51. Customer-Centricity Circle
To create something of value, organizations carry out a variety of tasks, that together is called their activity system. All tasks that directly result in value in the eyes of the customer are the primary activities, while support activities are undertaken to provide the necessary resources to run the primary activity system (see model 50, the Activity System Dial).
Organizations are customer-centric when they place the customer journey at the center of all their activities and organize their primary activity system as a seamless flow following the steps taken by the customer.
The Customer-Centricity Circle gives a generic picture of what a typical customer journey looks like and then shows how an organization’s primary activity system should be wrapped around this customer journey, to accompany each customer in a seamless manner. The framework suggests that the customer experience should be actively managed throughout the full journey, using the many moments of interface to create customer value. The people and departments performing this flow of activities must therefore work closely together, instead of only focusing on their own task and leaving customers to wander between departments. In practice, each type of customer journey, and therefore each primary activity system, will be different.
The five steps of every customer journey, and the linked types of activities, are the following:
- Explore: Get inspired. At the start of a journey, customers are often still orienting themselves, looking to which needs should be addressed first and what types of value propositions are available. They will also scan for potential suppliers. In this phase, an organization will want to understand the customer’s needs and behaviors, while making themselves visible as potential supplier. At the same time, a competitive value proposition will need to be formulated and information about it made available to the customer.
- Examine: Go Shopping. Once a customer has become more committed to the idea of purchasing a product or service, the serious shopping can begin. More specific information about various products and suppliers will be requested and evaluated. The organization can use this interaction to influence the customer’s wishes and steer them towards a particular offering. In this part of the sales funnel there is often also a need to negotiate about the price and conditions.
- Exchange: Get it. As soon as customers finish the decision-making process, they will want to purchase and receive the goods or services. For the organization this means that they need to be able to deliver, often requiring earlier capacity planning. Once the order is taken and processed, the previously produced goods can be handed over or delivered, or the product/service will still need to be created, which sometimes will happen immediately, but often requires some scheduling and provision at a later moment.
- Experience: Enjoy it. Many products or services can be directly enjoyed by customers, but sometimes they need help to install, start-up and/or learn how to use their new purchase. During use they can also have questions and/or require support, while some problems might need to be resolved. For the organization this means after-sales support, which can range from helpdesk activities to on-going maintenance, repair and dealing with customer dissatisfaction for any variety of reasons.
- Extend: Repeat it. Ideally, organizations would like to have repeat customers, or at least customers that promote them among other customers. So, when customers want to dispose of their old products and reflect on what they liked and what they would prefer to have differently, the organization needs to be present to help the customer to return the old product, look back fondly and even go around the circle again. Here customer surveys can feed into the next round of value proposition development.
- Customer-centricity requires putting the customer journey at the center. In a customer-centric organization, it is the customer’s value perception throughout the customer journey that is at the center of attention.
- Customer-centricity requires the primary activity system to follow seamlessly. To optimize the customer experience, all of the primary activities need to be aligned with one another to create a seamless flow following the customer journey.
- Customer-centricity requires a cross-functional approach. If different primary activities are given to different functional departments, the seamless flow will be endangered. Therefore, in a customer-centric organization, cross-functional coordination of the primary activities, or even cross-functional teams, is a crucial feature of the organizational design.
- Customer-centricity requires support activities to be supportive. In turn, all support activities (e.g., HR, IT, Finance, Procurement, Facilities, R&D) need to be wrapped around the primary activity system, focused on how to enable the primary activity providers to follow the customer journey as effectively as possible.
- The customer-centricity circle differs per business. Which type of customer journey to support and how to develop a primary activity system are strategic choices. No two will be the same. The customer-centricity circle model is only generic and needs to be adapted.
To prosper, organizations need to provide products and/or services that are valued by their clients – they must offer a value proposition that prospective customer prefer above all alternatives (see model 38, the Value Proposition Dial).
To deliver such a value proposition, organizations need to perform a wide variety of value-adding activities – they must orchestrate a large number of tasks that jointly cost less than the value proposition is worth. Porter (1985) initially called this whole set of tasks the value chain, but later switched to the term activity system, as the activities aren’t necessarily sequential.
The Activity System Dial provides a map of all potential value-adding activities performed in an organization, structured into three main categories. All activities directly influencing the value perception of the customer, are primary activities. All activities providing resources for running the primary activities (and each other) are support activities and only indirectly impact customers. The remaining activities all seek to steer the primary and support activities in a certain direction, which is why they are called control activities. Over their lifetime, organizations start at the center and then add activities to the outer rings, increasingly further away from the customer’s value experience. The Activity System Dial can be used to plot the existing situation, but also to discuss consistency, balance, and future improvements.
