Sunday, October 28, 2007

Strategic Insight in Three Circles

Sometimes the simplest tools are the most elegant and powerful.  In this month’s Harvard Business Review, Joel Urbany and James Davis of Notre Dame’s Mendoza College of Business suggest that critical strategic insights can be gained from populating a template involving just three circles.
Although most executives can recite the truism that a company must build a distinct competitive advantage in order to grow and be profitable over the long term, many have only the fuzziest idea what that really means. . .We often encounter these executives in our consulting work and in our classrooms. We tell them to draw three circles. Those circles, placed in the proper relationship to one another, provide a good visual representation of what strategy—both internal and external—means. 
While Urbany and Davis visualize this as a team exercise, you might try it first by closing your door for an hour, turning off the phone and email, and utilizing the tools of yesteryear: a pencil and a piece of paper.  Here’s how it works.

1. Draw a circle and fill it with the things that customers value and why—that is, Customers’ Needs. Depending on the complexity and breadth of your offering, you may need to focus on a specific customer segment. Note that this exercise, when done in a group, may reveal brand new or emerging opportunities for value creation. Urbany and Davis explain, “The first circle thus represents the consensus view of everything the most important customers or customer segments want or need.”

2. Now draw a second circle. You’ll fill this one with how customers perceive Company Offerings. This one could be especially tricky in a group exercise, because (short of good, hard analysis), there may be plenty of opinions about how customers perceive your product and brand.

3. Now “slide” the two circles together so that your specific set of offerings overlap with customers' needs. Let’s hope that the overlap “feels” good and solid, so that there’s a high comfort level that you are providing some significant benefit or set of benefits that the customer requires. Urbany and Davis tell us, “Even in very mature industries customers don’t articulate all their wants or problems in conversations with companies. ..Customers’ unexpressed problems can often become a source of relationship building and growth opportunity.”

At this point, working on your own, you can probably see a number of areas where further investigation may be required—even though you think about this stuff everyday. And, working as a group, it may be time for a lunch break, as (at least the first time through) there is bound to be a fair amount of debate around both circles, and their overlap.

4. Now it’s time for the last circle, which represents how customers perceive the offerings of your competitors. In a group setting, this may be the circle where there is the least amount of agreement. (Which is why you’re trying this exercise in your office with the door closed, first. Forewarned is forearmed.) This third circle slides up to overlap the first two in a variety of interesting ways, as follows:

Each area within the circles is strategically important, but A, B, and C are critical to building competitive advantage. You should ask questions about each.

For A: How big and sustainable are our advantages? Are they based on distinctive capabilities? (Urbany and Davis note: “But the biggest surprise is often that area A, envisioned as huge by the company, turns out to be minuscule in the eyes of the customer.”)

For B: Are we delivering effectively in the area of parity?

For C: How can we counter our competitors’ advantages?

You first, and later the team, should form hypotheses about the company’s competitive advantages and test them by asking customers. The process can yield surprising insights, such as how much opportunity for growth exists in the white space (E).

Another insight might be what value the company or its competitors create that customers don’t need (D, F, or G). This plays, by the way, to Christensen’s Innovator’s Dilemma: Where have you pushed the technology or offering so far that folks stopped seeing value in it?

Perhaps the greatest insight will be how much opinion and conjecture there are behind your "analysis," instead of data-based knowledge. That alone—knowing what you don’t know—may be one of the most useful outcomes of the exercise.

Thursday, October 18, 2007

Multitasking Makes You Stoopid

Multitasking, once ballyhooed as a staple of the modern digital executive, turns out to be a scourge.  And Walter Kirn’s recent excellent article assures us that not only is multitasking ineffective, but its end is near. And that’s good, because if you read the entire article, you’ll find that Kirn almost kills himself driving off the road while checking for messages from his girlfriend.

Here are 3 quick take-aways:
1. Multitasking messes with the brain in several ways. At the most basic level, the mental balancing acts that it requires—the constant switching and pivoting—energizes regions of the brain that specialize in visual processing and physical coordination and simultaneously appear to shortchange some of the higher areas related to memory and learning. We concentrate on the act of concentration at the expense of whatever it is that we’re supposed to be concentrating on.

