Strategy Skunk Works
Mihai Ionescu
Strategy Management technician. 20,000+ smart followers. For an example of a strong nation, look where European cities are bombed every day by Dark Ages savages. Slava Ukraini! ????
Strategy is about choices. Choices to do some things and not do others. At the same time, there is a Game Inside Strategy , a game of hypotheses about future causality relationships. And, as it always happens in life, some of those hypotheses will alway turn out to be invalid. We just don't know which ones.
So, we cannot predict if the Strategic Choices that we build our Strategy upon are the right ones, or not, if they are based on valid assumptions, or not. Well, that is stressful. And risky. In this regard, Clayton Christensen and Tony Ulwick have helped us understand that luck is not an option . But even within their Jobs-to-Be-Done (JTBD) paradigm, as the alternative to luck, Strategy remains a gamble of unknowns ... unless we can find a way to see the cards beforehand. What would be the trick for that?
Experimentation.
Unfortunately, we cannot experiment with our entire Strategy, at least not in the way we do in Design Thinking, for new products. Why? That would require us to effectively change our business for turning the Strategic Choices to life, to develop a whole Capabilities System that is required, and to see if our Strategy turns out to be successfully, or not.
In other words, we cannot actually prototype our Strategy, because (a) the prototype Strategy and the final Strategy would in fact be the same and (b) the Strategic Horizon (the timeframe for full Strategy implementation) is years-long, therefore too long for allowing us to do another run, in case the prototype fails. The business environment around us simply cannot freeze for several years, until we go through such experimentation loop.
But wait, there is a way around this!
We can experiment with each Strategic Choice alternative defined over Strategy's two dimensions:
Note: As you can see, we have moved beyond the non-JTBD definitions of the two dimensions introduced by Roger Martin and AG Lafley in their Playing to Win , but have retained the playful paradigm. The image below should clarify this market-product duopoly evolution:
Target JTBD Playground (TJP)
The world around us is full of all sorts of jobs that arise in people's lives, as well as in organizations' lives. And, when that happens, they have to look around for a solution that they can pull into their lives, to help them do that job. To identify our target jobs on this dimension, we may very well follow the workflow built around Tony Ulwick 's JTBD Market Definition Canvas (going from traditional market definition to a market of customer Jobs-to-Be-Done):
Winning JTBD Proposition (WJP)
The best JTBD solutions arise only from the most empathically insightful understanding of the customer JTBD. Then, based on aggregating the prototyping and customer-testing of a family of such JTBD + solution pairs, performing iterations through the Design Thinking workflow, we are able to define our positioning on the second dimension of Strategy and formulate our Value Propositions. Please note that such propositions (a) encompass more than a single JTBD+ solution pair, and (b) it is reaching far more than just the product itself (product meaning also service, of course). For more details, please read the article Linking Jobs-to-Be-Done to Strategy (2017).
Clarifying Note: Marketing Experiments are a form of market research through which companies test different product features or means of customer communication (such as sales pitches, calls to action, social media topics, email marketing subjects, and so on) to see which ones yield the best results. That kind of experiments are part of the Operations layer and have no relevance for our Strategic Choices employed within the Strategy layer.?
Which Strategic Choices?
The Playing-to-Win framework is relatively vague about any reference cognitive model that we should employ when defining the Strategic Choices on Strategy's two dimensions. Which choices types can we pick from for defining our Strategic Positioning? We do have many business choices available, and they may even vary depending on circumstances, but the types of choices, or the categories of choices available to us ... are not that many. And we know which they are. For more details, please read What Strategic Choices Do We Have - The Penta Model (2017), and The Balance of Strategic Choices (2022).
Editorial note: Please be a merciful critic of some Strategic Choices types' titles or placement changes, as the Penta Model has evolved over the past five-six years, based on a deeper understanding of the Strategy Models incorporated, which have evolved themselves over time, mostly based on practical applicability tests in experimental conditions. Editorial consistency updates are in progress for several published articles that are impacted.
Going back one step, why would we need a reference cognitive model for making choices during our Strategy's formulation process? Because the quality of our decisions depends on it. Take a look at the importance of the Orient stage in the OODA Loop (Observe - Orient - Decide - Act). To know more on using the OODA loop in business, read Chet Richards 's book Certain to Win: The Strategy of John Boyd, Applied to Business .