The three rings of the dial are the following:
- Primary Activities. As the customer determines what value is, all activities directly impacting the customer’s value perception are called primary. They are ‘wrapped around’ the customer and influence the customer experience at various moments throughout the customer journey. As customer journeys can differ significantly between different types of value propositions, so will the primary activity flow. Marketing tends to focus on the start of the journey, after which products/services are made and then sold, or vice versa, first sold and then made. But in practice, the primary activities tend to be intertwined, with various moments of truth presenting themselves in various orders (e.g., an operational deliver moment, leading to a brand experience moment, leading to a cross-selling opportunity). This is why we speak of an interlinked activity system, not a sequential value chain.
- Support Activities. In a typical start up, the few employees tend to focus fully on the primary activities, mobilizing the necessary resources on the fly. But soon a need emerges to get someone who can take care of some of the “back-office stuff”, like the people-related infrastructure (HR), finance-related infrastructure (Finance) and information-related infrastructure (IT). This soon leads more resource experts, for procurement (Purchasing), technology (R&D) and facilities. This division of labor allows for specialization, but requires more activity system coordination, while introducing the danger of support activities not fully aligned with primary activity priorities. Note that sometimes the support activities also interact with the customer (e.g., client billing, public facilities, procurement for customers), blurring the boundary between support and primary activities.
- Control Activities. The third ring of activities doesn’t provide resources, but provides guidance – these activities stipulate policies, determine procedures, shape conditions, and steer behaviors in order to get the best out of the two inner activity rings. In smaller organizations all these control activities tend to be carried out by managers themselves, as they steer performance, risk, quality, planning and sustainability policy. But in larger organizations further specialization takes place, with experts developing rules, templates, and processes, to reach a higher level of professionalization. However, this fragmentation of activities makes it even more important to align all activities in the activity system, while the hazard increases that specialists far away from the customer journey will establish value-destroying regulations and bureaucracy.
- The activity system is about creating customer value. The work that an organization carries out shouldn’t be done because of habit, but because it is the best way to create value for the customer. Therefore, the customer needs to be at the heart of any activity system, with all tasks organized and coordinated around the customer journey.
- The activity system consists of three types of activities. All activities directly influencing the customer’s value perception are primary. All activities focused on providing the resources to run the primary activities (and all other activities) are support activities. All activities steering the primary and support activities (and each other) are control activities.
- The activity system needs to be internally aligned. The activities in all three categories need to be aligned, forming a consistent and balanced system. Support and control activities need to keep customer value at the center and not become self-centered.
- The activity system needs to be strategically aligned. The activity system in turn needs to be aligned with the entire business system, which then need to be attuned to the market system and organizational sys
- ctivity system, as part of the overall strategy development.
49. New Pyramid Principle
Managers give presentations all the time – verbal monologues, often supported by visual projections. They can be short, taking only a few minutes, but can also be extensive, spanning many hours. The audience can be small, limited to only one or a few people, but can also be large, especially when broadcast via digital media.
Whatever the setting, the presenter will want to be impactful – realize a certain effect with the audience within a limited amount of time. A presentation is a means to an end, so presenters will want to tailor their monologue to achieve the intended result as effectively as possible.
The New Pyramid Principle describes four different kinds of presentations, with the width of the pyramid symbolizing the relative length of time that each sort of presentation would typically require. The framework suggests that staying higher up on the pyramid not only results in a shorter presentation, but also in a more impactful one. The name of the framework refers to the original pyramid principle, that stated that effective presentations start by offering a clear big picture overview and then move down into more detail where necessary. The New Pyramid Principle isn’t about moving from overview to details but similarly recommends selecting the top presentation type and only moving down if the situation requires you to do so.
The four types of presentations are the following:
- Presenting the Actions: With the intention to initiate. Most people give a presentation because they want to trigger some follow-up activities, although they often fail to specify what they want the audience to do. Therefore, the most impactful type of presentation is where it is made clear what is asked of the audience, while engaging them to act accordingly. The focus is on getting people to embrace the stated actions and to motivate them to start implementing. The more SMART (specific, measurable, actionable, realistic, and time-bound) the actions, the higher the chance of getting people moving.
- Presenting the Message: With the intention to influence. The second type of presentation is generally a bit longer and focused on influencing people to change their minds and embrace a new point of view. The more clearly, succinctly, and persuasively this message is formulated, the higher the chance will be that the audience will accept it and be converted to this new way of seeing things. Effective presenters will often combine the top two types of presentations, underpinning their compelling call to action with a convincingly formulated message explaining why the stated actions need to be realized.
- Presenting the Argument: With the intention to illuminate. The third type of presentation is even longer, putting forward a line of reasoning in order to explain certain conclusions. It structures a logical argument, based on analyses and insights, building towards a particular result. This argument can often be used to justify the above message and actions. However, the opposite often happens, as the audience gets overwhelmed with facts and insights that the sender is too eager to convey, while the message and actions for the receiver are drowned out or even forgotten.