Even worse, certain studies find that multitasking boosts the level of stress-related hormones such as cortisol and adrenaline and wears down our systems through biochemical friction, prematurely aging us. In the short term, the confusion, fatigue, and chaos merely hamper our ability to focus and analyze, but in the long term, they may cause it to atrophy.

2. The next generation, presumably, is the hardest-hit. They’re the ones way out there on the cutting edge of the multitasking revolution, texting and instant messaging each other while they download music to their iPod and update their Facebook page and complete a homework assignment and keep an eye on the episode of The Hills flickering on a nearby television. (“I get bored if it’s not all going at once,” says one 17-year-old.)

3. This is the great irony of multitasking—that its overall goal, getting more done in less time, turns out to be chimerical. In reality, multitasking slows our thinking. It forces us to chop competing tasks into pieces, set them in different piles, then hunt for the pile we’re interested in, pick up its pieces, review the rules for putting the pieces back together, and then attempt to do so, often quite awkwardly. (Fact, and one more reason the bubble will pop: A brain attempting to perform two tasks simultaneously will, because of all the back-and-forth stress, exhibit a substantial lag in information processing.) 
"To do two things at once is to do neither."  That's from Publilius Syrus, Roman slave--first century B.C.  It's high time we paid attention.

Thursday, October 11, 2007

The Myths of Innovation

The stickiest thing on earth is a myth.  Columbus discovered America.  Washington could not tell a lie.  Edison invented the electric light.  Batman could beat Superman.

See? Powerful, sticky, charming, and wrong.  And yet, we still love them.

We learn myths to help us cope with some new, complicated situation or body of knowledge. Then we get a little experience, and we spend the rest of our time unlearning the myths so we can get something useful accomplished.

If we’re lucky, that is. Because, inevitably, the truth is more interesting and richer than the myth, and the key to forward progress.

The myths we create and perpetuate in business are as debilitating as any of our historical or cultural myths. In fact, they may be more debilitating, since they can govern our professional success.  That’s why Scott Berkun’s The Myths of Innovation, published earlier this year by O’Reilly Media, is such an interesting read.

Berkun’s aims are articulated upfront: Identify the myths about innovation, explain why they're popular, and explore and teach from the truth. I count ten myths in all, but a single uber-myth weaves its way through most of the detail, and it goes like this: Innovation is about some brilliant person who is struck by a profound insight and then goes on to change the world. The quintessential myth-story, as Berkun illustrates, is that of Newton being hit on the head by an apple.

If we truly believed that, we’d all go home to swing in the hammock with a mint julep in our hand. Or we’d keep walking by the cube of the smartest engineer or marketer in the company, waiting for the disco ball to start turning. That’s why myths can be so debilitating.

The fact is that the truths about innovation are energizing. And, Berkun’s Myths of Innovation is full of good history and thoughtful ideas that can supply some great momentum for your own daily work.

In deference to Mr. Berkun, I’m going to include only 14 take-aways in this article (even though I have about 40). I don’t want to be the spoiler to your buying the book. And, while those of you who have knocked around a bit in the trade will have slayed some of these myths long ago, I would guess that those of you new to innovation will find all of the myths worth exploring.

Here are a handful of quick take-aways:
1. All innovations are a combination of materials and ideas that already exist, used in a different or new way. (That’s why innovation responds to “good process” and determined work, just like most everything else.)  This is a key take-away from both Schumpeter and Drucker, the topic of an excellent piece by Malcolm Gladwell (2008).

2. "The best lesson from the myths of Newton and Archimedes is to work passionately but to take breaks. Sitting under trees and relaxing in baths lets the mind wander and frees the subconscious to do work on our behalf. Freeman Dyson, a world-class physicist and author, agrees, "I think it's very important to be idle. . .people who keep themselves busy all the time are generally not creative. So I'm not ashamed of being idle. . .Some workaholic innovators tweak this by working on multiple projects at the same time, effectively using work on one project as a break from the other."

