Steve Shu on Management, Consulting, and Strategic Initiatives

A Peek At The Difficulties of Incubating New Initiatives Within Large Companies

Entrepreneurial situations in large companies differ from that of startups, yet one thing that they seem to share is that they often represent "hope" in one way or another. In the case of large corporations, these new initiatives can not only turn out to be profitable "ventures" but also boost morale and reward key employees through growth opportunities. Yet many of these new initiatives have difficulty getting off the ground. Frustration is common. This post provides a peek at some of the situations, complexities, and steps to resolution that I have seen.

First, here's a picture of a common situation in a large company faced with the prospect of starting a new initiative or business line:

• Perceivably significant yet amorphous business opportunity
• No money committed / no budget
• No or limited organizational resources
• Established products and sales & marketing channels
• Mature and complex business and product approval processes.

What adds a level of complexity to the situation (and sometimes leads to insanity for those working directly within the environment) is that:

• Venture requires substantial investment to ultimately succeed
• Finance cycle of start-up opportunities (opportunity timing) does not align well with the long, finance planning cycles of large companies (sometimes can be 14+ month delays!)
• Star players in the current organization have limited availability for the new organization
• Articulating and aligning on a business opportunity requires collaboration by many functions, and these functions are separate and overloaded in the current organization
• Sales and product development processes often need to be understood at more than the surface-level.

Here are some ideas for addressing many of the above issues:

• Recognize that it's not usually possible or desirable to speed up the process by cutting corners
• Break the process into smaller pieces to get rolling
• Search for the right sponsor and core team
• Secure a portion of time for each of the star players
• Give the employees a real chance to make things work 
• Consider getting a commitment for small amount of money to get rolling
• Start to articulate what the business opportunity looks like and document it
• Consider using a facilitator that can pull the pieces together, help layout program plan, and frame strategic issues and options
• Paint the vision for the org structure and build emotional attachment to the cause
• Involve those from sales and product development that will be eager to provide input and testing grounds
• Aim for pioneer sales and business development deals with lighthouse accounts (concrete wins)
• Rinse, refine, increase committment, and repeat.

It may take a leap of faith to get things started. But the leap of faith can be smaller than the temptation of the opportunity as a whole. Sometimes the keys are to look for forward motion and to take some initial steps as opposed to wanting to knock it out of the park too soon.

Let me know your thoughts and experiences!

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Perspectives on “The 24-Hour Customer” (Strategy, Marketing, and Innovation Book) in Context of Marketing Segmentation

Adrian C. Ott, CEO and founder of Exponential Edge Inc., included me on her distribution list for an advanced reading copy of her new book, The 24-Hour Customer. I cannot say enough good things about this book. In my mind, the book is excellent for executives, strategists, marketing, and innovators. From a strategy perspective, the approaches are well-structured and remind me of timeless, Michael Porter-esque classics. Yet the book goes beyond the classics and uses examples in the book that are cutting-edge, modern, timely, and technology-rich. Above all, Adrian Ott provides an innovative treatment of customer segmentation based on their propensity to pay attention and spend time. She additionally sheds light on various tools that can be exploited specifically with respect to dimensions of time and customer values. In this post, rather than addressing an overview of Adrian Ott’s total approach, I’ll simply point out one of the key frameworks and cover why it renews and gives marketing segmentation the respect it deserves.

One of the biggest laments I hear from marketing professors at various universities is with respect to how students and undergraduates look at marketing segmentation. Marketing segmentation is about subdividing markets into subsets of customers that behave similarly or have similar needs. But the craft of identifying segments is often under-appreciated or rushed. My wife, a professor of marketing at the UCLA Anderson School of Management, has often characterized a segmentation “pecking order” to students:

Segment based on “why” customers purchase first. Then look at what they purchase, how they purchase, and who purchases. (The Why/What/How/Who marketing segmentation pecking order)

The biggest segmentation error that people tend to make is that they start with the “who” because it is the most salient. Suppose one wanted to have a business that sold roses. If you started with the “who” dimension, you might start with a marketing segmentation strategy that is focused on middle-class families in a metro area. But a better strategy is to start by thinking about “why” people purchase. By engaging in this research, you might unearth important consumer behavior and situational aspects. For example, many males buy roses last-minute because they need to improve prospects with a key relationship. “Last-minute” is a key reason why people purchase – hence the presence of roses in places like grocery stores, 7-Elevens, and entrepreneurial, street-side vendors.