- Presenting the Voyage: With the intention to inform. The fourth type of presentation is the longest of all, retelling the intellectual voyage that was undertaken to arrive at the reported facts and insights. This journey description typically clarifies how the data was collected and the analysis performed. However, this is the formula for death by PowerPoint, and fits more with a written report than in a verbal presentation. Moreover, taking people along on this voyage in a presentation is more about your need to share your work (sender-centric), than thinking about what the audience needs to hear (receiver-centric).
- Presentations are not verbal reports. Too many presentations sound like someone is reading a written report aloud (and the fact that many reports are written in PowerPoint makes it all the more tempting). Yet readers can flip through a report as they see fit but have to sit through a presentation with no control of the process. This places a huge responsibility on the presenter to think from the perspective of the receiver.
- Presentations can have 4 types of impact. The most powerful impact is when a presentation gets people to do things (focus on initiation), while the second most impactful gets people to think things (focus on influence). One step short of this type of convincing is to get people to understand things (focus on illumination), while the least ambitious is to get people to know things (focus on informing).
- Presentations can have 4 types of format. An actions presentation is a tangible call to action, a message presentation has a clear point to make, an argument presentation explains a line of reasoning and a voyage presentation reports on all of the steps taken.
- Presentation inputs are created bottom-up. Presenters typically create their material bottom-up, starting with an analytical voyage, resulting in some type of argument. Sometimes they even make the effort to distill their key message for the audience and even formulate some follow-up actions they believe the audience should take.
Presentation content should be selected top-down. Effective presentations are constructed the other way around, starting with the desired actions and then the underpinning message, while only including supporting arguments and a description of the analytical voyage where necessary. This keeps the presentation short and focused.
48. Cultural Fabric Model
A culture is the set of unwritten social rules determining how people are expected to behave – norms that govern how we should conduct ourselves, literally telling us what is normal. These norms are rooted in certain shared beliefs (what is true) and values (what is important). Any group of people can develop a culture, from a nation to an organization or even a team.
Cultures are notoriously difficult to change, as the shared beliefs and values seem self-evident to the people immersed in the culture and individuals internalize behavioral norms as part of their identity, deriving moral certainty, pride, and a sense of community from them.
The Cultural Fabric Model describes the four types of “threads” that can be employed to weave a renewed culture for any group of people, whether a team, department, unit, organization, industry, or nation. The metaphor of weaving a fabric is intended to convey the notion that cultures are not constructed like a machine, but delicately spun and knit together from a multitude of initiatives, none of which is strong enough by itself, but jointly create a robust and durable whole. The model suggests there are four types of culture-weaving initiatives (in the light blue rectangles), that differ along two dimensions, described in more detail below.
The four types of culture-weaving initiatives differ along two dimensions:
- Espoused vs. Enforced Norming. To reshape a culture, you need to advertise which new behaviors you expect and then check up on whether people are conducting themselves in this new manner. The advertising upfront is called espoused norming – you proactively communicate which rules people should embrace (steering by feedforward). The checking along the way is called enforced norming – you steer people by feedback on how well they are doing, rewarding appropriate behavior, and pushing for changes where needed.
- Explicit vs. Tacit Norming. To reshape a culture, you need to get people to learn new behaviors. This learning can be driven by explicit norming – precisely articulating what it is that needs to be learned, then transferring these tangible norms to the receiver, who then needs to understand and internalize them. But people can also learn by being exposed to tacit norming – the new norms aren’t spelled out but can be indirectly derived and copied from examples and circumstances. This is learning by assimilation, instead of articulation.
These two dimensions lead to the following four types of culture-weaving initiatives:
- Conveying Cultural Direction. These explicitly espoused norming initiatives are all directed at communicating the desired cultural change by making the unwritten social rules more written. By making the new behavioral norms more tangible and easier to understand, it is hoped that people will more readily adopt them and change their behavior accordingly.
- Checking Cultural Compliance. These initiatives are all directed at explicitly enforcing that people stick to the new cultural norms. They include providing tangible feedback on how well the group and the individuals are doing, as well as rewards for exhibiting the desired behavior and corrective measures where the expected conduct is found lacking.
- Contributing Cultural Examples. Instead of explicitly saying what the behavioral norms should be, they can also be shown and speak for themselves. These initiatives are all intended to communicate the desired culture by example, so that people become inspired and start to believe that the espoused changes will truly happen.
- Calibrating Cultural Fit. Finally, these initiatives are directed at the ongoing fine-tuning of people’s behaviors by tacitly and subtly reinforcing the positive and discouraging dissonance. People can be continuously nudged in the right direction by appreciating what went well and helping them to see what they could have done better.
- Shaping culture is hard. To people who share a culture, their norms are normal – these unwritten rules are self-evident and have become part of people’s identity. Adapting these norms, and underpinning beliefs and values, is a gradual process that can take a long time.
