Exploring possibilities, together

Good morning!

At the Uncertainty Project, we explore models and techniques for managing uncertainty, decision making, and strategy. Every week we package up our learnings and share them with the 2,000+ leaders like you that read this newsletter!

In last week’s newsletter, we introduced a visualization called the Strategy 5x5. It’s a facilitation tool, and it aims to make the potential choices for a strategy more visible, which could help produce better dialog within a leadership team.

We made the argument that it could help leaders improve their strategy practice by supporting better:

• Clarity - each one tries to distill a known strategy framework into some guiding questions

• Efficiency - in constrains the dialog to choosing amongst 5 options, for each of 5 decisions

• Decision-making - it builds on elements of good decision architecture

• Guards against bias - it can be used to challenge the status quo and combat confirmation biases

The layout frames the dialog to help us navigate uncertainty and complexity:

• Potential strategies are considered as possibilities and evaluated against each other

• Strategy is defined as a coherent set of choices, and the options across the individual decisions form a possibility space

• We explore the options by tying them to our beliefs, which are crafted with probabilistic thinking

• The preferred possibility that emerges from the dialog is framed (and funded) as a hypothesis

• It supports a time-bound strategy development campaign, but can also be treated as a living document, to adapt the choices to new realities, as conditions change

Last week, we shared an example of a Strategy 5x5 that was built around Roger Martin’s Strategy Cascade, and his concept for evaluating possibilities by asking “what would have to be true?” (WWHTBT). Over the next few weeks, we will introduce more examples of Strategy 5x5’s, that distill other leading strategy frameworks into the same form.

We’ve loosely categorized the frameworks we’ve done so far (based on the audience for which they’re best suited):

• Business unit or product leaders - accountable for driving revenue

• Technical leaders - accountable for effectively leveraging new technology and methods

• Mid-level leaders - accountable for making local choices that make an impact

This week, we will take a tour of four Strategy 5x5s in the first category: exploring possibilities for business unit of product leaders. The strategy frameworks and authors we will show are:

• Better, Simpler Strategy - Felix Oberholzer-Gee (drawn from “Better, Simpler Strategy”)

• Blue Ocean Strategy - W. Chan Kim & Renee Mauborgne (drawn from “Blue Ocean Strategy”)

• Hierarchy of Powers - Geoffrey Moore (drawn from “Escape Velocity”)

• Strategy Kernel & Foundry (The Crux) - Richard Rumelt (drawn from “Good Strategy/Bad Strategy” and “The Crux”) 

Over the next few weeks, we will offer a similar treatment for ideas from Simon Wardley, Mark Schwartz, Jonathan Smart, Dave Snowden, Marc Benioff, and Martin Eriksson. 

But for this week, let’s focus on the needs of leaders of business units, like directors, or Heads of Product. They tend to have responsibility for a P/L and deeply understand the competitive landscape. As they oversee a portfolio of products (or services), they talk in terms of offers, applying an outside-in mindset.

There is no right, or wrong, or best framework for this. Each of these examples (and many more that are out there) can be a good fit for a leader’s needs at the moment. And next time, in a different moment, a different framework might ask better questions to help you find your best answers. In fact, different frameworks can be complementary - each bringing a different lens or angle to the possibility space. [It might make sense to use a different one each time you sponsor a strategy development campaign!]

For now, think of the Strategy 5x5 as a canvas - something that could be supported in a workshop, maybe by a whiteboard tool. To make it a living canvas, however, better tooling would be required. We’d need tooling that could connect the options and choices to external sense-making (and corresponding beliefs) and to internal progress (and the current beliefs around that). If we could connect the dots like this, the possibility space could “come alive” and support adaptive strategy.

How would you know whether the Strategy 5x5 is helping? You would know when you see the dialog (e.g. in a 3-day offsite, or a quarterly review) being influenced by the structure of the new view. Leaders would refer to “decisions-to-make” and how options for those form a “possibility space” and how any possibility should be described as a “hypothesis” that can be worthy of funding (or “bets”). 