3. "The love of new ideas is a myth: we prefer ideas only after others have tested them. We confuse truly new ideas with good ideas that have already been proven, which just happen to be new to us. The paradox is that the greater potential of an idea, the harder it is to find anyone willing to try it.”

4. There is a huge gap between how an innovator sees the world and how others see the world. Howard Aiken, a famous inventor, said, "Don't worry about people stealing an idea. If it's original, you will have to ram it down their throats."

5. "Apple, like Edison, earned well-deserved credit for vastly improving existing ideas, refining them into excellent products, and developing them into businesses, but Apple did not invent the graphical user interface, the computer mouse, or the digital music player. Similarly, Google did not invent the search engine, and Nintendo did not invent the video game."  For additional discussion on this, pick up a copy of Mariana Mazzucato's The Entrepreneurial State.

6. “Despite the myths, innovations rarely involve someone working alone, and never in history has an invention been made without reusing ideas from the past. For all of our chronocentric glee, our newest ideas have historic roots: the term network is 500 years old, webs were around before the human race, and the algorithmic DNA is more elegant and powerful than any programming language. Wise innovators--driven by passion more than ego--initiate partnerships, collaborations, and humble studies of the past, raising their odds against the timeless challenges of innovation." 
7. The myth that the best idea wins is dangerous. The goodness or newness of an idea is only part of the system that determines if it will win or lose.  This suggests that the most successful innovations are not the most valuable or the best ideas, but the ones that appear on the sweet spot between what's good from the expert's perspective, and what can be easily adopted, given the uncertainties of all the secondary factors combined."

8. "It's deceptively hard to create good constraints, and there's less glory in problem finding than solving; however, the number of successful innovations based on clever constraints proves it's worth the time."
One of the great takeaways from the book is Berkun’s contention that there is safety in numbers. “To some extent, we've lost the ability to innovate because so many of us make other people's stuff, and are willing to use what's there rather than devise something better.”  The solution, according to Linus Pauling, is this: “The best way to have a good idea is to have lots of ideas.”

Thursday, October 4, 2007

Today I Turn 50

I turn 50 today.  I was born on October 4, 1957, the same day a 184-pound aluminum sphere called Sputnik streaked skyward from 100 miles east of the Aral Sea, launching the Space Age.

1957 was somewhere just past the mid-point of the Baby Boom and turned out to be the largest birth year in the midst of the largest baby boom in U.S. history. So, at a time when the country was only 60% of its current population, we graduated the largest batch of infants ever from hospitals, and then on into high schools, colleges and the job market. The class of 1957 has been fighting for position our entire life.

At 50 I am smart enough to ask for your sympathy on this point, and wise enough not to wait around for it. Just know, as you go to the polls to vote on the bond issues to renovate and expand all of those elementary schools built in the 1960s: They were built for us.

So, we've had to adjust to the Space Age, the Cold War, the British invasion, Kaizen, the oil crisis, globalization, and the knowledge-based economy. We survived folk music and disco and grunge and Neil Diamond. We've gone from three black-and-white channels (and some very weird puppets on PBS) to satellite TV and Tivo (and, come to think of it, still some very weird puppets on PBS). We used to have a single pair of "sneakers" that we wore for any and all sports, and now have made room in our closet for running, cross-training, tennis, hiking and biking shoes.

And speaking of that, we have walk-in closets that are as big as our bathrooms used to be, and bathrooms as big as our bedrooms used to be. In fact, I grew up in a house built around 1900 that had no shower--only a bathtub in a single upstairs bathroom. We got two adults and three children cleaned and fed and out the door every morning by 7:30 a.m. We did not know at the time that we were breaking the laws of physics.