- Shaping culture requires a focus on norms. While culture is rooted in different beliefs and values, these are extremely difficult to change directly. Instead of focusing on changing what people think, it is easier to focus attention on changing how they should behave.
- Shaping culture requires many initiatives. To achieve cultural change, it is necessary to weave together a new cultural fabric from a large number of threads – initiatives that are mutually reinforcing and together can form a strong whole.
- Shaping culture requires espoused and enforced norming. To change a culture, you must constantly and proactively take initiatives to communicate where you intend to go (steering by feedforward), while at the same time checking whether course corrections are needed and/or the current direction needs to be locked in (steering by feedback).
- Shaping culture requires explicit and tacit norming. To change a culture, you can take initiatives to make the unwritten rules explicit and get people to consciously embrace them (learning by articulation), but you can also leave the social rules tacit and encourage people to copy the positive behavior of others (learning by assimilation).
47. Corporate Strategy Framework
When an organization operates in two or more lines of business, it needs a separate business level strategy for each business unit, choosing where to position itself in the market system (“where to play”), which model to use for its business system (“how to play”) and which model to use for its organization system (“who should play”). These three key business level strategy choices are described in the Strategic Alignment Model (Meyer’s Management Models #32).
But besides strategies for each of the business parts, multi-business organizations also need an overarching corporate level strategy for the whole. This is true for organizations with just a few business units, but equally for organizations with dozens or even hundreds of them.
The Corporate Strategy Framework outlines the four key choices when formulating a corporate level strategy. This framework builds on the business level strategy choices described in the Strategic Alignment Model, shown here as three gray vertical ‘silos’ (the market, business, and organizational system choices of each business unit). Only three lines of business are depicted here to keep it simple, but there can be many more. The key corporate level strategy choices are the red arrows, that come on top of the business level strategy choices. The light red arrows are business model choices, while the dark red arrows represent organizational model choices.
The four key choices that need to be made for a corporate level strategy are the following:
- Corporate Value Creation: Which balance between responsiveness & synergy? Each business unit needs to align its market and business system choices, being responsive to its own specific competitive situation. Yet, at the same time, cross-business synergies can be pursued, such as leveraging resources, linking activities and aligning value propositions, but this requires being less unique and using a joint approach. So, a choice must be made about what to do differently or similarly across business systems to create maximum value.
- Corporate Composition: What businesses to be in? When choosing which lines of business to be in, a corporation needs to follow the above-mentioned value creation logic, building or acquiring businesses that are responsive and can be successful in their own right (creating standalone value), while simultaneously preferring businesses that fit with the key synergies being pursued (creating synergy value). So, businesses need to be selected that maximize the sum of the standalone and synergy value.
- Corporate Linkages: Which balance between autonomy & integration? To support its responsive business system, each business unit requires some autonomy to develop its own specific organizational system, including its own type of culture, structure, processes, people, and leadership. At the same time, to achieve the intended synergies, the business units require some integration into a joint corporate organization. So, a choice must be made about what to do separately or together across organizational systems.
- Corporate Management: Which balance between control & empowerment? The more responsive a business unit needs to be and the more autonomy it has been given, the less guidance it will require from the corporate center – it can be empowered to make its own decisions, with limited central control. The more cross-business synergy and cross-unit integration envisioned, the more steering that will be required from the center. So, the center needs to choose what and how much to control, and where to empower.
- Corporate level strategy encompasses business level strategy. Each business unit part in a corporation needs its own strategy, on top of which a strategy is needed for the whole. Both levels need to be aligned, but which is in the lead can vary.
- Corporate level strategy is about adding value to businesses. Having a corporate level adds extra cost, so it must add at least as much synergy value to make sense, while avoiding too much loss of responsiveness. This makes finding the right balance between responsiveness and synergy the key business system choice.
- Corporate level strategy is about choosing the best corporate composition. A corporation will want to be in businesses that can create stand-alone value, but also create synergy value in accordance with chosen responsiveness-synergy balance.
- Corporate level strategy is about choosing the supporting organization model. To achieve the intended value creation with the chosen businesses, a corporation needs to balance business unit autonomy and corporate integration (called horizontal design), as well as business unit empowerment and corporate center control (called vertical design).
- Corporate level strategy is more than central vs. decentral. Corporate strategy discussions are often framed as centralization vs. decentralization. This is a dysfunctional approach. Synergies are achieved by integration, which doesn’t have to be at the center, nor does it always require central control. It’s time to ditch the central-decentral dichotomy.
46. Ambition Radar Screen
Motivations are the reasons why people intentionally do something – they are the goals driving people’s behaviors. Of course, many other psychological forces also influence how people think and behave, such as emotions, routines, beliefs, and personality. But humans are willful beings and much of their behavior is motivated by striving towards certain goals.
