(2017-02-10) Denning Strategic Agility
This is the dark secret of the Agile management revolution: the major financial gains from Agile management will come from the next frontier of Agile management: moving beyond operational Agility to strategic agility—namely, through mastering market-creating Innovation.
In the world of strategic Agility, we have learned that there is no such thing as a mature industry: there is only an industry to which imagination has yet to be applied.
In the decade and a half since the Agile Manifesto of 2001, progress was made in understanding and implementing Agile management by mastering the three laws of Agile: “the law of the small team,” “the law of the customer” and “the law of the network,” as explained here.
Ideally, there is a natural progression from operational Agility to strategic Agility as shown.
In practice today, many firms are still learning how to achieve operational Agility at the enterprise level, and so never have the opportunity to achieve full operational Agility (Figure 3), let alone strategic Agility (Figure 4). They are stuck at operational Agility at the team and unit level (Figure 2), having failed to master the third law of Agile, “the law of the network.”
In the 20th century, a firm was seen as having a core competency that was solid and static. The firm would generate a product and drive that product through to market with mass-marketing. Most adjacent moves generally failed—around 90 percent failure by one estimate. Managers brought up in that oligopolistic period knew that the main thing was to concentrate on and dominate your core.
Studies show that more generally R&D spending doesn’t correlate with market value or growth. As Booz & Company reports, “Spending more on R&D won’t drive results. The most crucial factors are strategic alignment and a culture that supports innovation.”
What's involved in systematically achieving Strategic Agility
Strategic Agility occurs in two main ways: either as a by-product of operational Agility or through use of an explicit playbook to generate market-creating innovation.
A. By-product Of Operational Agility
Spotify’s approach to innovation is mainly based on the lean-startup principle that views the biggest risk in innovation to be building the wrong thing.
While this approach can work well in terms of improving existing products for existing users, it has several limitations in terms of systematically generating market-creating innovations
In the absence of an explicit playbook to foster market-creating innovation, decisions on such large investments will tend to be based on corporate politics: the loudest voice having the most hierarchical clout will end up making the call. In the absence of hard numbers, proceeding with the investment will often be perceived as presenting too great a risk and the investment will be abandoned
B. A Playbook For Market-Creating Value Propositions
Four Keys To Creating Market-Creating Value Propositions
Curt Carlson and his colleagues at the Silicon Valley icon, SRI International, where Carlson was president and CEO from 1999 to 2014. It is described in his book, Innovation: The Five Disciplines for Creating What Customers Want
The playbook is called the Innovation-for-Impact Playbook (i4i Playbook)
Among the i4i Playbook components is a concise but complete definition for a value proposition. It has four parts — Need, Approach, Benefits per costs and Competition — that are summarized in the mnemonic, NABC.
1. Identify The Need
on outcomes and the potential customer’s need
How acute is this need? Would a solution be a lifesaver, a painkiller or a supplement? Furthermore, how can you quantify the need? Is the need relevant to one person, a few people, or an entire demographic?
So as a first step, write down a tentative number on how big you think this need is.”
Obviously, the first port of call should be the customers,” write the authors of Blue Ocean Strategy. “But you should not stop there. You should also go after non-customers. And when the customer is not the same as the user, you need to extend your observations to the users
Think big but proceed incrementally: “Don’t worry if you don’t have an approach completely nailed down at the outset,”
2. Clarify The Approach
how you solve this particular need of the custome
what your secret sauce is
Think Platforms: “What happens with companies that have successfully externalized,” says Haydn Shaughnessy, “is that they manage to lay off a lot of the burden of change onto their ecosystem. That frees management to make decisions without having to think about all the issues of scaling the base.
Acquire digital competency: Traditionally, adjacent moves were perceived as risky and firms were advised to stick to their core business. Once firms acquire competency in handling very large amounts of data, and operate in a network fashion, they become able to make quite radical adjacency moves, as at Amazon.
A bias for action: “I used to attend conferences in Europe where Nokia people would talk about the digitization of everyday life,” says Shaughnessy. “It was fascinating because this was 2005. They were talking about how we would end up digitizing absolutely everything. The problem is that it was Facebook that captured that.
The indirect approach: Separating customers and end-users is often key... having the monetization happening in the background creates a seemingly frictionless experience for the user.
Create the secret sauce from an existing strength
3. The Benefits Per Costs (for both the customer and the producer)
tells you not only what a difference for the better your solution will make in the life of the customer,” says Venkataraman, “but also how much of a difference
almost every significant benefit can be quantified, even if only by proxy.
intangible but yet quantifiable things - for example, increasing the number of hours of their free time that they would spend with family and friends or on their hobbies, the number of words they have to use to communicate a particular idea, the amount of effort expended (in footsteps or calories, for instance) to get to a certain place, or the number of minutes one could be continuously immersed and engaged in an entertaining or other valuable experience.
4. Identifying The Competition and Alternatives
who Netflix was competing against. “Really we compete with everything you do to relax,”
think “What have people done or could do to meet this need.”
The Need To Continue To Iterate (Iterative)
When you’ve looked at all four components of the NABC once,” says Venkataraman, “you get to go back and revisit the Need again, repeating the whole process as many times as needed. Chances are that your original thoughts on what you believed to be the need has changed.
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