With that perspective on common customer segmentation errors as backdrop, Adrian Ott’s book offers up a series of methods and tools for understanding and applying how time (and the scarcity of time) affects a company’s potential approaches to engaging customers. One key tool (the "Time-ographics Framework") that Adrian uses in her book is depicted below (image reproduced with permission of author and publisher):

The Time-ographics Framework relates a customer’s propensity to spend time with the propensity to pay attention. (Yes! It is focused on teasing out the details of “why” people really purchase!) The significance of the stratification Adrian uses is that in order to play in one quadrant, one often needs to develop separate and specialized strategies. For example, to play in the “Habit” quadrant, one often has to tie into regular routines that cue the customer. Adrian Ott cites the example of P&G’s Febreeze, which was a great product that initially failed in the market because people forgot to use it. Once P&G helped to tie the image of Febreeze with the notion of the daily task of tidying up a room, Febreeze turned the situation around into one of the fastest growing brands. As another example in the “Motivation” quadrant, Adrian Ott introduced me to the concept of geocaching (which I have since purchased software and taken up with my kids). At risk of selling geocaching short, geocaching is basically a worldwide treasure hunt and trinket exchange system where users use global positioning systems (GPS) on their mobile phones to locate hidden boxes all around us (yes, sometimes hidden everyday in parking lots, by restaurants, etc.). Services by http://www.geocaching.com enable people to use slices of time to embark on quick, mysterious adventures. My kids are “motivated” by the mystery to check on the position of geocaches near us. Sometimes we’ll take a 1000-foot detour to find a hidden magnetic Altoids box that someone has tacked on the back of a fire hose box (where we drop off some items and pick up things like foreign coins, coupons, etc.). To bring Adrian Ott’s framework back full circle, she addresses the challenges of products in each Time-ographics quadrant and key tools that can be used for each.

The 24-Hour Customer is a book with rich thinking. It is sure to become a definitive source for professionals with respect to time-strategies, very current company examples and case studies, and timeless treatment of a marketing segmentation area that has not been comprehensively addressed before.

Adrian, excellent work on the book!

Update (6/30/2010): Catchy teaser video on Time-onomics just released. Link here.

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Should You Seek Input or Help From a Third Party?

People should view this post as a “food for thought” post. The idea for this post was triggered by things I have been increasingly seeing in companies as the recession bottoms out. The managerial situations are similar pre-recession, but anecdotally the occurrence seems more numerous as managers raise their heads-up to reassess their vantage point.

What if your intent as a leader within a company is to (any of the following):

• invest in a new effort (hard to run company while changing direction or building a new capability)
• get a new perspective
• get perspectives on other companies and/or industry trends
• work with (versus against in the short-run) biases that indicate greater reception to consultants versus internal ideas (e.g., see “consultation paradox” on slide 12)
• change the DNA and culture of an organization
• leverage resources from within the company but from another area to plug a gap
• mediate or facilitate a program or business initiative requiring new cross-functional activities
• signal substantive actions and investment to outside world or other areas of company
• get functional expertise not in-house or that was lost
• audit current project or process (see a customer point of view here)
• complement team
• outsource ultimate responsibility for core area (warning flag)
• welcome new input and ideas into the company
• fill a management gap (e.g., interim management)
• analyze common trends across multiple industries (see here for some consulting industry history)
• address low, organizational morale (with recession I sense a larger percentage of situations with organizations exploring business improvisation & experiential learning solutions – disclosure: client of mine here)
• recover and retry a failed effort (flip-side warning to consultants here with bullet #3)

Should you seek input from a third party? A third-party could be another person within the firm (organizationally close or distant), an advisor, outside management consultant, services or product vendor, etc.

Feel free to share your experiences and thoughts. If you have a specific situation you’d like to talk through, please feel free to contact me directly, and I’d be happy to share perspectives. Thanks!