When people’s motivations are consistent over time, they have an ambition – they are, consciously or unconsciously, aiming to realize some fundamental objective. An ambition is the overarching theme – the leitmotiv – driving much of their actions.
The Ambition Radar Screen builds on the work of McClelland (1961) to outline the four main motivational factors driving people’s behavior (tagging on virtue to McClelland’s achievement, affiliation, and power). The model adds an extra layer by indicating that people might desire each factor in its own right but might also be motivated by the status attached to each – the social standing flowing from the factor might be a goal in itself. The radar screen metaphor emphasizes that the model is not intended for mapping and understanding people’s psychology in detail, but to have an early warning of “where each person is coming from”.
The four main motivators making up a person’s ambition are the following:
- Striving for Achievement. Many people are driven to realize something of value – to be successful at some skill or activity. It can be as small as improving their golf handicap or increasing sales, and as large as building a company or saving lives. The satisfaction can come from reaching the goal, but also from making progress and doing better than expected. But the motivation can just as well come from the prestige of achieving more than others. It can be about being recognized as better, or even the best, and then being admired, praised, or even immortalized, because of the accomplishment.
- Striving for Virtue. Besides doing well, you can also be good – instead of focusing on achieving a goal, ensuring that your behavior en route to the goal is morally sound. You can strive to act with integrity, honesty, and honor. The satisfaction can come from knowing that you have done the ethically right thing, but also from the resulting trust that others will have in you. But here too the motivation can come from the prestige of being morally superior to others. It can be about being recognized as more righteous, principled, and exemplary, and then being respected, praised, or even idolized for it.
- Striving for Affiliation. As social animals, people also strive to be connected to others – to have meaningful relations. This can be a loose relationship in which a person is seen, accepted and respected, or a tighter relationship of friendship or love. The satisfaction can come from feeling psychologically safe in the presence of the other, all the way to feeling a sense of affection and belonging. At the same time, belonging to a specific group can be an enormous boost to a person’s social standing. The motivation can be to be seen as part of the in-crowd, and then to be looked up to and to be given special privileges.
- Striving for Power. As willful animals, people also strive to have control over the situation – to be able to determine what happens. This can be influence over your own future, by having the resources and autonomy to act, but can also be influence over others. The satisfaction can come from having the freedom to find your own way, but also from having the clout to get your own way. But here too the motivation can come from being seen as more powerful than others. It can be about being recognized as stronger and potentially more forceful, leading others to take you more into account, or even to be more compliant.
- Motivation drives people’s goal-directed behavior. People do things for many reasons, such as fear, hope, habit, belief, and situation, so understanding their behavior is difficult. But a considerable influence on thinking and acting are the goals that people intentionally strive to realize. When these motives for behavior are consistent, they form an ambition.
- Motivation comes from striving for four main goals. People can pursue four types of goals: achievement (having success), virtue (being good), affiliation (being connected) and power (having control). For most people, all four will be part of their motivation, but their ambition will focus on one or two of them.
- Motivation can be intrinsic or socially-driven. People can pursue each of these goals as desirable in themselves, or because they give higher social standing – people can be motivated to play status games, being better than others at each of the four goals. Intrinsic and socially-driven motivation usually go together, but one dominates the other.
- Motivation can be tracked with a radar screen. Few managers have the skill, time, and circumstances to paint a detail psychological portrait of the people around them. A more pragmatic approach is to quickly spot where people’s behavior is coming from, by screening them with a more rough-grained tool, such as the ambition radar screen.
- Motivation screening is more useful than personality type indicators. It is fashionable to use MBTI, DISC or Management Drives to give people a quick label (“you are blue, that’s why you act that way”). Reflecting on people’s motivations requires a bit more effort, but generally offers much more insight into their behavior and how to influence it.
45. Resistance to Change Typology
Panta rhei – everything flows – was the observation made by Heraclitus about 2500 years ago. People change, organizations change, conditions change; only change itself is permanent. It can vary, from slow and incremental to fast and transformational, but occurs everywhere.
Yet not only change is ceaseless, so is people’s inclination to resist change – to be reluctant to embrace the transition from A to B. When people value what they have, they show resistance to letting go; when they question what they are getting in return, they exhibit resistance to taking hold. Not everyone resists all the time, but it is a common human response to change.
The Resistance to Change Typology outlines the six generic categories of reasons why people experience reluctance to change from a current to a future state (also see Meyer’s Model #1, the Mind the Gap model, for the challenges of change). The typology distinguishes between three different drivers of resistance, namely interests (political resistance), views (cognitive resistance) and feelings (emotional resistance). It also makes a distinction between resistance that is due to the need to let go of the current state and to take hold of the future state.
The six reasons that people resist change are the following:
- Political Resistance. When people anticipate that a potential change might not serve their interests, there can be a strong motivation to push back. This resistance is called political as it is driven by people’s perception of winning or losing part of their stake in the “game”.