What does Orient stage's reference cognitive model help us do? Make sense quicker and more consistently of what happens within our business environment, of the unfolding circumstances that influence our Competitive Advantage. By using such a model of available alternative choices, we can take better decisions, covering all possible angles of analysis. Regarding it like this, the reference cognitive model of Strategic Choices types becomes an important decision-support tool for defining our Strategic Positioning.
We call it The Penta Model, evolving from Prof. Arnoldo C. Hax 's Delta Model . You can find below this model's two pentagram components (Alpha & Beta), aligned with the two Strategy Dimensions, and split over Geoffrey Moore 's two Zone-to-Win groups of focus areas (1: Performance and Efficiency, 2: Incubation and Transformation).
The Skunk Works of Strategic Choices
Skunk Works is an official pseudonym for Lockheed Martin's Advanced Development Programs . It is a place where company's boldest experiments took place, where great aeronautics concepts were born, and where aircrafts that are the pinnacle of innovation and performance were designed and then assembled for the first time. Books like Jim Goodall 's 75 Years of the Lockheed Martin Skunk Works tell the story of such an extraordinary experimentation lab.
That is exactly what we would need for testing new Strategic Choices!
As discussed above, it is virtually impossible to experiment with our Strategy as a whole. But we can experiment with its core components, namely with the Strategic Choices that the Strategy is built upon. Once we get back some choices experiments data, our decisions to bring one type of Strategic Choice or another into our Strategic Positioning mix becomes much easier and less risky. What kind of experiments can we perform? Let's look into the Penta Model choices types, on the two dimensions of Target-JTBD-Playground (TJP) and Winning-JTBD-Proposition (WJP).
Caution: We use this opportunity to pass through all of Penta Model's Strategic Choices, looking at them from an experimentation stand point, so this section is more elaborate, but the insights gained here may be worth your while.
The Target JTBD Playground
A.1 Mid-Market Experiments
This is the traditional STP (Segmenting, Targeting, Positioning) approach, re-focused on the customers Jobs-to-Be-Done, not on the customers themselves and on their attributes. How would an experiment with these choices look like? Maybe presenting an existing Value Proposition to a limited selection of beta customers that have some different JTBD to solve, other than the ones for which our Value Proposition was designed. For example, if we have designed our Value Proposition around organizing corporate events for medium-high profile businesses (B2B), we may experiment with organizing social events for B2C customers, or open events (conferences, fairs) for multiple small B2B customers and startups.
Of course, as part of such experiments, we cannot afford to perform a major-change adaptation, therefore the types of JTBD addressable is limited to those close to our original targeted JTBD. So, we can organize several such experiments, but not too many. These experiments are typically handled in the Incubation + Transformation Zones, as they require deep research into other customer JTBD than the one we currently understand.
A.2 Market Edges Experiments
If we never targeted customer JTBD neither in the high-end | luxury | vanity market, nor in the low-end | long-queue | commodity | bottom-of-the-pyramid market, we only have some limited experimentation possibilities, due to certain design limits of changes that we can apply to our original Value Proposition.
Targeting the High-End Market requires a level of quality, customization, and customer focus that may be problematic to offer, even in some limited edition of our products or services. Furthermore, branding is an essential asset in this market, and we cannot extract a reputable brand value out of some magic hat ... it takes a long time to get there. That is why the effort of creating prototype Value Propositions for this market requires some significant preparation and even the re-design of our products or services.
For instance, we may pick the most stylish products in our top category and add a number of high-quality finishing, like gold-plating, engraving, luxury feature assortments, or any equivalent of that, which are not usually found in our portfolio of products or services, then offer them to an attentively selected number of luxury-focused potential customers, typically for free. This experiment might be worth the effort, if we get a positive feedback, because this opens the perspective of entering a new and highly-profitable JTBD market.