And that’s just the influence of the layout. The deeper value comes from learning (and applying)  one of these strategic frameworks, with their rich vocabulary and industry-proven methods.

Our goal here is not to explain or summarize the books referenced above (our advice: get the books!). Our intent is to show you how we can distill the core ideas from different frameworks into a common format that helps leaders apply it in practice, i.e. with a facilitated workshop. Obviously, the more knowledgeable your team is on the framework, the better the results.

Maybe start a book club for those with an interest in “becoming more strategic”. Don’t expect everyone to read them, but you’ll need to find a facilitator that can effectively apply the ideas to your context. [Hint: Think about how you can leverage your decision architecture to support the exploration and learning needed to produce good options.]

And please remember: the five-point decision frameworks that follow are just my gross (over-)simplification of a much-deeper, much-richer strategy framework. They are just an attempt to distill some ideas from the author into five core questions that could activate a good dialog.

Better, Simpler Strategy

Decision Framework:

• What customer segments are we targeting with this offer?

• Who are our key suppliers (including employees)?

• Which value drivers should we target?

• How can we drive change in WTS/WTP, for our targeted value drivers?

• How should we change how the value gets distributed/realized?

This approach works great for leaders seeking to close the gap between “engineering” and “the business”, or for product leaders that know they need to increase their Business IQ. It leans heavily into the ideas of “willingness to pay” (WTP) and “willingness to sell” (WTS) to build a (yes, simple!) definition of value creation that is less fuzzy, and more actionable. The entire conversation gets centered around a single offer, maybe start with an existing one.

For this specific offer, it works to identify the targeted customer segments and the internal suppliers behind the construction of the offer (including employees). Value is created and distributed across this new axis: some to the customer, some to employees and suppliers, and some retained by the firm as margin.

The possibility space is constructed to help leaders explore the best value creation opportunities for the offer. It explores value in the eyes of the customer, value in the eyes of a supplier, and value in the eyes of employees - all on equal footing. Then it considers how pricing, supplier rates, and competition might influence choices and the desired outcome: healthy margins.

The best possibilities are marked as paths through the possibility space. Oberholzer-Gee refers to these possibilities as “strategic moves”. A strategic move would integrate choices on a segment (or supplier or employee) where value will be created, the value driver we are seeking to increase, the specific idea, and the proposed distribution of the new value (on the “value stick”). 

The visualizations of the Value Stick and Value Map support the dialog, as possibilities are evaluated against each other. 

Blue Ocean Strategy

Decision Framework:

• What 'non-customer' segments could form a new buyer group?

• Where are there opportunities for new Blue Ocean offerings?

• What are the competing factors in our current industry?

• What action will we take for each competing factor?

• What price should we set for the new offering?

This approach supports leaders focused on finding growth opportunities. It seeks to craft new offers in market segments where the feeding frenzy of competitive pressures are less “bloody” (a “blue ocean”, not a “red ocean”). It asks leaders to explore the adjacencies, to find a buyer group that is not feeling the love from the market today. Then it seeks to define a potential new offer in ways that avoid direct competition on the same old factors, and instead finds unique combinations of factors that can help it stand out. Pricing is obviously a crucial part of this conversation.

The possibility space is built with the different options for target buyer groups, offer types, factors, which actions to take to emphasize or de-emphasize a factor (for differentiation), and different price points.

The combinations or paths through the space will outline potential new offers. They would integrate a specific buyer group with an offer type, then call out the key factor(s), and how it would be emphasized. Pricing choices could finish the rough description enough to evaluate how well it could differentiate (go “blue”).

W. Chan Kim & Renee Mauborgne offer some simple, yet expressive visualizations for finding opportunities (the Buyer Utility Map) and comparing factors (the Strategy Canvas), that can support the search for options on the decisions, and the subsequent dialog.