- Loss-Aversion. All changes involve the inherent threat of losing something of value, such as money, access to resources, influence, autonomy and standing. It makes “game theoretical” sense to avoid such losses of power and to safeguard your interests.
- Risk-Aversion. Most changes also offer potential gains, as an individual, department and/or organization. But it is seldom guaranteed that the future state will bring the projected benefits, making people hesitant to engage in such a risky endeavor.
- Cognitive Resistance. When a potential change is at odds with people’s understanding of what is necessary, they are also likely to be reluctant to come on board. This resistance is called cognitive, as it is driven by people’s mental beliefs, assumptions, and reasoning.
- Discomfort. If a change challenges people’s established worldview, pushing them out of their comfort zone and requiring them to let go of cherished certainties, this can cause mental anguish. People generally prefer to avoid such disorientation and distress.
- Confusion. At the same time, change usually presents a new reality that is difficult to comprehend and internalize. New insights and new rules just don’t seem to make sense, leaving people confused. Rejecting such foreign ideas helps to reestablish mental order.
- Emotional Resistance. When a potential change negatively impacts people’s deeper feelings, they are also more likely to push it away. This resistance is called emotional, as it is driven by people’s, often subconscious, inner sentiments and disposition.
- Grief. If a change makes people feel they need to let go of something for which they have great affection and to which they have become psychologically attached, this can result in sorrow and the need to mourn. People prefer to evade the pain of grief.
- Fear. At the same time, change usually triggers angst for what might happen en route to the future state and when the destination is reached. There can be fear of loss, discomfort, confusion, grief, and even fear of fear – all emotions preferably averted.
- Resistance to change is about reluctance to let go and take hold. In a change, you know what you have, but not what you’re going to get. Both aspects cause resistance. If you know what you have, letting it go can be disadvantageous, disorienting and even painful, while grabbing onto the new can be risky, confusing, and even outright scary.
- Resistance to change can be political, cognitive, and emotional. There are three core drivers of change resistance. Political resistance happens when people fret about what change will mean for their interests; cognitive resistance when people struggle with ideas contrary to their views; and emotional resistance when change triggers negative feelings.
- There are six different types of resistance to change. Political resistance comes in two flavors – loss-aversion when current interests need to be let go, and risk-aversion when potential future interests are difficult to ensure. Cognitive resistance likewise – discomfort at letting go of existing certainties and confusion in trying to grasp new views. Ditto emotional resistance – grief for letting go of present attachments and fear for what the future might bring.
- The six types of resistance to change often reinforce each other. All six types of resistance can come into play at different moments, but they are often intertwined in practice, as political and cognitive resistance quickly spark emotional resistance.
- Resistance to change can trigger resistance to resistance. For change managers it is crucial to understand what type of resistance they are facing. At the same time, they need to realize they might become resistant to resistance for many of the same reasons.
44. 5I Innovation Pipeline
Innovation is the process of coming up with something new and introducing it into practice. In organizations innovation efforts can be directed at novel products, services, or value propositions, but also at new procedures, processes, or ways of working. More ambitiously, even the business model or the organizational design can be reworked.
Innovation is not a brief event, but a longer process, typically consisting of a number of stages. It is also seldom the work of just one person, but usually involves a variety of stakeholders. Given the multiple steps and people required, it is important to map out and effectively structure the innovation process.
The 5I Innovation Pipeline framework outlines the five generic stages that need to be organized to successfully innovate as organization. The framework suggests that numerous innovation ideas are generally needed at the start of the process to eventually finish with just one or a few launchable innovative ventures (be it a new product, process or even business). As such, the process can be pictured as a narrowing pipeline, through which the potential innovations need to flow, with various initiatives at various stages of development. Separating the sequential steps are stage gates at which the viability to move to the next step is measured and no-gos are filtered out. Lubricating the pipeline flow are supporting learning and political processes.
The five stages of the innovation pipeline are the following:
- The first step is to generate a wide variety of ideas, which can be done in many ways, such as brainstorming, scouting for external leads, doing research, and envisioning the future. The general rule of thumb is that coming up with new ideas shouldn’t cost more than a few hours. Then the ideas need to be evaluated on their viability – are they attractive and realistic enough to justify the investment of additional days or weeks of work.
- Invention. The second step is to convert the viable ideas into more tangible concepts. This process of using initial hunches to create potentially workable solutions is called invention and can involve deeper analysis, exploratory discussions, experimentation, and ongoing tinkering. Eventually each invented product, process or business model will also need to be evaluated on its viability – is it practically feasible. This is also called proof of concept.
- Initiation. Passing to the third step means the organization is willing to invest weeks or months to turn the invention into a minimum viable product (MVP) – something just good enough to field test with potential users. This initiation phase might involve modelling or simulating the new product, process, or business model, and then ramping it up to a prototype, followed by something externally presentable, to pass the project viability test.
