STRATEGIC THINKING AND THE ART OF BEING DISCONTINUOUS

THE VELOCITY OF CHANGE

• Change has:

– A rate i.e., how much, how often

– A direction i.e., more of the same versus going in a new direction

McCarthy I. P., Lawrence T. B., Wixted B., & Gordon B. R. 2010. A multidimensional conceptualization of environmental velocity. Academy of Management Review, 35(4): 604-626

Access the full paper here.

DISCONTINUOUS CHANGE

• To identify, create or cope with discontinuous change it helps if you have:

– The right mindset and an appetite for weirdness

– An appropriate approach to environmental scanning

– An ability to create or respond to environmental ‘disruptions’

– Use and learn from escalating experiments

ENTREPRENEURIAL THINKING

• An entrepreneur is:

– someone who identifies an opportunity and takes action to pursue it.

– the action involves bringing together and organizing resources not currently controlled.

• Entrepreneurial thinking underlies problem solving and innovation

PUZZLE VERSUS QUILT MAKING

MINDSETS

Effectual Logic (mindset) Causal Logic (mindset)

THE CAUSAL MINDSET

• Good managers use causal thinking

– Starts with a desired and relatively known outcome.

– Focuses on the best means to generate that outcome.

• Efficiency and optimization of a known solution for a known outcome

• Use existing means to attain a known end.

Saras Sarasvathy,

THE CAUSAL MINDSET

Distinguishing Characteristic:Selecting between given means to achieve a pre-determined goal

GivenGoal

M1

M2

M3

M4

M5 Given Means

Saras Sarasvathy (2001). What makes entrepreneurs entrepreneurial? (PDF). Harvard Business Review. p. 9. Retrieved 2014-01-26

THE PUZZLE

• Why does the puzzle demonstrate causal thinking?

– You are given an organization and fixed resources (given means). What are these?

– You are given precise goals? What are these?

– You plan and organize. How?

– You execute. How?

– You measure progress. How?

THE EFFECTUAL MINDSET

• Good entrepreneurs use effectual thinking

• Imagining possible new ends using a given set of means

• Imagine the end, and create the means

THE EFFECTUAL MINDSET

E1

E2

E3

E4

E5

Given Means

Distinguishing Characteristic:Imagining possible new ends using a given set of means

What are the means?

M1M2

M3

M4M5

Imagined Ends

Saras Sarasvathy (2001). What makes entrepreneurs entrepreneurial? (PDF). Harvard Business Review. p. 9. Retrieved 2014-01-26

THE QUILT

• Why does the quilt demonstrate effectual thinking?

– You do it on your own initially.

– You select and accumulate resources you like.

– The goal is broad and open.

– The product emerges over time. Don’t know what it looks like until the end.

– Not tied to precise plans and organization.

EFFECTUALMINDSET

CAUSALMINDSET

ENVIRONMENTAL SCANNING

• Environmental scanning is monitoring and interpreting the external environment to better understand the nature of trends and drivers of change and their likely future impact on your organisation.

Scanning(Data collection)

Interpretation(Data given meaning)

Learning(Action taken)

Daft & Weick 1984

MODES OF SCANNING

UNDIRECTED VIEWINGConstrained interpretations. Nonroutine, informal data. Hunch, rumor, chance opportunities.

ENACTINGExperimentation, testing, coercion, invent environment. Learn by doing.

CONDITIONED VIEWINGInterprets within traditional boundaries. Passive detection. Routine, formal data.

DISCOVERINGFormal search. Questioning, surveys, data gathering. Active detection.

Unanalyzable

Analyzable

ASSUMPTIONSABOUT ENVIRONMENT

Passive Active

ORGANIZATIONAL INTRUSIVENESSDaft & Weick 1984

ICEBERG MODEL

Events

Patterns

Structure

Questions

What happened

What’s been happening?

What explains this?

The water line

Actions

Knee-jerks

Analyse and plan

Understand and redesign

ICEBERG MODEL

• Events = scenes in a story

• What happened?