Our class and its Boomer kin have perhaps traveled the furthest technologically: We are the people that can program Tivo and improve reception with rabbit ears. We may have been the only junior year high school Physics class forced to learn the slide rule while hiding our Bowmar Brains under the desk. We are still capable of changing a typewriter ribbon and text-messaging with our thumbs. And, not to put too fine a point on our technological flexibility, but we know how to rip MP3 files (legally, of course) and how to tape a nickel to a tone arm of a record player so the record won't skip.

Now that I think of it, we've bought "Sympathy for the Devil" on vinyl, cassette, CD, and iTunes. And we would have bought it on 8-track had that technology lasted more than five minutes. No wonder the Rolling Stones are so rich.

I suspect, given our capacity to adapt, we'll make it through the digital economy and Web 2.0, we'll weather global warming and outsourcing, we'll survive the meltdown of the nuclear family and the polar ice caps, and we'll do just fine with whatever the next half-century throws at us.

To be fair, we've had our share of breaks as well. Being born in 1957 kept us out of Vietnam and even gave us a free pass on the draft.

Being 50 creates a set of indelible markers. We are the first-graders who got off the bus to find our mothers in tears at the news of President Kennedy's shooting. We stayed up late to watch Neil Armstrong walk on the moon. We were building our careers when the Challenger exploded and were beginning to really hit our stride on 9/11.

The trip to 50 is also about perspective. The First Lady has gone from being our grandmother to our mother to someone we might have dated. The oldest veterans in professional sports, hobbling around in extended careers, are still just youngsters. We place our lives in the hands of experienced doctors twenty years younger than us. We hire people in entry-level jobs who were born in 1986. We remember when "Made in Japan" meant something entirely different than it does now. We miss getting prizes in cereal boxes. We ask people to "roll up the window" in the car. We still call CDs "albums" and occasionally say "it's quarter-to-two" when our digital watch says "1:45," and we know enough about the old Moxie not to want to try the new Moxie.

It helps, of course, that we were born into the greatest country in the history of the world and have lived for the 50 greatest years of its history. Having done a bit of traveling, as well as a bit of history, I am pretty well convinced of that. It is nothing short of a miracle how democracy, a belief in the sacredness of life, and the ability to create endless amounts of wealth and intellectual capital all came together at a single time, in a single place. Add the existence of over 20 different kinds of Coke, and life has been awfully good.

So, what have I learned during my 50 years? Here are 13 very minor take-aways: 1. This is how you get old: One day you wake up and your face looks tired. You take a shower and your face looks refreshed again. A years later you wake up and your face looks tired again. This time when you shower, it still looks tired. When you go to bed you check again, and now it really looks tired. Now, you’re old.  2. Never be the first or last person to drink from a quart of milk.  3. If you haven't made at least three good enemies by the time you're 50, you're not really trying.  4. I saw an analysis that showed that Cal Ripken's career production would have been much better if he'd rested occasionally. I get that.  5. The worst musical mistake generations make is to carry their tired, old songs with them through life.  6. I own a mountain bike that is as expensive as my father's first car, and my grandfather's first house. We call that progress.  7. By 50, you begin to accumulate ghosts, the many people who have touched your life but who are now dead.  Many lived long, active, full, meaningful lives. To my children, they are stories, and a name on a family tree. It is a very odd feeling to have parts of your life slip away like that.  8. Speaking of slipping away, I have this sinking feeling that the Baby Boomers may be pitied as the last generation that didn’t regularly live to be 125, or maybe even 200.  9. Write this one down: If you turn the spout of the plastic lid so it lines up with the seam of the coffee cup, you will drip coffee on your clothing on the way to work. Guaranteed. 10. If you're explaining, you're losing.  Count on it.  11. When I first became a CEO I pulled aside one of my trusted board members and asked, "Any advice for a new CEO?" Without hesitation, he said, "Make your numbers." "Anything else," I asked? He thought for a second. "No. Just make your numbers." The secret to credibility? Make your numbers.  12. I agree with Homer Simpson when he said, “When someone tells you your butt is on fire, you should take them at their word.”

I was told once that if you can double your age and still reasonably expect to be alive, you're alright. I'm hanging onto that thought all day.