Experimentally targeting the Low-End Market requires the opposite type of effort: we need to be able to provide streamlined, simplified versions of our Value Proposition, re-designed for minimum costs of production, distribution, and customer support. Imagine, for example, our products sold and supported until now only through specialized local partners, taken into an experimental retail channel, or sold over the Internet, as commodity items. As part of an experiment, that is something that we would perform for a limited period of time and make them available only to a limited number of qualified customers. The results may provide us insights on whether we can adopt the Strategic Choices in this group, or conclude that they are outside our reach.
These experiments are typically handled in the Incubation + Transformation Zones, as well, since they require deep research into the low-end customer JTBD and into the specifics of the commodity markets.
For digging deeper in the theories, best practices, and methodologies of the Market Edges choices, consider some relevant reading, as the following titles:
B.1 Customer Proximity Experiments
The Customer Proximity choices are about customers that require not only solutions that best address their JTBD, but also direct assistance along their Customer Experience (CX) journey, from matching the solutions for their JTBD, to support provided that includes complementary information, or interactive support services. Given the fact that we have a separate category of Strategic Choices dedicated to the Sales Channels (B.2), the choices in this group do not regard the sales part of the CX curve.
If you want to dig deeper into the theory, best practices, and methodologies related to the Customer Proximity choices, often mapped with the Customer Intimacy WJP choices, there are a lot of books available. Just don't ignore this anthological reference title:
This kind of Strategic Choices experiments can be best performed if we isolate a single, but relevant, product or service from our portfolio, and add the complementary direct customer interaction features (customer JTBD profiling, customized support, solution co-creation, and so on), limited in time, and only made available to a selection of customers. Based on the analysis of the ratio between the (a) results of increased customer satisfaction and (b) the associated effort, we can decide if choices in this group may help us retain our customers better and allow us to defend our existing Competitive Advantage more successfully.
These experiments are typically handled in the Performance + Efficiency Zones, since they do not target significantly different customer JTBD than those targeted before, although a deeper CX curve analysis (pleasure & pain points) for those JTBD is beneficial.
B.2 Sales Channels Experiments
The Sales Channels choices regard the alternatives for addressing the customer JTBD during the first part of the CX curve, including or not the matching the solutions proposed to the JTBD, something that is often handled outside the sales channel, mostly as part of the Marketing functionality, especially in the B2C market.
One type of experiments with this choices group is related to increasing our market reach by using a franchise system. Another type of such experiments is that of moving from exclusive direct sales to indirect sales (distributors or agents), with a similar effect of widening our addressable market. Of course, since this is a test, not the real thing, we would involve just a few potential partners that have expressed an interest to become part of our franchise system or indirect sales network.
On the opposite end of the spectrum of Sales Chanels choices, we can experiment with implementing a direct sales channel, in parallel with our dominant indirect sales channels, or taking-over our most successful franchise partners, something that, for instance, IKEA does on regular bases in emerging markets. The main effects of adopting such choices is a better control of addressing the customer JTBD during the sales activity. As in the other cases of this choices group, the experiment would be limited to one product or service, to a small batch of test customers, or to a limited geography, and to one or a few of partners or franchisees involved.
These experiments are typically handled in the Performance + Efficiency Zones, since they do not target any significantly different customer JTBD than those targeted before, with the exception of the buying portion of the CX curve.
C.1 Geography Experiments
The Geography choices allow us to potentially increase the performance of our current Competitive Advantage by addressing the same customer JTBD, solved by our solutions, but in new geographies, where the same needs driving the willingness to buy may provide better opportunities than in the home market, whichever meaning might the home market have: our neighborhood, our city, our region, or our country.
The possible experiments regard the testing of the intended new market by offering of the same products or services to a limited number of customers having the same JTBD as in our home market. Should the interest for our Value Proposition by high enough during the experiment, this may trigger the full focus on entering that new geography, mobilizing all the resources that such a move may require.
These experiments are typically handled in the Performance Zone, since they lead to the increase of our current Competitive Advantage's economic results, due to the geographical scaling of our business.
C.2 Value Stream Experiments
The Value Stream choices represent decisions to enter new business areas upstream or downstream of our current Value Chain position and provide solutions for JTBD of new customers. The aim is to obtain a more significant vertical integration, with benefits (e.g. reduced external costs), but also with risks (e.g. depreciation of relationships with suppliers or distributors). By adopting these choices, we are exploring new business areas, with new processes that we have never operated before, with new capabilities requirements, and direct serving new customer JTBD.