Hierarchy of Powers / Competitive Separation

Decision Framework:

• Who is in our competitive set? [Company Power]

• What are our 'crown jewels' and/or 'core capabilities'? [Company Power]

• In which segment should we start a target market initiative (TMI)? [Market Power]

• What differentiating aspect(s) should form the core of our offer? [Offer Power]

• What asymmetric bet are we making on our innovation investments? [Offer Power]

This approach is designed to help leaders “free your company’s future from the pull of its past”, per Geoffrey Moore. It aims to create competitive separation, via new offers, to move beyond the status quo. It is built around his model, called the “hierarchy of powers”, that shapes the structure of the book, Escape Velocity. We’ve pulled a couple of the models in the book to use here.

Since the goal is competitive separation, the first choice is defining the competitive set, one or more companies that will compete for market share. After that “outside-in” exploration, we turn “inside-out” to claim our crown-jewels or core capabilities that form a source of our relative strength. Then it’s back to clarifying the segment and identifying what aspects can help with differentiation (sound familiar?). Lastly, he emphasizes the need to make an asymmetric bet on building this aspect, for this segment, leveraging this core capability, to differentiate from this company (or companies). So we include the nature of the bet as a decision as well.

This combination can be written up as a hypothesis: the theory that supports the bet.

Moore has many simple visualizations (he calls them models) that help illustrate ideas across the “hierarchy of powers”. Two that are relevant here are the Competitive Set, and the Core/Context model. Use these to help identify options for the possibility space.

Strategy Kernel / Strategy Foundry

Decision Framework:

• What is our most significant challenge?

• What is our diagnosis?

• What method or approach will guide us?

• What coordinated actions must be imposed on the system?

• What concentrated actions will deliver change?

This approach is fairly generic. While Rumelt illustrates his books with examples from the C-suite, his concepts can be applied at any level in an organization. The key is to start with a challenge that that leaders are facing, in their local context.

This is also where the possibility space for this Strategy 5x5 unfolds a bit differently (in our interpretation of Rumelt’s work). Once you lock down a specific challenge to focus on, the rest of the possibility space should keep that focus. So you look for five alternate diagnoses of the challenge, then rally around the most promising one. Then you explore remedies, or methods, to address the diagnosis. Then for a promising method, you explore the needed coordination action (i.e. the kind only leaders can provide) and the needed concentrated actions around change (also sponsored actively by the leaders).

While you could explore the five decisions independently to create the possibility space, this one works better when the decisions-to-make are approached more sequentially.

The paths through the possibility space are what Rumelt calls a “guiding policy”. It’s got enough action behind it to create momentum, but it’s not explicit as a solution (still more about the “what” than the specifics of the “how”).

Since so much springs from the choice of the challenge, Rumelt offers a way to evaluate options there. Construct a simple visualization of the Addressable Strategic Challenges (ASC) by scoring each candidate challenge on two dimensions: a relative score for importance (criticality), and one for addressability (like feasibility of solving for it). Plotting the challenges across these two axes supports dialog (hint: look in the upper right quadrant).

In his Strategy Foundry, which is an example of a multi-day strategy development campaign, Rumelt emphasizes learning from recent projects in the organization. Get leaders talking about the reasons why some projects didn’t succeed. That should surface some challenges. It also helps clarify what coordinating and concentrated actions might be needed in a new guiding policy. So while it’s not a visualization per se… put those on the table as well.

Hopefully, these examples help you picture how a Strategy 5x5 could shape and steer dialog in your next strategy meeting. By borrowing smart lines of questioning from the world’s best thought leaders on strategy, we can drive new ways of thinking (to borrow again from Roger Martin) and fight the status quo. By constraining the size of the grid, we bring focus and efficiency to the meetings. By building on a decision architecture, we can avoid the common traps of poor decision making.

And by connecting our choices to the output of strategy development - focused investments - we can increase the leverage of our strategy decisions.

As Rumelt said in the last sentence of his latest book: