Thursday 30 March 2023

Organizational Resources

Aside from gaining a competitive advantage through capabilities, organisations can also leverage their unique resources to gain or increase their competitive advantage. Resources come in two forms, Tangible and Intangible, and either or both can significantly grow an organisations competitive advantage.

Resource types Examples
Tangible ressources Financial Internally generated cash, cash on hand, borrowing capacity
Physical Machinery, Building, Computing & Telecom equipment, raw material sources(forestry, mining, etc), Retail outlets, Warehouses, Real estate, inventory, etc
Intangible resources Technology Product innovations, Creative products, Prototypes & models, Designs & Plans, Knowhow, Production processes, Innovation processes, software & It Systems, Organizational routines & systems
Relational Product reputation, Brand loyalty, Customer relationships, Alliances, Supplier & Distributor relationships, relationships/Reputation with stakeholders (Government, shareholders, public, etc)
Human Capital Skills and expertise, training, motivation, creativity & Adaptability, Commitment, team cohesion, leadership abilities, coordination

We may wonder which resources provide the most value to an organisation, it is generally accepted that just like capabilities the resources which increase the Price-Cost wedge are the most value added. What that means is that resources that can widen the gab between providing a good or service and the price which it can be sold ate are the resources that provide the most benefit to the organisation. Ideally these value-added resources are also rare, that is an organisations rivals do not have access to them, providing the organisation with an advantage.

Tangible vs Intangible resources

Which is better? well as always it depends on the industry, for example if the industry is logging, then having access to a high quality but cost effective forestry would potentially be a high value resources, however in an industry such as Consulting then having access to highly skilled, motivated workforce would prove to be the highest value resource. 

In general research has shown that overall, intangible resources greatly outweigh tangible ones in organizational value in recent times. Basically how firms do things generates more value than what they do. This is the case, because in the modern economy organisations have much more access to financial and physical resources in the modern market, greatly decreasing the advantage a firm can gain from anything that can be purchased.

Industry vs Organisation Performance

What drives the overall performance of an organisation, is it the organisation or is it the industry which the organisation operates in, well shockingly it's both. There are industries that are historically more profitable than others, but within each industry, regardless if it's a high or low margin industry there is always an industry leader who is more profitable than its competitors.

  • Industry effects: Performance resulting from durable industry effects resulting from being in a high or low profit industry.
  • Company effects: Performance resulting from the unique company attributes which result in the company out performing its competition.
Company effects are a significantly more important factor when it comes to overall profits, they account for approximately 80% of an organisations revenue, this follows common sense, since business is a zero sum game, and clients will generally choose the superior product or service at a 'Fair' value, that is to say customers have an expectation for the price of a good or service, an organisation that meets or exceeds that expectation is more likely to win the customer over even if their price is not the lowest.

Measuring performance 

In all industries there are market leaders, these are the organisations who in the long run outperform their peers within a given industry or market, and are said to have a competitive advantage. To identify organisations which demonstrate better performance we can Accounting profitability indicators:
  • Return on Assets (ROA = Net Income / Total Assets): is a financial ratio that measures a company's profitability in relation to its total assets. ROE measures how efficiently a company is using its physical assets to generate profits. 
  • Return on Equity (ROE  = Net Income / Shareholder Equity): is a financial ratio that measures a company's profitability in relation to the amount of shareholder equity. ROE measures how much profit a company generates for each dollar of shareholder equity
  • Return on Capital Employee (ROCE = (Earnings before interest and taxes (EBIT) / (Total assets - Current liabilities))/Number of employees): is a financial ratio that measures the profitability of a company in relation to the amount of capital employed in its operations. Return on capital employed per employee (ROCE/employee) is a variation of this ratio that indicates how efficiently a company is using its capital per employee.
These indicators are extremely accurate, because they are rooted in numeric values, however their downside is that they are historic indicators, and not necessarily indicators of future performance.

An alternative way to measure organizational performance would be to rely on a companies stock evaluation, which in theory should factor in a companies future prospects, however in practice this is rarely the case.
  • Privately held companies are not held to the stringent accounting benchmarks as publicly held companies and often time inflate their valuations. 
  • Publicly traded companies valuations are also often times subject to irrational swings in which they can be either under or over valued.
A more reliable marker for future performance is a companies Economic Value Added (EVA) measurement. The EVA is the difference between the sale price and the production price of the good or service. 

An organisation is said to have a high EVA if their cost of providing their goods or services is lower than the industry average, meaning that even if all the competitors price their goods at the industry average the organisation with the competitive advantage will be able to undercut them and still turn a profit. The EVA focuses on price and profit margin however it does not effectively measure value to customers. 

