Quick takes

Catherine Gorrell (strategy consultant)

Strategy & Leadership

ISSN: 1087-8572

Article publication date: 18 January 2016

155

Citation

Gorrell, C. (2016), "Quick takes", Strategy & Leadership, Vol. 44 No. 1. https://doi.org/10.1108/SL-11-2015-0082

Publisher

:

Emerald Group Publishing Limited


Quick takes

Article Type: Quick takes From: Strategy & Leadership, Volume 44, Issue 1

Catherine Gorrell

Catherine Gorrell is a veteran strategy consultant newly based in Portland, Oregon (4mcgorrell@gmail.com) and a contributing editor of Strategy & Leadership.

These brief summaries highlight the key points and action steps in the feature articles in this issue of Strategy & Leadership.

Integrating experiences into your business model: five approaches

B. Joseph Pine II and James H. Gilmore

A business model is defined by what it charges for. In the Economic Pyramid of customer value creation (see Exhibit), there are five stages of evolution.

  • Commodities. A company that charges for undifferentiated stuff is in the commodities business.

  • Goods. One that charges for tangible things is in the goods business.

  • Services. One that charges for the intangible activities its employees execute is in the services business.

  • Experiences. But if a company charges for the time its customers spend with it, then and only then is it – economically – in the experience business. Charging for time incorporates experiences in a business model as a distinct economic offering.

  • Transformations. The fifth stage is to offer transformations. These experiential transactions are crafted to match an important customer aspiration at a particular moment in time. By meeting this desire, companies can promise a “transforming experience” – one that changes customers in some fundamental way. Examples: healthy life-style changes or cars that make better drivers.

Today, customers are increasingly dissatisfied with mass-produced goods and services and instead want their purchases to be authentic experiences. Memorable offerings that engage each individual in an inherently personal way are driving the economy. This is why the Transformation Economy is rapidly becoming a part of our daily lives.

In little more than a decade, experience thinking has influenced the development of new business models in a wide variety of enterprises. Five approaches are noteworthy:

  • Experiential marketing (EM or XM) applies experience staging to the marketing of goods and services, seeking to be less dependent on traditional media as the means of building demand.

  • Digital experiences increasingly flourish, using the Internet and other electronic platforms to create new technology interfaces focused on the user experience (UX).

  • The application of experience-staging prowess to operations – in what many call customer experience management (CEM or CX) – typically aims to enhance interactions with customers.

  • Experiences as a distinct economic offering works best when the focus is on the using experience of a company’s offerings, instead of just the user. This yields marketing experiences that can generate greater demand for a company’s core offerings plus it creates profitable experience offerings.

  • Designing experienced-based business models based on a transaction that offers transformational value – better health, improved appearance, critical training, wealth enhancement – allows the company to charge for the demonstrated outcomes customers achieve.

Bottomline

Recognize trends in customer needs and aspirations that provide opportunities to innovate business models that offer high value experiences or even customer transformations.

Designing innovative business models with a framework that promotes experimentation

Cara Wrigley and Karla Straker

Business model changes are among the most sustainable forms of innovation. To become more adaptive and responsive to changes, businesses will not only need to engage in business model experimentation, but also look to embrace business model innovation as a core competency and a means for sustained competitive advantage.

This requires exploration of dynamic, design-driven approaches to the creation of innovative business models. Using the “Business Model Canvas” of Osterwalder and Pigneur (Exhibit 1), five model types are identified for the process of business model innovation.

Need for experimenting

New business models rarely work the first time around. Business model experimentation and prototyping emphasizes the importance of the iterative learning and problem solving processes for testing different solutions and adapting them based on the results. The business model prototype serves a dual purpose. First, prototyping helps explore various scenarios and then can be used to stress test the viability and potential profitability of a venture. Second, a prototype forces participants to make their assumptions explicit and also to shift to a dynamic test-and-learn mind-set, an exploration of a broad range of new business model options.

Five design typologies

Five archetypal business models are offered as real world case studies. Each area of the business model canvas shows a different segment as the most logical primary driver behind each company’s business model transformation.

1. Customer led strategy explores diverse possibilities in new and untouched customer segments.

2. Cost driven strategy looks to reduce specific expenses, which often leads to creation of a unique product or service offering.

3. Resource led strategy uncovers novel ways to restructure or reapply the company’s resources and capabilities.

4. Partnership led strategy example is online product development platform Quirky.

5. Price led strategy aims to holistically reduce cost across the entire business model to provide a cheaper price. Southwest Airlines is the example.