Experiments with these choices are typically handled in the Incubation + Transformation Zones, since they require new knowledge of business processes that are specific to the new Value Chain areas we are expanding into. The experimentation should be limited to the acquisition or development of one or a few upstream business process units, with one or a few downstream distribution facilities acquired or developed internally.
Should the results of these experiments show that we can manage those processes in a sustainable manner, and we get positive feedback from the new types of customers on handling their JTBD, the Value Chain expansion choices may become part of our next Strategic Positioning.
D.1 Adjacents Experiments
The Adjacents choices allow us to address complementary JTBD of (mostly) existing customers. For example, many restaurants have entered the adjacent business of home delivery, or office catering, for their most loyal customers, and even for new customers that never entered any of their restaurants. A construction and specialized equipment supplier of fuel storage & metering equipment for fuel stations networks have enhanced their Value Proposition with maintenance services for fuel depots, and with disassembly & demolition services for fuel stations that must be relocated elsewhere.
Experiments with these choices are typically handled in the Incubation + Transformation Zones, since they require insight into new customer JTBD and new knowledge of business processes that are specific to the adjacent domains. The experiments should normally focus on a limited geography and a few friendly customers whose JTBD can be addressed by solutions co-developed with them, as alternatives to incumbent vendors' offering.
D.2 Substitutes Experiments
With the Substitutes choices we move not into the JTBD territory of non-customers, but also in that of JTBD solutions that we have never offered to customers. In other words, a diversification move during which we must both gain insights in new JTBD, and explore new Value Propositions. The caveat is that, in order to make these choices more feasible, we develop new solutions by modifying our existing products or services, adapted to solve a new set of JTBD. Therefore, our solutions become substitutes for the incumbent solutions already available in the market for those customer JTBD.
Let us look at an example. In the US, the Greyhound coach lines have just announced at the end of 2022 that they are closing down their Greyhound Package Express service that could be used to send packages with their inter-city buses. It seems that they could not sustain the competition with the very strong US courier companies, like FedEx and UPS, because the customer JTBD of shipping packages door-to-door is better solved by those competitors.
However, in Europe, where the courier market is more fragmented, many international coach lines companies serve a different JTBD: the Diaspora market of Eastern Europeans who relocated to Western Europe and travel often to their home countries, where part of their families still live. If they cannot travel themselves, they send gifts packages back home, or receive packages with traditional home food. A good opportunity for pan-European coach lines companies to add package delivery services to their portfolio, a surrogate solution to that offered by traditional courier companies. Why is this a surrogate service? Because this is not really door-to-door, you still need to go and deliver or pick your parcel to/from the local coach bust station. But this shortcoming seems to be offsetted by the low cost and by the inherent international same-day or next-day delivery.
Experiments with these choices are typically handled in the Incubation + Transformation Zones, since they require gaining of insight into new customer JTBD, prototyping surrogate solutions for them, as well as testing with a limited number of customers, to see if they are willing to adopt the new alternatives to what was offered until now by incumbent vendors.
The Adjacents and Substitutes choices, and partially the Value Chain choices, are included within the Business Diversification approach to business growth, aimed at launching new business lines and entering new markets and industries. It may be worth noting that although these choices are related to either our current customers and to their JTBD, or to our existing Value Propositions, such diversification can happen completely unrelated to them, through the Mid-Markets or Market Edges choices, something that is typical for conglomerate corporations.
If you want to dig deeper into the theory, best practices, and methodologies related to the Geographies, Value Stream, Adjacents, and Substitutes choices, there are a lot of reference books available. Just don't ignore this anthological reference title:
E.1 Emerging Needs Experiments
With the Emerging Needs choices, we are in the over-served customers territory, of JTBD that are too expensive, or too complicated to be solved by the solutions existing in the marketplace. Such JTBD don't require better solutions. In fact, solutions that are worse than the existing ones may do the job. They just need to be simpler and more affordable, because this is what characterizes those new needs. The Emerging Needs choices are usually paired with the J.1 Disruptive Innovation set of choices on the Winning-JTBD-Proposition (WJP). More details are provided over there.