Competitive advantage 

Despite that fact the EVA is an imperfect measure of future performance, it is most likely the best approach, and can by augmented with other performance based measurements such as ROA, ROE, ROCE, Stock price, and so on. The goal is to identify organisations with competitive advantages or to identify the competitive advantages within an organisation. Once identified, the priority should be to bolster and sustain those advantages.

Tuesday 28 March 2023

PESTEL Framework

The PESTEL framework is a tool used to analyze the macro-environmental factors that may impact an organization or firm. It is an acronym that stands for:

  • Political: This refers to the political factors that may impact an organization, such as government stability, political ideology, trade regulations, tax policies, labor laws, corruption, etc.
  • Economic: This refers to the economic factors that may impact an organization, such as inflation rates, interest rates, unemployment rates, economic growth, exchange rates, consumer confidence, etc.
  • Sociocultural: This refers to the social and cultural factors that may impact an organization, such as demographics, social trends, lifestyle choices, and cultural attitudes.
  • Technological: This refers to the technological factors that may impact an organization, such as advances in technology, technological innovations, and the adoption of new technologies.
  • Environmental: This refers to the environmental factors that may impact an organization, such as climate change, natural disasters, pollution, and environmental regulations.
  • Legal: This refers to the legal factors that may impact an organization, such as employment laws, regulatory compliance, intellectual property laws, and consumer protection laws.

By analyzing these factors, an organization can gain a better understanding of the external environment and potential risks and opportunities that may affect their business. This framework helps organizations to identify key trends, anticipate changes, and adjust their strategies accordingly to better position themselves for success.

The Macro environment can by though of as external factors outside of the Industry: beyond competition, suppliers, partners, and consumers. The Macro environment does not just affect your organisation, or industry, but all industries, some related, some not.

The Macro environment is the outermost layer, farthest from the company itself, it is made up of societal institutions and trends in the broadest sense which can impact any businesses either negatively or positively depending on the businesses and the trends currently in vogue.

Tuesday 21 March 2023

VARS Model

VARS is an acronym describing a simplified business model innovation framework:

  • Value Proposition: What product or service can the new business model offer customers to increase the Economic Value Added (EVA). EVA is the difference between what it costs to provide a product or service and what can be charged for that same product or service. Thus a business model can increase their EVA, by either providing more value to it's customers or lowering the cost of providing it's product or service.
  • ARCs (Activities, resources capabilities): What new activates, resources and capabilities does the organisation need to invest in to provide value to its customers, how will these increase the EVA. These activities, resources and capabilities do not need to be inhouse, they can be outsourced or provided by strategic partners, in the VARS framework we are concerned with identifying and understanding how they impact the EVA.
  • Revenue: How will the new business model convert EVA into a revenue stream, how will these changes increase rents for the business, will they generate more revenue by decreasing costs, or by providing more value and charging a premium. Understanding the right revenue model for a business, specific to the particular business context of that model and industry. 
    • Subscription model: organisations charge a monthly fee to access their services Netflix, Disney+, many online premium content providers use this model.
    • Razor-blade model: organisations sell a relatively low cost product that then requires the purchase of a compliment to the original product, Razor handles and their blades, Gaming consoles and video games, printers and ink cartridges.
    • Freemium model: organisations offer some basic features for free to get users to engaged with their product but than require an upgrade to use premium services, Figma, Invision, and linkedin are great examples of this
    • Two-sided model: organisations provide a service but then earn rents in either to form of a commission are a reselling of information, google is a great examples of this.
    • Multi-sided model: organisations bring buyers and sellers together, and extract a commission, Uber, Airbnb, Ebay are examples of this type of model
  • Scope: An enterprise's scope refers to the footprint of what the business does and can be mainly envisioned along three key dimensions.
    • Customer segments: the groupings of customers the organisations provides value for, these could be: Males, aged 16 to 22 or Females 30 to 54, or both or some other segmentation of customers, it could be as specific as 'Male chefs of Japanese decent', it is a logical grouping of customers types. 
    • Horizontal scope: how many products and services are organisations it, what do they sell or provide to their customer segments, and which things to which segments.
    • Vertical scope: where does the organisation sit in the value chain what do they source from suppliers and what do the provide to whom, maybe they sell directly to consumers, maybe they are a supplier themselves, or maybe they control the entire of part of the value chain to the consumer.

The four properties of a VERS model are interconnected changing one of them impacts the others and for the model to be effective it must be in cohesive balance, each part must be aligned with the others.

At the end of the day, whether we are discussing the VARS model or some other business model framework we are creating a theoretical abstraction or mental representation of how a business provides ore will provide value to it's customers and generate revenue from that value. However beyond being just a mental model it is also a pragmatic design that explains how an organisation will generate value for customers and convert that value into revenue.