• What are some of the notable events?

• Patterns = the messages in a story

• What's been happening?

• How has performance changed over time?

• What are other important trends?

• Structure – understanding why the story happened and what it means

• What has caused the problem/issues?

• What are some of the consequences and opportunities?

Data and facts

Hypotheses

EXPLOITATION EXPLORATION

Follow the rules and drive out the variance and slack.

Break the rules and promote variance and slack.

Focus on serving existing customers and their needs.

Serve new customers with new needs.

Manage and refine existing competences. Develop and lead new competences.

Optimize the organization for existing rules. Develop new organization system with new rules.

Make money now. Make money later.

AMBIDEXTERITY: TWO MODES OF LEARNING

Based on the following research:McCarthy I. P. & Gordon B. R. 2011. Achieving contextual ambidexterity in R&D Organizations: A Management Control System Approach, R&D Management, 43(1): 240-258Access the full paper here.

DISRUPTIONS

Regency TR-1 — the first transistor radio (1954)

Zenith AM/FM Tube Radio (Model G730W) from the 1950's

HARD DRIVE EXAMPLE

CELL PHONES VS. CAMERAS

Philippe Kahn, June 1997

DISRUPTIVE INNOVATIONS

• Existing customers do not value performance attributes of the innovation

• The innovation performs worse on certain attributes

• It appears to be financially unattractive: small markets, low profit margins

• Difficult to predict the growth rate of the market

• Requires new manufacturing/delivery processes

• Yet a disruptive innovation can disrupt (destroy) your market and your company.

WHAT SHOULD YOU DO

• Be Observant– Customers won’t lead you to them.– Less profitable than alternatives - with current business models.– Marketing, sales and financial people will oppose or be unenthusiastic.– Senior management will often be unaware or attach little importance

to the opportunity.

• Be Proactive– Initial applications will be unclear. Watch for a market to emerge.– Vulnerable markets are those which are over served in terms of

functionality and populated by large, complex, inconvenient products and services.

– Draw a trajectories map.

COSTS REDUCE SIGNIFICANTLY OVER TIME

• Price of 1GB storage by year

• 1981 =

• 1987 =

• 1990 =

• 1994 =

• 1997 =

• 2000 =

• 2004 =

• 2012 =

$300,000

$50,000

$10,000

$1,000

$100

$10

$1

$0.10

MARSHMELLOW CHALLENGE

Source: Tom Wujec

1. Reward success and failure; punish inaction

2. Think of some ridiculous or impractical things to do and plan to do them.

3. Take your past successes and forget them

4. Hire slow learners of the organizational code, people who make you uncomfortable

5. Encourage people to ignore and defy their bosses and peers

BE WEIRD

ESCALATING TESTS

Plan

Experiment

Learn

Reshape

Plan

ExperimentLearn

Reshape

STACY’S PITA CHIPS - ESCALATING MARKET TESTS

• Social work with a passion for food, wants to open a restaurant, but……?

• Food cart sells pita bread wraps, but the real success is ….?

• Creates Stacy’ Pita Chip Company but how could they reach the masses ……?

• Manufactured the chips by …….?

• Raised money by……?

BIG BELLY

ESCALATING TESTS

• We test to:

– Learn. If a picture is worth a thousand words, a prototype is worth a thousand pictures.

– Solve disagreements. Testing helps eliminate ambiguity, assist in ideation, and reduce miscommunication.

– Start a conversation. Tests are a great way to have a different kind of conversation with users.

– Fail quickly and cheaply. Creating quick and dirty tests allows you to assess ideas without investing a lot of time and money up front.

– Manage the entrepreneurial process. Identifying a variable to explore encourages you to break a large problem down into smaller, testable chunks.

SUMMARY

• How you go forward determines where you go.

– Causal vs. effectual mindsets

– Conditioned viewing vs. enacting

– Exploitation vs. exploration

– Planning vs. doing

– Being weird vs. being normal