These five approaches provide the stakeholder with a viewpoint from which to quickly prototype new and innovative business models. The intent is not to propose one “right” model, but rather generate many different and diverse “possible” models to evaluate and learn from.

Bottomline

A business model is never complete or static. Using the tools that enhance and expand the practice of business model experimentation should be iterative and ongoing. These five typology models provide a set of starting points from which a business can begin to explore different perspectives and gain insights into the internal and external capabilities of their company.

Masterclass Effective leadership today – character not just competence

Brian Leavy

Three recent publications offer valuable insights into the new directions that leadership development thinking and practice now need to take, with all three books placing particular emphasis on the importance of character, identity and values, not just competence.

Fred Kiel on character virtues and the bottom line

Organizational psychologist Fred Kiel’s book, Return On Character sets out to show that the strength of a leader’s character is an important driver of business success and to examine the implications for leadership development.

Kiel uses the metric Return on Character (ROC) – the result of Character (who a leader is) + Skills (what a leader does) – to explain how virtuoso leaders consistently outperform their more self-focused peers – as much as five times the level of return on assets. He then shows that much of what constitutes character in this context is a matter of habit. With sufficient dedication to self-development, good leadership character habits can be strengthened and bad ones changed.

Four “keystone character habits,” two of the head – integrity and responsibility – and two of the heart – forgiveness and compassion – provide Kiel’s basis for assessing character strength in practice.

Bill George on “authenticity”

Discover Your True North by Harvard professor and former CEO of Medtronic Bill George examines why the self-development process of discovering one’s core values and passion (authenticity) to lead is essential to becoming an engaging and empowering leader.

  • A survey of authentic leaders showed that their most “striking commonality” was the way their life stories influenced their leadership.

  • With examples, George shows how to become a more authentic leader by using your life story to 1) uncover your deepest values and discover who you really are at your core, and 2) find your own leadership voice and passion to lead.

Robert Kaplan on achieving the ownership mindset

The theme of leadership as a life-long developmental challenge is Robert Kaplan’s primary focus in What You Really Need to Lead. He explains why helping everyone to “think and act like an owner,” can drive the transition to more engaging workplaces and empower more leadership at every level. For Kaplan, leadership effectiveness revolves around the willingness and ability to develop an ownership mindset. What this involves can best be captured in the following set of questions:

  • Can you figure out what you believe, as if you were an owner?

  • Can you act on those beliefs?

  • Do you act in a way that adds value to someone else, a customer, a client, a colleague or a community?

  • Do you take responsibility for the positive and negative impact of your actions on others?

Bottomline

Kaplan, Kiel and George recognize the central role that a leader’s life story plays in this process.

Leadership and the wisdom of crowds: how to tap into the collective intelligence of an organization

Kurt Matzler, Andreas Strobl and Franz Bailom

There is compelling evidence for the superiority of groups in decision making. For leaders who are designing their organizational culture to drive innovative thinking and actions, there are ways to embed this truth for competitive gain.

Premise

Diversity trumps ability when: 1) there is a difficult problem to solve, 2) perspectives and heuristics of problem solvers are diverse, 3) the group of problem solvers is large enough, and 4) these problem solvers are collected from a pool that is large enough.

To tap into the collective intelligence of their organizations, leaders must create four prerequisite conditions: cognitive diversity, effectively tap into decentralized knowledge, let individuals contribute their ideas and knowledge without interference or influence and effectively aggregate existing knowledge.

Four steps to a smarter organization

The real challenge is for leaders to change their attitudes and their management style. There are four critical steps leaders can take to boost the collective intelligence of their organizations:

1. Create cognitive diversity. To learn new things we need to have more contacts outside of our circles of close contacts. Cognitive diversity embraces four elements:

  • Diverse perspectives – different ways of representing situations and problems.

  • Diverse interpretations – different ways of categorizing or partitioning perspectives.

  • Diverse heuristics – different ways of generating solutions to problems.

  • Diverse predictive methods – different ways of inferring cause and effect.

2. Create independence. Three of the biggest impediments to good group decisions are subservience to leaders, a culture of conformity and peer pressure. Effective tools to thwart groupthink are offered.

3.Access decentralized knowledge. To discover the levers and the fulcrum needed to produce a solution, leaders have to access the pieces of decentralized knowledge and bring them together. Many approaches have merit: for example, idea contests, Wikis, Blogs and worldcafés.

4. Effectively aggregate knowledge. The fourth challenge is to effectively aggregate dispersed knowledge. Averaging individual opinions is the simplest way. A more sophisticated approach is prediction markets. These can be used for a wide variety of purposes: to predict new product success, sales volumes or the value of an idea.

Bottomline

If company leadership effectively manages the four key conditions that promote collective intelligence, a crowd of volunteers with a wide range of backgrounds can be smarter than the best expert, introducing fresh ideas and solutions from different fields of knowledge.

Why a CEO should think like a Scrum Master

Alistair Davidson and Laura Klemme

CEOs seeking to drive continuous innovation throughout their firm often find themselves at a serious disadvantage when competing with smaller, fast-moving innovators. A common cause of this disadvantage is that many newer firms are employing a form of team management called Agile that has been refined in high performance software firms and is now increasingly practiced in other industries.

Employee empowerment speeds up learning and improvement

Almost all product and service offerings nowadays have a significant digital component. In practice, it is not a radical notion to have processes that are based upon Agile software development adopted as a general business model for product and service innovation. In Agile processes:

  • Work is done by self-organizing teams, networks and ecosystems that mobilize the full talents of those doing the work.

  • Work is focused directly on meeting customers’ needs, and interaction with the customer is essential for continuous testing and learning.

  • A member of the team, the “product owner,” focuses attention on the customers’ needs by prioritizing development issues.

  • Work proceeds in iterative cycles and progress toward fulfilling the needs of customers is assessed at every stage.

  • Rather than demanding super-human development efforts, the organization attempts to maintain a development pace that does not burn out the innovation team.

CEO as Chief Scrum Master

High performing, empowered Agile teams don’t spontaneously generate. They need a sponsoring senior manager, and that person can often be the CEO. One approach for CEOs is to imitate the role that a “Scrum Master” has in high-speed software development projects.

The CEO can actively shape management systems for supporting knowledge work. He or she can enable and promote a culture of autonomous teams, and act as a judge of last resort to support Agile teams. Shaping knowledge work requires creating an environment for training, coaching and incentivizing high performance teams for rapid innovation and faster learning from customers.

Strategy for innovation

In his or her role as Chief Scrum Master, here are some recommended strategic moves the CEO can take to promote innovation capabilities:

  • Set the expectation that innovations should account for a higher percentage of revenues and profits.

  • Identify innovation teams and grant them self-management status. Make the CEO available for removing high level problems.

  • Change remuneration practices to reward the entire team rather than individuals.

  • Specify an iterative approach that surfaces problems more quickly, so fixes can be made.

  • Push the organization to involve customers, and in some cases suppliers, which increases the value added and value creation of the project.

How leading companies practice software development and delivery to achieve a competitive edge

Eric Lesser and Linda Ban

Effective software development – from ideation to delivery – is crucial to achieving competitiveness. Yet most organizations are underprepared to leverage today’s technology trends. Furthermore, only a quarter of the companies studied are successful at it today, so there exists a significant “execution gap.”

Technology trends

Software development is the engine powering technology innovations. And these innovations have the potential to change industry landscapes:

  • Mobile device proliferation: Software applications for mobile devices can enable new customer relationships, help improve loyalty, introduce new channels and enhance productivity.

  • Collaboration across the ecosystem: Software can connect customers, partners and employees across boundaries, enabling innovative interactions.

  • Explosion of unstructured data – or “big data”: Through analytics software, organizations can better interpret the mass of structured and unstructured data to develop insights regarding customers, the supply chain and other parts of the operating environment.

  • Cloud platforms and solutions: Cloud solutions allow for business flexibility and reduced fixed IT costs by offering “as needed” services. Organizations are applying cloud solutions to optimize their existing processes, develop new products and services and create new business models.

  • Intelligent/connected systems: Software can integrate a range of fixed and mobile devices to build real-time decision-making capability into devices and integrated systems, making it easier to automate tasks.

Challenge and solution

Establishing an enterprise capability for accelerated software delivery has become essential for companies to find differentiation in the market. An IBM study shows that there are three dimensions of software development performance needed to close the execution gap.

  • Capabilities – The organization’s effectiveness in areas of software design, development and delivery, where they will need to excel to be competitive.

  • Practices – The organization’s maturity in processes, methods and systems for managing the software development and delivery lifecycle.

  • Results – The organization’s ability to deliver positive software development outcomes that contribute to the business.

Bottomline

Leading software organizations focus on software investments that efficiently and speedily deliver marketplace results. They build deep skills in Agile and lean software development methods and fostering extensive collaboration among business users, IT professionals and customers throughout the software development and delivery lifecycle.

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