Tuesday 14 March 2023

Stakeholder strategy

Stakeholder strategy aims to optimise  how the various stakeholders, interact with one another in order to create value. An organization could be understood as a set of relationships between different stakeholders., and to understand how these relationships work, is to understand the business organization. The goal of a stakeholder strategy is to support the executives,  managers, and leaders in shaping these relationships in such a manner that value can be created ideally for all of them. 

Organisations have generally two types of stakeholders, primary as well as secondary stakeholders. The primary ones have a vested interest in the organisation, they are directly affected by the actions good or bad by the firm in question. These primary stakeholders most often are:

  • Investors: are generally looking for ROI
  • Employees: are generally looking for a great place to work, with job security and fair pay
  • Customers: are looking for value for price 
  • Suppliers: are looking for long term mutually beneficial relationship
  • Communities: are looking for a good neighbor
Because all of these stakeholders are important the best strategies do not favor one group of stakeholders over another, but aim for is to align their interests. In order to align stakeholder interests we must first understand their interests, to accomplish this we can use a stakeholder interest matrix.

Interest Employees Customers Government Community Shareholders
Product safety Medium High High High Medium
Job security High Low Low Medium Low
ROI Medium Low Low Low High
Environment Medium Medium High High Low

By mapping out all the different stakeholders and  their interests, we can gain an understanding of where and how we can align these interests to maximise value for each group and in turn the organisation.

Secondary stakeholders may not have a vested interest in the organisation, but they can bring institutional pressure onto the firm, influencing its strategy and performance.
  • Special interest groups: Can lobby against or for your interests 
  • Media: Media can provide both negative or positive press coverage.
  • Government: Through legislation can make it easier or more difficult to turn a profit
  • Competitors: Can aggressively compete to drive profits down, or can keep a distance
  • Consumer advocate groups: Can either recommend or can criticize your product
On occasion Institutional pressure my be completely unwarranted, it may very well come from an individual or group wanting to draw attention to themselves for self-interest reasons, whenever dealing with slander transparency and  information are your weapons of choice. However more often than not institutional pressure comes from normative or distributional conflict. 

Normative conflict arises when an organisation violates the norms and beliefs of the community which they are located in or serve, examples: unsafe working conditions, child labor, polluting the environment, etc. Anything that society would find in conflict with their values or beliefs, has the potential to become a normative conflict. These sorts of conflicts are extremely costly, and should be proactively avoided like the plague.

Distributive conflicts are more nuanced than normative ones, some types are:
  • Market power: when organisations leverage unfair practices to price their goods or services above competitive levels. This generally happens through collusion, cartels, and predatory pricing.
  • Negative externalities: when an organisation imposes some sort of 'cost' which could be monetary, but most likely in the form of some other inconvenience onto a third party without compensations. This most often comes in the form of Noise, air, or water pollution.
  • Common goods: when an organisation exploits a common good such as fish, oil fields, water, forests, any sort of natural resource, which a company can extract to the determent of others.
  • Information Asymmetries: when one party know more than another and can leverage this privileged information to take advantage of the other, a common example is the used car salesman who knows the value of a car, but doesn't share information about the care accident the care was in with the potential customer, and just tries to maximise the sale price.

Monday 13 March 2023

Corporate diversification

Corporate diversification refers to the process of a company expanding its business activities into new product lines, markets, or industries. This strategy offers various benefits to firms, including financial, operational, and strategic advantages. 

  • Financial diversification helps a company to reduce its overall risk by spreading its investments across various assets, minimizing its exposure to any single investment. 

    Argument Critique
    Conglomerates can reinvest retained earnings to capitalise in new/unrelated markets. The role of the organisation is not to reinvest but to provide value to Shareholders, and it's the shareholders who should choose where to invest for themselves.
    Conglomerates have privileged information as well as domain expertise regarding profitable investment opportunities within related markets.  Little empirical evidence suggests that internal capital markets are more efficient.
    Conglomerates can reduce the volatility of earnings, by spreading their investments across multiple lines of business, if one doesn't do well it's impact is tampered by the others. Again this is a decision that should be left to the shareholders, how they wish to diversify their own portfolios and how much risk they are comfortable with.
    By diversifying their portfolio of businesses a conglomerate may be able to reduce the risk of bankruptcy and thus lowering theirs costs of financing as well as employment. If there is less likelihood of bankruptcy then loans should be granted on more favourable terms.  Little empirical evidence suggests that this is true, and some evidence suggests that this diversification increases risks, that the problems of one business can bleed into another, for example in the case of a boycott.

