Strategic Thinking and the Art of Being Discontinuous

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Strategic Thinking and the Art of Being Discontinuous

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STRATEGIC THINKING AND THE ART OF BEING DISCONTINUOUS

9-Aug-14

Page 1

THE VELOCITY OF CHANGE

Change has:

A rate i.e., how much, how often

A direction i.e., more of the same versus going in a new direction

McCarthy I. P., Lawrence T. B., Wixted B., & Gordon B. R. 2010. A multidimensional conceptualization of environmental velocity. Academy of Management Review, 35(4): 604-626

Access the full paper here.

DISCONTINUOUS CHANGE

To identify, create or cope with discontinuous change it helps if you have:

The right mindset and an appetite for weirdness

An appropriate approach to environmental scanning

An ability to create or respond to environmental disruptions

Use and learn from escalating experiments

ENTREPRENEURIAL THINKING

An entrepreneur is:

someone who identifies an opportunity and takes action to pursue it.

the action involves bringing together and organizing resources not currently controlled.

Entrepreneurial thinking underlies problem solving and innovation

Markus Frind - POF

Neil Clark Warren -eHarmony

4

PUZZLE VERSUS QUILT MAKING

5

MINDSETS

Effectual Logic (mindset)

Causal Logic (mindset)

A mindset is way of thinking. It is also called a logic.

6

THE CAUSAL MINDSET

Good managers use causal thinking

Starts with a desired and relatively known outcome.

Focuses on the best means to generate that outcome.

Efficiency and optimization of a known solution for a known outcome

Use existing means to attain a known end.

Saras Sarasvathy,

7

THE CAUSAL MINDSET

Distinguishing Characteristic:

Selecting between given means to achieve a pre-determined goal

Given

Goal

M1

M2

M3

M4

M5

Given Means

Saras Sarasvathy (2001). What makes entrepreneurs entrepreneurial? (PDF). Harvard Business Review. p. 9. Retrieved 2014-01-26

8

.

THE PUZZLE

Why does the puzzle demonstrate causal thinking?

You are given an organization and fixed resources (given means). What are these?

You are given precise goals? What are these?

You plan and organize. How?

You execute. How?

You measure progress. How?

9

THE EFFECTUAL MINDSET

Good entrepreneurs use effectual thinking

Imagining possible new ends using a given set of means

Imagine the end, and create the means

10

THE EFFECTUAL MINDSET

E1

E2

E3

E4

E5

Given Means

Distinguishing Characteristic:

Imagining possible new ends using a given set of means

What are the means?

M1

M2

M3

M4

M5

Imagined Ends

Saras Sarasvathy (2001). What makes entrepreneurs entrepreneurial? (PDF). Harvard Business Review. p. 9. Retrieved 2014-01-26

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THE QUILT

Why does the quilt demonstrate effectual thinking?

You do it on your own initially.

You select and accumulate resources you like.

The goal is broad and open.

The product emerges over time. Dont know what it looks like until the end.

Not tied to precise plans and organization.

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EFFECTUAL

MINDSET

CAUSAL

MINDSET

13

ENVIRONMENTAL SCANNING

Environmental scanning is monitoring and interpreting the external environment to better understand the nature of trends and drivers of change and their likely future impact on your organisation.

Scanning

(Data collection)

Interpretation

(Data given meaning)

Learning

(Action taken)

Daft & Weick 1984

14

MODES OF SCANNING

UNDIRECTED VIEWING

Constrained interpretations. Nonroutine, informal data. Hunch, rumor, chance opportunities.

ENACTING

Experimentation, testing, coercion, invent environment. Learn by doing.

CONDITIONED VIEWING

Interprets within traditional boundaries. Passive detection. Routine, formal data.

DISCOVERING

Formal search. Questioning, surveys, data gathering. Active detection.

Unanalyzable

Analyzable

ASSUMPTIONS

ABOUT

ENVIRONMENT

Passive

Active

ORGANIZATIONAL INTRUSIVENESS

Daft & Weick 1984

15

ICEBERG MODEL

Events

Patterns

Structure

Questions

What happened

Whats been happening?

What explains this?

The water line

Actions

Knee-jerks

Analyse and plan

Understand and redesign

16

ICEBERG MODEL

Events = scenes in a story

What happened?

What are some of the notable events?

Patterns = the messages in a story

What's been happening?

How has performance changed over time?

What are other important trends?

Structure understanding why the story happened and what it means

What has caused the problem/issues?

What are some of the consequences and opportunities?

Data and facts

Hypotheses

17

EXPLOITATIONEXPLORATIONFollow the rules and drive out the variance and slack.Break the rules and promote variance and slack.Focus on serving existing customers and their needs.Serve new customers with new needs.Manage and refine existing competences.Develop and lead new competences.Optimize the organization for existing rules.Develop new organization system with new rules.Make money now.Make money later.