Experimenting with these choices is mandatory, because we are talking about new JTBD, and more experiment iterations my be required for fine-tuning the level of affordability and simplicity accepted by the new customers. Naturally, the experiments are handled in the Incubation + Transformation Zones, since they require gaining of insight into new customer JTBD, prototyping the new solutions that often use emerging technologies, like the transistors that made portable radios affordable and simple, although not providing better quality, in times when the market was dominated by vacuum tubes radios, which addressed other kind of JTBD.
E.2 New Needs Types Experiments
The New Needs Types are the choices of JTBD that never existed before. It is the territory of non-consumers or marginal customers that seldom buy certain products or use certain services. Why does that happen? Because they would need something else, which the market of incumbent vendors doesn't provide yet. That is what Blue Ocean Strategy innovators do: they define JTBD that never existed before, assembling old and new attributes into a new format, and develop solutions for them that are the only ones available in the market.
The New Needs Types choices are usually paired with the J.2 Conceptual Innovation choices on the Winning-JTBD-Proposition (WJP). More details, over there.
Experimenting with these choices is mandatory, as well, because we are imagining new JTBD, and more experiment iterations my be required for testing if we have reached the level of novelty that will really attract those new customers. The experiments are handled in the Incubation + Transformation Zones, since they require gaining of insight into new customer JTBD, prototyping the solutions for them.
The Winning JTBD Proposition
F.1 Price Leader Experiments
The Price Leader choices are probably the oldest choices in the history of trade. Sell at the lowest price and you'll occupy a dominant position in any commodity market. To be understood: there is only one Price Leader, only one lowest-price reference in any single market. All the other competitors are more expensive ones, for the same commodity product.
Normally, these options requires the highest level of Operational Excellence, which commands the delivery of those products or services to the market with the lowest costs. In fact, that is what these choices are all about.
However, there are some vendors in the so-called Blitzscaling category that sell the cheapest products or services at a loss. For how long? For as long as they can find investors to give them money to cover those losses. Why would those investors do that? Because they are told that the evolution of the technology and of the operational effectiveness will drive the hole market towards the price level that they are offering today, and they'll be able to make a profit, but from a dominant market position.
How would we experiment with the Price Leader choices? By determining a lower target level of costs, one that we believe that we can achieve in the future, and which allows us to become Price Leader in our market. Then test a sample of the market, over a limited period of time, with our products or services offered at that lowest price point. If the result is a good response of the market, something of an order of magnitude higher than our current results, we can start investing in Efficiency Innovations to reach that required low-cost level and either (a) wait to achieve that level for attacking the Price Leader position, or (b) take the Blitzscaling-route and convince some deep-pockets investors to finance our loses and attack the Price Leader position right away, with a fast scaling approach, targeting the acquisition of the largest market share possible.
These experiments are typically handled in the Performance Zone (scaling) and Efficiency Zone (costs decreasing), since they lead to improving our current Competitive Advantage's economic results.
F.2 Product Differentiation Experiments
With the Differentiation choices, we are in the Incremental Product Innovations territory. The next year version of our product will have a couple of new features that will place us in front of the competition for offering the best targeted JTBD solution. This is a popular way of competing in many arenas, from the auto industry to the software products industry, and to many more. What new features will next year's BMW model have?
The best approach is pairing these choices with any of the Target-JTBD-Playground choices that aim to satisfy a narrow JTBD definition. In this way, we decide to play in a highly-specialized products or services territory, in which we are raising the barrier of entry for new competitors with each new feature that we add to our portfolio of products or services, and with each new capability or resources that we dedicate to that development.
How do we experiment with these choices? We are fully in Design Thinking territory here, but still working with our existing business lines and strengthening our current Competitive Advantage. That is why we are typically performing such experiments in the Performance Zone of our business, developing new product or service attributes, and working with a selection of our existing customers acting, as co-creators.
G.1 Customer Intimacy Experiments
The Customer Intimacy choices address complementary facets of our existing customers' JTBD and aim at improving the way our Value Propositions solve those JTBD. This includes supplying the customer more detailed and maybe interactive information about how to best use our products or services. It may be about subscription-based Value-Added Services (VAS) that increase the lifetime of our products, or extend the reach of solutions provided to some closely-related JTBD family.