- Incubation. Once the project (i.e., product, process, or business model) has proven to be technically viable, the next step is to incubate it further, to turn it into a commercially viable proposition that can be launched in practice. This stage usually involves doing market research, staging trials, gathering lead customer feedback, adapting the proposition and finetuning a business plan.
- Introduction. If the proposition is commercially attractive enough it will pass to the fifth and final stage of the innovation pipeline. This introduction can be inside the organization, in the case of a process or way of working, or outside in the market, if it is a new product, service or business model. Either way, the focus is on selecting the right application area and gaining acceptance from the prospective users and/or buyers.
Note that the main innovation pipeline activities are flanked by two crucial facilitating activities:
- Learning process. Innovating is a constant journey of questioning existing views and discovering new insights, which challenges the innovators, but other stakeholders as well.
- Political process. Innovating also means change, which is risky and can upset existing power structures. So, innovators need to align interests and secure ongoing support.
- Innovation requires much more than invention. Invention is the process of coming up with something new, but it is only an innovation if the new product, process, or business model is introduced into practice. Invention is technical, innovation is also commercial.
- Innovation requires going through 5 stages. Innovation starts with many ideas being generated (ideation), which are then turned into potentially feasible solutions (invention). Some of these rough concepts are subsequently ramped up into minimum viable products (initiation) and then molded into commercially attractive propositions (incubation). The last step is to launch the new venture and ensure stakeholder acceptance (introduction).
- Innovation requires increasing investment & commitment. As potential innovations move through the pipeline stages, the required management commitment and investment in money, capacity and attention multiplies, so their number usually dwindles in step.
- Innovation requires ongoing learning & political support. Innovation challenges the status quo, by upsetting received wisdom, creating new risks, and undermining existing interests. Hence, innovators need to keep an eye on organizational learning and politics.
- Innovation requires a filled pipeline. As it takes quite long for innovations to pass through all five stages and only a few make it to the end, organization need to keep their pipelines filled. This framework can be used to visualize an organization’s innovation portfolio.
43. Thinking Directions Framework
People think all day, but they seldom think about how they think. In practice, people follow certain thinking routines to which they have become accustomed, often taking mental shortcuts (called cognitive heuristics) to make life easier. Yet, such habits of the mind limit and color what people see. This makes everyone susceptible to cognitive biases.
As alternative to such “quick and dirty” judgement, you can also use more “slow and thorough” thinking methods. These structured approaches to thinking discipline you to follow a certain line of inquiry, aiding you to explore issues and potential solutions more meticulously.
The Thinking Directions framework outlines five complementary thinking methods that are applicable to every challenging issue, in business or elsewhere. Each of the thinking methods points the exploration into a certain direction, to ensure that an issue and/or solution are looked at from all angles. No examination is complete until all five have been used.
The five thinking directions are the following:
- Drill Down. The best question to kick off the deeper examination of an issue is “what?” – what is going on, what is the issue, what are the parts of the issue and what is the issue behind the issue? Drilling down starts with delineating the issue (what is the scope?), followed by mapping the variables involved and identifying their relationships (what is the structure?). The objective is to dig deep enough to understand the issue’s complexity.
- Zoom Out. A valuable follow-up question is “why?” – why is this happening, why is this an issue and/or why is the proposed solution fitting? Zooming out is about taking a step back to be able to see the bigger picture – to see the forest, not only the trees. The objective is to gain enough overview to understand in what way the issue is influenced by the broader context and how it in turn can/will have an impact on other issues.
- Zoom In. Thinking in the opposite direction leads to the questions “who”, “how”, “where”, and “when” – who is involved, how does it work, where is it felt and when are actions expected? Zooming in is about taking a step forward to be able to see the detailed picture – to see the leaves on each of the trees. The objective is to gain a fine-grained insight into the situation and to thoroughly understand how any solution might play out in practice.
- Diverge. A fourth thinking direction is to ask the question “what else?” – what else might be going on, what else can explain the situation and what else might be a solution? Diverging is about looking further than the likely suspects, by considering alternative explanations or paths forward. The objective is to avoid jumping to conclusions by always searching for a number of different ways of understanding and/or acting.
- Converge. After asking all of the other questions, it is essential to also ask “what then?” – what then is the issue, what then is the advice, what then is the decision? Converging is about evaluating the various options and arriving at a conclusion. The objective is to avoid ongoing paralysis-by-analysis by weighing the alternatives already on the table with the intention of coming to a definitive result.
- Thinking is colored by cognitive biases. Every person sees the world through their own lens. This mental map shapes what you observe and how you make sense of these observations. This biased view of reality can be reenforced if other group members share the same assumptions (called the dominant logic or in extreme cases groupthink).