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Review of “Open Leadership” Framework (Leadership and Social Technologies Book)

Charlene Li, founder of the Altimeter Group and co-author of the bestselling book Groundswell, was generous to include me on her distribution list for an advanced reading copy of her new book Open Leadership: How Social Technology Can Transform the Way You Lead. Open Leadership both motivates and provides an excellent framework & toolkit for changing and opening up an organization through support of social technologies. In this post I overview key elements of the book and my favorite contributions to the business & leadership book landscape.

Charlene Li describes “open leadership” as “about how leaders must let go to gain more.” Stepping aside from Open Leadership’stable of contents, I created a one-slide summary figure (sort of like a "cheatsheet") to help describe the key concepts. While the figure doesn't capture every element of the book, I think the figure focuses on the key areas a company must address when designing and implementing social technology-based strategy.

I see her book as tying together five key areas:

• Openness Strategy and Design – This part of the book covers an audit of where your company is at in terms of openness. This part also frames open strategy in terms of four objective areas (applicable to company/brand/product) of learn, dialog, support, and innovate and increasing levels of engagement with constituents. I like this part of the book particularly because it starts to weave together marketing, branding, social technologies, and the fringes of innovation.
• Benefits & ROI – For those that have read Groundswell, this part is similar in that it covers some qualitative and quantitative models for using social technologies. One area where the book goes further is in its segmentation of these models by the learn, dialog, support, and innovation objectives outlined in the openness strategy section. Here I see the models as inspirational and thought-provoking as opposed to being ready off-the-shelf. Readers should draw learnings from these and figure out how to best adapt for their specific management context (as there are a mixture of top-down and bottoms-up quantitative analysis and numerical sensitivity issues). Charlene provides some additional perspectives on customer lifetime value and net promoter score, the latter which is a personal favorite for tying brand management and social technologies together in an instructional context (e.g., business school curricula).
• Openness Covenants – This part of the book covers social media guidelines and policies. Covenants are about how an organization defines the “safe area of the sandbox to play in”. The use of checklists and case examples makes for a nice reference and workbook to drive an organization’s development process.
• Openness Orchestration – I found this part of the book to be one of the most important areas of the book. Because the use of social technologies involves openness across the entire organization (sometimes cutting across isolated departments and functions) this book provides a nice treatment of thinking about customers and constituents, specific workflow areas (e.g., customer service, marketing), and organizational models (e.g., centralized, distributed) and tradeoffs for implementing.
• Organizational Change – There are sections of the book dedicated to nurturing organization change, and this involves mindsets and traits, leadership assessments, and something Charlene Li calls the “failure imperative”. While organizational change is a “soft” topic in many texts, Charlene Li does a nice job reconstructing a variety of real-life case examples of how companies and individuals failed in specific situations related to social technologies. Some of the companies and individuals managed to pick themselves up, re-adapt, and succeed eventually. Similar to use of social technologies, effectively dealing with failure is something core to innovation, improvisation, and leadership. So the sections covering organizational change are a nice wrap to the book and provides concrete inspiration from which to draw.

Open Leadershipserves as an excellent, end-to-end process toolkit and is well-suited for corporate executives, marketers, business information technology professionals, and management consultants looking for leadership frameworks supported by social technologies. Treatment of the subject is just above the technology-evaluation level (which would include determining whether technologies such as BuzzMetrics, Yammer, Radian6, Communispace, Umbria, Twitter, Wordpress, and Facebook are appropriate).

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Book Review of “The New How” (Business Strategy Book)

It is atypical for me to write a book review for this blog, but Nilofer Merchant’s “The New How: Creating Business Solutions Through Collaborative Strategy” is very respectable contribution to both audiences of this blog and the process of strategy development in general. In particular, the book does two important things beyond other strategy books:

• it breaks down the ivory tower of centralized strategy and addresses, in detail, the roles and responsibilities that each employee must fulfill in the new model, and
• the book explicitly documents a collaborative process that one can use to develop strategy, a process which from my vantage point has only been addressed either through mentorship and transfer of tacit knowledge or in fragments within other documents.

The book divides strategy into two domains – 1) where a company competes, and 2) how a company competes. The premise of the book is that the former topic (where a company competes) is well-addressed by existing strategy books, such as those by Porter, Chan, Kim, and Mauborgne. Nilofer’s book addresses the gap in business texts regarding the latter topic, which includes day-to-day and quarter-to-quarter strategies, such as “how do we grow sales of product XYZ” or “how do we grow sales of division Y by Q%?”  As she writes, “One person’ strategy is another’s tactics. The unnecessary and fruitless war of what is tactics or strategy or execution must end.”