These choices may add another level of customization or self-configuration to various elements of our Value Proposition, or increase convenience, like the groceries ordered online from the office and picked-up several hours later from click & collect lockers that are conveniently placed along the typical commute journey between office locations and residential areas. An even better convenience improvement is provided by online orders that are not delivered to the home door, but to lockers that are placed in nearby supermarkets or fuel stations locations, so the customers can pick them whenever it is convenient for them, within a 48h window. They pick their deliveries, based on a secure code notification sent to their mobile phones via SMS, followed by a 24h reminder.
If you want to dig deeper into the theory, best practices, and methodologies related to the Customer Intimacy choices, there are a lot of books available. Just search the customer experience and customer intimacy keywords on Amazon.com, and you will get dozens of suggestions. By the way, don't forget that the Customer Experience Curve is not a flatline, so it should be managed wisely. Read more in late Sampson Lee's articles .
Experiments are very easy to design and launch for the Customer Intimacy choices, as the palette of additional value provided to our customers is only limited by our imagination. The essential thing is to increase the usefulness and convenience of our Value Proposition for their JTBD. That is why these experiments don't require the high-level innovation muscles of the Incubation Zone, being performed mostly in the Performance Zone.
G.2 Horizontal Value Experiments
Mapped very well along the D.1 Adjacents TJP choices, the Horizontal Value choices define Value Propositions that usually span a set of related JTBD that our existing customers must solve. It is like IKEA that started several years ago to complement their portfolio of kitchen furniture offering with a series of kitchen appliances, addressing the customer JTBD of completely furnishing and equipping their kitchens. These choices are about what we generally call one-stop-shop Value Propositions.
The experiments with these choices don't usually require the high-level innovation muscles of the Incubation Zone, being performed mostly in the Performance Zone. We do that by closing provisional resale deals with complementary products vendors, or with suppliers of complementary services. The aim is to test the horizontal value proposition response of a limited selection of our existing customers, then fully launch such proposition, in case the feedback is positive. Alternative ways of turning these choices into reality is through Merger & Acquisition of complementary vendors or suppliers, once the experiments are successful.
H.1 Channel Dominance Experiments
The Channel Dominance choices is the territory of exclusive commercial deals, or to the exclusive distribution of certain products or services to a specific geography. Think of the chains of fuel stations that cannot afford more than one ice deep-freeze cabinet in the front of the station, a limitation that pushes them to have exclusivity agreements with ice vendors that supply those cabinets, periodically replenish them, and repair them if malfunctioning.
Similar retail space dominance may be achieved based on paid-for preferred placement of merchandise on the retail shop floors or on the shelves, something that guarantees increased sales compared to competitors having less favorable placement of their merchandise.
The experiments with these choices don't usually require the high-level innovation muscles of the Incubation Zone, being performed mostly in the Performance Zone, through limited sales locations experiments, testing the outcome of such potential exclusivity or preferred retail arrangements.
H.2 Multi-sided Platforms Experiments
The Multi-sided Platforms choices represent the positioning as dominant exchange provider of services to at least two categories of actors, primarily sellers and buyers. Two characteristics make these choices define a platform system:
To dig deeper into the theories and methodologies of Multi-sided Platforms choices, this is the short list of recommended reading:
Experiments with these choices are neither easy, nor cheap to perform, as in the absence of the platform and of a critical mass of buyers, sellers won't use it. Nevertheless, limited geography or audience proof-of-concept experiments can be organized, gaining a feeling of both buyers' and sellers' preferences. Since this is a significantly different model than that of direct seller-buyer relationship, these experiments usually happen within the Incubation Zone and are transformed to full implementations, if successfully incubated.