- Thinking is steered by cognitive heuristics. People are not only biased but also tend to cut corners when thinking by using quick and dirty reasoning methods. Such cognitive heuristics include assuming that things are simple, that they can be understood in isolation and that old explanations and solutions can be used again.
- Thinking can be enriched by thinking methods. To circumvent cognitive biases and heuristics as best as possible, people can use more slow and thorough thinking methods that discipline the user to ask a number of questions and go through various thinking steps more consciously. Doing this with a diverse group of people is even better.
- There are five universal thinking methods. Under all circumstances people’s reasoning can be improved by thinking in five directions: Drilling down, to understand the issue structure; zooming out, to understand the bigger picture; zooming in, to understand the specific details; diverging, to understand the potential alternatives; and converging, to understand what the conclusions could be.
- Effective managers use all five thinking methods. The five thinking directions are complementary and should be used by managers for all non-routine issues to ensure they don’t “jump to solutions”. The five sets of questions can be seen as a type of checklist to help managers look at issues from all angles. However, while each thinking direction is conceptually easy to understand, having the discipline to consistently employ them is hard.
42. Corporate Management Styles
Firms often organize themselves into business units when they serve different markets and need to be responsive to the differing customer requirements and competitive dynamics encountered in each market. Each business unit will develop its own specific business strategy, while the firm as a whole will formulate a corporate strategy.
The business units will typically report to a headquarters, called a corporate center, that in turn will steer the business units in a particular way, which is called corporate management. There are different approaches to steering that the corporate center can take, referred to as styles.
The Corporate Management Styles framework outlines five different approaches to steering the business units, along a continuum from a high level of corporate control to a high level of business unit empowerment. The styles higher up the continuum are used when the corporate center needs to take the lead and integrate the business strategies to ensure that the important synergies are realized. The styles lower down the continuum are used when the business units need to take the lead and differentiate their business strategy to ensure responsiveness to their specific challenges.
The five corporate management styles are the following:
- Integrated Organization Style. In this style the corporate center runs the firm as if it was almost a single business unit. One integrated corporate strategy is set, that needs to be implemented at the business unit level, with only minimal wiggle room for specific adaptations. Many primary activities are centralized or highly coordinated, as are almost all of the support activities, in order to maximize cross-business synergies.
- Strategic Direction Style. In this approach the business units have a more distinct identity as separate vessels, but the corporate center keeps the fleet closely together to ensure that the significant cross-business synergies are realized. These synergistic activities tend to be centralized and/or coordinated, as are support activities, while on other activities the units have more room to maneuver as long as they stick to the overall strategic direction.
- Strategic Control Style. Using this style, the corporate center strives to balance between steering the business units towards specific synergies and empowering them to take the initiative and respond to the demands in their own market. Therefore, the strategy will be a co-production, with the corporate center setting a general direction, challenging BU ideas, and giving final approval. Centralization and coordination of activities will be more selective.
- Strategic Guidance Style. In this approach the business units are clearly in the lead, giving them the autonomy to flexibly respond to developments in their own market. The corporate center will give them some strategic guidelines (e.g., grow or hold) and financial targets, while challenging and ultimately approving their plans. Cross-business synergies will be limited and often not mandatory for the business units.
- Financial Control Style. Finally, in this style the corporate center behaves more like a holding company, running a portfolio of financial investments, with little more than financial synergy between the business units. There might be some strategic discussions between the corporate center and the BU teams, but the performance targets set and monitored will be financial. Meeting these targets will ensure that the business units remain empowered.
- Corporate centers have a management style. In model 14 (7I Corporate Center Model) it was outlined that every corporate center can play 7 roles, but it wasn’t described how differently these roles can be played. The specific approach taken by a corporate center to playing these roles, and thereby steer the firm, is their corporate management style.
- Corporate centers balance control and empowerment. One the one hand, corporate centers want to exert control over their business units, actively influencing what they do, to increase corporate value creation (see model 35). On the other hand, they want to empower their units, to be responsive to market conditions and create business value.
- Corporate centers can select from 5 styles. There are 5 corporate management styles on a continuum from corporate control to business unit empowerment. In the first two (integrated organization style and strategic direction style) the corporate center is in the lead, with the business units following and adjusting. In the last two styles (strategic guidance style and financial control style) the business units are in the lead, with the corporate center placing guardrails. The middle style (strategic control) is balanced.
- Corporate centers can easily overdo control. Control needs to add value, by facilitating synergies and challenging BU management. But corporate centers easily descend into knowing everything better, crushing BU initiatives, pursuing useless synergies, and imposing one-size-fits-all solutions. Without reflection, corporate center domination lurks.
- Corporate centers can easily overdo empowerment. Empowerment also needs to add value, by allowing business units to be entrepreneurial and responsive. But corporate centers easily allow stubborn BUs to undermine synergy efforts and act like cowboys, as long as the targets are met. Without reflection, corporate centers can steer too little.