AMBIDEXTERITY: TWO MODES OF LEARNING

Based on the following research:

McCarthy I. P. & Gordon B. R. 2011. Achieving contextual ambidexterity in R&D Organizations: A Management Control System Approach, R&D Management, 43(1): 240-258

Access the full paper here.

18

DISRUPTIONS

Regency TR-1 the first transistor radio (1954)

Zenith AM/FM Tube Radio (Model G730W) from the 1950's

19

HARD DRIVE EXAMPLE

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CELL PHONES VS. CAMERAS

Philippe Kahn, June 1997

21

DISRUPTIVE INNOVATIONS

Existing customers do not value performance attributes of the innovation

The innovation performs worse on certain attributes

It appears to be financially unattractive: small markets, low profit margins

Difficult to predict the growth rate of the market

Requires new manufacturing/delivery processes

Yet a disruptive innovation can disrupt (destroy) your market and your company.

22

WHAT SHOULD YOU DO

Be Observant

Customers wont lead you to them.

Less profitable than alternatives - with current business models.

Marketing, sales and financial people will oppose or be unenthusiastic.

Senior management will often be unaware or attach little importance to the opportunity.

Be Proactive

Initial applications will be unclear. Watch for a market to emerge.

Vulnerable markets are those which are over served in terms of functionality and populated by large, complex, inconvenient products and services.

Draw a trajectories map.

23

COSTS REDUCE SIGNIFICANTLY OVER TIME

Price of 1GB storage by year

1981 =

1987 =

1990 =

1994 =

1997 =

2000 =

2004 =

2012 =

$300,000

$50,000

$10,000

$1,000

$100

$10

$1

$0.10

MARSHMELLOW CHALLENGE

Source: Tom Wujec

25

Reward success and failure; punish inaction

Think of some ridiculous or impractical things to do and plan to do them.

Take your past successes and forget them

Hire slow learners of the organizational code, people who make you uncomfortable

Encourage people to ignore and defy their bosses and peers

BE WEIRD

9-Aug-14

Page 27

ESCALATING TESTS

Plan

Experiment

Learn

Reshape

Plan

Experiment

Learn

Reshape

PLAN - What do I know? What do I need to learn? How can I learn it at lowest cost? What are my expected outcomes? How do I measure against plan (metrics)?

EXPERIMENTING - Who/what is the subject? What is the test? Lowest cost possible What do I expect to learn? How does the subject respond?

LEARNING What did I expect to find? What did I actually find? Can I explain the difference?

What do I still need to learn?

RESHAPING - How do I incorporate my learning? What is the next market test?

28

STACYS PITA CHIPS - ESCALATING MARKET TESTS

Social work with a passion for food, wants to open a restaurant, but?

Food cart sells pita bread wraps, but the real success is .?

Creates Stacy Pita Chip Company but how could they reach the masses ?

Manufactured the chips by .?

Raised money by?

https://www.openforum.com/articles/the-story-behind-stacys-pita-chips/

http://www.effectuation.org/article/identity-chip-story-stacys-pita-chips

29

BIG BELLY

http://www.youtube.com/watch?v=z5mOulNalJI

http://www.youtube.com/watch?v=Ervb3qX_xi8

30

ESCALATING TESTS

We test to:

Learn. If a picture is worth a thousand words, a prototype is worth a thousand pictures.

Solve disagreements. Testing helps eliminate ambiguity, assist in ideation, and reduce miscommunication.

Start a conversation. Tests are a great way to have a dierent kind of conversation with users.

Fail quickly and cheaply. Creating quick and dirty tests allows you to assess ideas without investing a lot of time and money up front.

Manage the entrepreneurial process. Identifying a variable to explore encourages you to break a large problem down into smaller, testable chunks.

Look at design thinking at prototyping

http://dschool.stanford.edu/wp-content/themes/dschool/method-cards/prototype-for-empathy.pdf

Prototyping is getting ideas and explorations out of your head and into the physical world. A prototype can be anything that takes a physical form be it a wall of post-it notes, a role-playing activity, a space, an object, an interface, or even a storyboard. The resolution of your prototype should be commensurate with your progress in your project. In early explorations keep your prototypes rough and rapid to allow yourself to learn quickly and investigate a lot of dierent possibilities.

Prototypes are most successful when people (the design team, the user, and others) can experience and interact with them. What you learn from those interactions can help drive deeper empathy, as well as shape successful solutions.

31

SUMMARY

How you go forward determines where you go.

Causal vs. effectual mindsets

Conditioned viewing vs. enacting

Exploitation vs. exploration

Planning vs. doing

Being weird vs. being normal

9-Aug-14

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