I.1 Business Ecosystem Experiments
The Business Ecosystem choices represent an extension update of Prof. Arnoldo C. Hax's Proprietary Standard choices, in the Delta Model. This develops around a successful core product or service that becomes a de-facto proprietary standard, to which a critical mass of complementors choose to align (and become part of a Value-Added network), in order to gain access to standard owner's market, which is sometimes called an orchestrator. Two characteristics define the Business Ecosystem:
To dig deeper into the theories and methodologies of Business Ecosystems choices, this is the short list of recommended reading:
The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems (1997) - James Moore
The Wide Lens: What Successful Innovators See That Others Miss (2012) - Ron Adner
Ecosystem Edge: Sustaining Competitiveness in the Face of Disruption (2020) - Peter Williamson, Arnoud De Meyer
Network Advantage: How to Unlock Value From Your Alliances and Partnerships (2014) - Henrich Greve, Tim Rowley, Andrew Shipilov
The Ecosystem Economy: How to Lead in the New Age of Sectors Without Borders (2022) - Venkat Atluri, Miklós Dietz
Business Ecosystems (2022) - Martin Reeves, Ulrich Pidun (Authors & Editors)
Design Thinking for Business Growth: How to Design and Scale Business Models and Business Ecosystems (2022) - Michael Lewrick
Experimenting with the Business Ecosystem choices may start with a beta-test period that includes a limited number of the most enthusiastic complementors and a limited number of selected early adopter or visionary customers. Since the resulting Value Proposition may diverge significantly from the current single product/service offering, intending to work within a win-win relationship with the network of complementors, these experiments are better suited for the Incubation Zone of the standard owner or orchestrator.
Whenever in doubt if a case belongs to either of the Multi-sided Platforms or the Business Ecosystem choices types, use this matrix as a hint provider:
I.2 Unique Enablers Experiments
The Unique Enablers choices represent in the minds of certain Strategy gurus the foundation of the Strategy discipline itself, the primary option for building an organization's Strategy. Of course, as the Penta Model shows this is only one of many choices types. The Unique Enablers choices have two flavors.
One is derived from the Resources-Based View of the Firm (RBV) theory that postulates that an organization's growth should be based on controlling some Valuable, Rare, difficult to Imitate resources, and the Organization is ready and able to exploit them (VRIO). In an initial phase of the theory, the last attribute was that of the resources being Non-substitutable by some non-rare ones (VRIN).
The other flavor is derived from the Capabilities-Driven Strategy theory that postulates that an organization's growth must be based on exploiting a Right-to-Win that was gained in time through the development of a number of essential Distinctive Capabilities that are hard to imitate as a Capabilities System. In consequence, the Strategy becomes a matter of aligning that Distinctive Capabilities System with the right marketplace opportunities, exploiting an advantage called The Coherence Premium.
To dig deeper into the theories and methodologies proposed for these Unique Enablers choices, this is the short list of recommended reading:
The experiments with the Unique Enablers choices are relatively easy to perform, by exploring new combinations between customer JTBD and solutions for them that are based on our existing capabilities or rare resources that we posses, and targeting a relevant test sample of customers or potential customers. Since we are talking about new JTBD addressed and new Value Propositions, these experiments usually happen within the Incubation Zone and are transformed to full implementations, if successfully incubated.
J.1 Disruptive Innovation Experiments
The Disruptive Innovation choices are creating markets for existing products and services made more affordable and simpler, so that over-served customers can pull them into their lives and do some JTBD that otherwise cannot be matched by the unaccessible solutions available in the existing market. To dig deeper into these choices, this is the short list of recommended reading:
Experiments with the Disruption Innovation choices are ideally performed with the new disruptive technologies, or new business models, tested on either early-adopter technology enthusiasts, or with visionaries that recognize the new products or services proposed as best fit for their JTBD limits of affordability and usability. If the test results are promising, the entire bottom of the market that share the same JTBD limits may be targeted with a good chance that arena's incumbents will not fight back.
Since we are talking about existing JTBD, but addressed with new Value Propositions, these experiments must happen within the Incubation Zone, and then transformed into full implementations, if the experiments are successful.
J.2 Conceptual Innovation Experiments
The Conceptual Innovation choices are addressing Blue Ocean JTBD markets that never existed before, by building JTBD solutions that combine existing, but either (a) diminished, or (b) enhanced, product or service attributes, with (c) new attributes never considered before by vendors or service providers targeting the same market, but also (d) eliminating certain high-cost attributes. The outcome is both and simultaneously: (i) the increase in value of the new-concept customer JTBD addressed, commanding a premium revenue, and (ii) a reduced costs structure. W. Chan Kim and Renée Mauborgne call this Four Actions Framework (a-d) + Value Innovation (i-ii). This is also driven by the Strategy Canvas and aimed at JTBD identification based on the Six Paths Framework, to name just a few of the Blue Ocean Strategy tools that are built into the BOS instrumental practice blueprint.
