucky enough to work for some years with a fine international Insurance & Wealth Management firm that has a deep connection to its 150-year history – a history of achievement, stability, and community service. The corridors leading the Board room display foundational images, and the portraits of senior leaders beginning with the founder. The message is unmistakable – This is where we come from, who we are and what we believe in. Needless to say, helping answer such questions is an essential element of my practice.

Where are we going and how do we get there?

Here are helpful subordinate questions, courtesy of Roger Martin: ‘Where will we play & how will we win?’ The first part of this entails defining what markets, what offerings, what part the of the value chain and such. The second part entails defining a compelling ‘winning logic’ that everybody from the C-suite to the front line understands and can explain.

The Stick Model of Value is a useful framework for telling your story. Will we win by creating more Value & thereby increasing the customer’s Willing to Pay? Or by continuously reducing our cost by engaging all team members in waste reduction, so that we sell more? Or permutations thereof?

A high-end recreational vehicle supplier I know has defined their winning logic as follows: ‘Speed – Cost – Innovation: 1) We’ll be faster at design & deployment than our low-cost offshore competitors by…, 2) We’ll reduce of cost of labor through Lean/OpEx methods to less than 20% of total cost so that it’s irrelevant, and 3) We’ll have the best Tech & innovation in our industry by…’

Result? On familiarizing himself with the books, the new CFO said to me, “This place is a cash machine.’  The company also has a rich sense of where they come from & a history of decency & fair play. As a result, people stay, get better & better at their work, and contribute. Win-win.

Last thing, can you outsource all this to AI?

Best wishes,

Pascal Dennis         E: pascal.dennis@leansystems.org