Part 1 of the book provides a call to action for individual employees and leaders. But the book goes further by providing specific responsibilities that each person must fulfill. Where I admire the book is in its approach to addressing each employee’s role. Whereas “older” methods of strategy may have been focused on executive management teams, this book provides context, terminology, and frameworks for educating a broader audience. As an aside, I am also struck by the fact that Nilofer does a good job of incorporating concepts of improvisation into the strategy development process, culture, and mindset of employees. Improvisation is especially a soft spot for me given my involvement with Business Improvisations, a collaboration between business academics and improvisation instructors which helps companies in areas such as innovation, leadership, teamwork, etc. through customized, experiential learning sessions.

Part 2 of the book goes into greater detail on process of strategy development. It breaks down the process into four major areas:

• Question Phase – articulating the problem scope and assessing the current state of the organization
• Envision Phase – creating options for the organization developing criteria that would be used to evaluate options
• Select Phase – using a “MurderBoarding” process to sort, tune, fix, etc. options
• Take Phase – creating accountability, identifying who does what, and getting down to interdependencies and execution.

Although the book goes into much greater detail on all of these areas (with specific examples, charts, tables, etc.), one of my favorite charts is the MurderBoarding overview chart (copyright image reproduced below from “The New How” via permission from Nilofer Merchant). I often find this part of the strategy development process to be at risk of falling apart – this part of the strategy process is inherently messy, and unless the team focuses on a disciplined reference framework (like the one here), it becomes too tempting and easy to try to cut corners. Look carefully at the chart and see if you have been tempted to cut corners in the process. For example, did you forget to test the idea in part before finalizing the strategy? Or did you forget to vet and refine the criteria used to evaluate a strategic option?

Even as an experienced management consultant and manager, I would highly recommend this book (I’ve also added it to my popular Crash Course Consulting Reading List). The book is practical and covers a body of knowledge that has been largely undocumented to date. Whether one explicitly uses the processes Nilofer describes, the book still provides a good framework for assessing how one is doing. This book is well-suited for corporate executives, strategic planners, general managers, and management consultants. It would also be good as a textbook to supplement strategy and/or consulting courses.

Feel free to let me know your thoughts!

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How To Help Ensure Strategy Scorecards Don't Fail You

For many strategy engagements, a lot of attention is paid to the detailed analysis framework. For example, should a benchmarking framework be used? Or will that framework lead us down a path of mediocrity? Or perhaps value-chain or Blue Ocean-like analysis should be used here? What method should we use for prioritizing brand associations and rectifying brand image versus identity? Regardless of strategy technique, one key output of these efforts is often a scorecard summary. A scorecard is tangible. It can be like a report card that you got from school in elementary school. While the scorecard is important, it's important to not lose sight of how a scorecard is developed and what the scorecard could mean for your organization.

The figure below shows an illustrative scorecard for a company. The scorecard helps to identify strengths and weaknesses. In the scorecard below, I've also depicted areas where the company needs to make improvements (operational and tactical focus) and where the company needs to differentiate longer-term (strategic focus).

 
Traps with scorecards can happen with the processes before, during, and after the scorecard.

Common traps that can occur before the scorecard are:

• Failing to craft the problem statement properly
• Pursuing too narrow activities to solve the problem statement
• Falling short on involving a broad part of the organization in the assessment & strategy development process
• Getting the wrong mix of structured and unstructured methods
• Using the wrong tools for the job
• Having an inherently biased processes or failing to frame and address biases and limitations properly

Traps during the scorecard readout process include:

• Being too negative and demotivating an organization
• Not stepping back from the scorecard to look at the bigger picture
• Failing to educate new audience members about the context of the scorecard and the prior processes used to arrive at the scorecard
• Letting an organization rest on its laurels

(Very) common traps after the scorecard readout process include:

• Failing to develop specific action plans
• Not having a good follow-up and cadence for making progress

The picture below shows the logical context for an example scorecard process, and it is an important aspect often lost in the mix. Note that the process context for the scorecard is as important (if not more important) than the scorecard itself.