To dig deeper into these choices, this is the recommended reading:
The experimentation with the Conceptual Innovation choices before adopting them is mandatory, because the novelty of targeting non-consumer or marginal customers JTBD ( the associated New Needs TJP choices) and pairing them with a novel Value Proposition make these choices very risky. The best approach is to separately test the new attributes (those in the Strategy Canvas) and maybe experiment with some of their combinations. The target would be non-consumer or marginal customers for whom we target what we believe to be meaningful new JTBD. Should the experimentation results be conclusive, we can engage in launching the new Blue Ocean business line.
Of course, since these are new JTBD addressed with new Value Propositions, these experiments must happen within the Incubation Zone, and then transformed into full implementations, if the experiments are confirming our conceptual hypotheses.
When should we experiment with Strategic Choices?
This is probably the most important question about our Skunk Works experimentation with Strategic Choices. Why? Because it breaks away from the monolith experiments that characterize the Design Thinking approach to designing a new product or a service.
The most logical answer is that we should continuously experiment with the Strategic Choices that are not part of our current Strategic Positioning mix. Why leave those out? Because it is too late for them, we have already progressed to implementing our Strategy that is based on those choices. It's the Strategy Execution process that will provide the adaptive feedback (validity or invalidity of the hypotheses about the choices that we have picked), as soon as those choices turn into reality and meet the real market.
Although we may be tempted to consider that this may be another Zone to Win than our Incubation Zone, the fact that such experimenting with Strategic Choices happens within all zones, indicate that the best choice is to put our Skunks Works department under the coordination of the Office of Strategy Management (OSM) and instead of a single Chief Strategy Officer (CSO), put in control of the office the four Chief Strategy Officers in the organizational structure below:
I hope that this diagram makes more sense now, in case you have seen it before.
Finally, one more thing. It becomes clearer now that we need at least two related experimentation threads to be executed in parallel with our core Strategy processes of formulation, strategic planning, and strategic plan execution. They are:
Since we are talking about continuous, or iterative, experimentation activities, planning of experiments, and plans' execution, the rational way to handle and coordinate them is under the OSM umbrella. And the reason why the two experimentation threads must be related has been explained at some extent in the article Design Thinking Inside Strategy .
To conclude this observation in a graphical way, here is how the Strategy Clockwork diagram looks like, illustrated with these two experimentation threads:
As always, I would like to thank you for your patience to read this rather long text. Your observations, questions, or bricks are more than welcome, so don't hesitate to throw them at the author :-)
Other?Strategy Clockwork?newsletter?articles:
The Strategic Alignment
Don't Rely on a Single Strategy!
Without a Plan, Strategy is a Fairytale
Design Thinking inside Strategy
Beyond [static] Balanced Scorecard
The Deeply Integrated Strategy
The Game inside Strategy
The Balance of Strategic Choices
The Corporate Balanced Scorecard
The Strategy Clockwork Newsletter
Enjoy!
Manager Quality Management at Botswana International University of Science & Technology
9 个月Thanks Mihai, comprehensive and very informative. ??
Marketing Advisor | Business Designer | Strategie di marketing tramite Design Thinking * Identifichiamo i tuoi clienti migliori e facciamo conoscere il tuo valore in modo etico e sostenibile
1 年??
Catalyseur de changements et succès ACX Mentor? CPP-Champion? CBPP? BAIP? RBPMP? BPT-PL?
1 年Thanks Mihai for another excellent integrated perspective analysis. I really liked the Roles model of the future oriented company. Strategy experimentation and assumptions testing are quite challening as they presuppose a certain level of maturity in strategy. I also like to link with Roger's WTP-HTW approach.
Y?netici, Kurumsal Strateji Dan??man?, MBA ??retim G?revlisi,
1 年Thank you Dear Mihai Ionescu for this excellent tour of designing experiments on strategic choices and for adding up the dots between different approaches.