 
What are your experiences with scorecards? How can you use them more effectively?

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The Business Plan Is Alive And Well But It May Not Be What You Think

As many times I have written a "business plan", it seems the flavor of it can vary quite substantially. I think the notion of this catches a good number of people by surprise. And why shouldn't that be the case? Many textbooks and templates seem to cover business plan outlines with relatively similar structures. My suspicion is that the perspective that gets lost in the mix is intent. The intent of a business plan affects its format and content dramatically (more than outline). For this post, I thought it would be good to share some perspectives on why the process and plan should vary.

Business plan as a process - The process of vetting ideas, getting buy-in, and achieving alignment is most important in these situations. Example situations are new business launches in larger companies (e.g., intrapreneurship). Business plans can often take the form of workshop sessions and Powerpoint documents as opposed to a traditional textual Word document. See a popular post of mine, "In Consulting The Process Is An Essential Part Of The Deliverable".

Business plan as a sales document - This situation is particularly appropriate for fund raising (e.g., angels, VCs). Key goals of the document are to establish trust with prospects, enable the investment idea to be shared via networks, and persuade people of the merits of an investment opportunity. Often need a mix of instruments here (Powerpoint & Word docs, napkin drawings, demo), depending on the team, industry, and phase of product development (e.g., technology feasibility, commercial feasibility, ramp-up).

Business plan as a hypothesis test or investigative framework - An entrepreneurial way of looking at a business plan is more as a framework or series of hypotheses tests. Questions may be: do customers really want product aspect A, do customers prefer this variation over that one, do customers perceive me as Y relative to my competitors, and will the dog eat the dog food? The business planning effort can be more organic than written and involve focus groups, customer prospect interviews, etc. But the framework process should be systematic in determining which hypotheses are true/false to prove out aspects the business over time.

Some other ways that come to mind are viewing the business plan as a communication tool, a dissertation (that must be closely inspected), debate tool, product development stage gate requirement, and RFP response requirement (e.g., for government grants).

How do you view you business planning efforts? To what extent could you benefit from new ways of thinking about them?

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The Power of Using "We" In Client-Consultant Communications

Recently I found myself in the doctor's office seeking advice on a health issue I had been having with finger & joint pain. The way these conversations played out (with me in a reverse role as a client) triggered some thoughts about client-consultant communications that I thought I'd share here.

Now as context, many services relationships with medical professionals can be viewed as similar to consultant-client relationships. For example, David Maister (professional services guru, now retired) has characterized analogous medical professional types (to consultant types) as pharmacists, nurses, brain surgeons, and psychotherapists. Key distinctions between these services delivery types are on the customer contact and customization dimensions. So by way of example, nurses and psychotherapists deliver their value to customers with heavy client contact (whereas others provide work behind the scenes). On the customization dimension, psychotherapists and brain surgeons tend to be more involved in diagnosis and customized problem solving versus the other practitioners types which use more standardized procedures to serve their customers.

So using the nomenclature above, the doctor I had seen could be categorized in the psychotherapist category (high-level of customer interaction with custom problem-solving orientation, very similar to what I do when on the other side). When we talked about the issues with my hand pain, the doctor used the "we" term extensively. "We can solve this." "Try this drug, and let's work over the next two weeks to see what we can learn about its effectiveness." "What do we know?" As a client, the approach put me into a collaborative frame for solving my problem. I found myself offering corners of my personal medical history, work habits, histories of my parents, etc. to try to get better (even if imperfect) information on the table.

The concept of using the term "we" in consulting engagements can also be very helpful for setting the tone for a collaborative consulting engagement. As an example, in some recent client meetings related to exploring business model and branding strategies, I used phrases like "we will use that information to figure out the best way to position against our competitor" or "what is our competitive advantage over competitor XYZ". The framing of these types of statements put me in a position as if I was directly part of the client's organization. I was fighting for my client as if I were the client. In turn, I felt that my posturing helped to energize the client, and we ultimately got more creative perspectives on the table. For me, a collaborative-type of positioning (while not appropriate for all engagements) goes beyond traditional empathy methods often advocated for consultants.

If you are a client, how do you like your consultants to communicate with you? If you are a consultant, what communication distances do you try to establish with clients?

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