  • Operational diversification allows firms to leverage existing resources, technology, and expertise across different business lines, enabling them to achieve economies of scale and scope. A common nomenclature for this in business is 'synergy', the term  basically means "the interaction or cooperation of two or more organizations, substances, or other agents to produce a combined effect greater than the sum of their separate effects:" 

    Argument Critique
    exploit economies of scale and scope, meaning that conglomerate can lower costs by reducing or eliminating duplicate effort, for example creating shared services such as HR or IT between lines of business. Synergies are often hard to realise in practice and often better achieved through strategic partnerships or simple outsourcing rather than acquisitions. 
    Share technology, know-how, reputation, maximise underutilised resources across lines of business. Synergies are often hard to realise in practice and often better achieved through strategic partnerships or simple outsourcing rather than acquisitions. 
    Conglomerates can improve coordination among their held businesses, incentivise cooperation and information exchange between business units. Synergies are often hard to realise in practice and often better achieved through strategic partnerships or simple outsourcing rather than acquisitions. 

  • Strategic diversification enables companies to explore new markets and capitalize on emerging opportunities, helping them to stay ahead of the competition and maintain long-term growth. 

    Argument Caution
    if a Conglomerate acquires a business they can subsidise a price war with the competition, allowing their acquisition to operate at a loss to drive out competition.  This may actually be illegal and a violation of anti-trust laws.
    Aquire organisations upstream or downstream to one of your existing businesses, and use it to starve out your competition, by restricting their access to a key resource this can only be achieved by holding a monopolistic position in the up/down stream activity. Again their are legal considerations to take into account.
    Reduce rivalry through mutual forbearance, in other words, through mutually assured destruction; Conglomerates who overlap in businesses and markets can price each other out of business in an all out war. By holding similar positions to competitors this can reduce the risk of anyone throwing the first stone.  If a price war does break out it could mean the end of one or both conglomerates, it's generally a gentleman's agreement at best and a fragile peace treaty at worst.
    minimise transaction costs of using preferred partners, geographically located facilities near upstream suppliers to minimise transport fees   This requires either vertical integration or extreme trust between partners.

Overall, corporate diversification is a valuable strategy for firms looking to increase their competitiveness, minimize risk, and maximize their potential for success, however it is extremely difficult and complicated to accomplish successfully. 

Diversification matrix

The strategist can leverage the diversification matrix to help analyse the multiple business that on organisation operates in.

On the y-axis we measure how attractive an industry, this refers to how much potential and how profitable the industry is, the more opportunity to generate revenue the more attractive a business is.

On the x-axis we measure what the competitive advantage the business unit has, do they have a patent or are their other barriers to entry that allow them to have a competitive advantage.

based on where a business unit falls on the diversification matrix we can decide whether it's worth holding onto it, building it up more or harvesting it, that is selling it off, for more capital to invest in one of the other quadrants. Keep in mind that you have take into account the impact on other business units, a conglomerate may very well have a shipping company that is low on both scores, but provides a competitive advantage for a different business unit.

Friday 10 March 2023

The competitive lifecycle

Before we discuss the competitive lifecycle, let's quickly review the fundamental rule of business strategy.

Before we spoke of two types of profits:

Ricardian rents: Profits based on individual ability, there are organisations that have a competitive edge because they can do something better than the competition, processing, marketing, innovation, customers service, there is something that a particular organisation does that allows them to make profit, either by charging a premium or providing there product or service for a lower rate than the competition.

Monopoly rents: Profits exist because of some barrier to entry, Not everyone can enter the market allowing the incumbents to maintain an advantage and turn a profit. Barriers to entry could come in the form of: restrictive costs: it's just too expensive to enter the market, Licensing: there is a limited number of licences issued, Patent: a organisation has legal protection from imitation.

Now we are going to introduce a third type, the Entrepreneurial or Schumpeterian rent.

Entrepreneurial rents: Profits are based on dynamic capabilities, profits are the result of some sort of temporal advantage, namely in the form of technological innovation. These advantages come as organisations innovate, and then go as new technologies distrust the industry. A great example of this is the horse drawn carriage, disrupted by the combustion engine car, now being disrupted by the electric automobile.

The competitive life cycle

The competitive life cycle can by be broken up into three distinct phases
  • Emergent phase: during the emergent phase, organisation are trying out new business models or technologies, they are experimenting working on something that will give them an advantage. Profits are generally low during this phase if not negative, organisations are leveraging capital to bring something to market.
  • Growth phase: during the growth phase, organisations are expanding, new competition is entering the market. During this phase the demand is still high, thus organisations are generally aiming for new customers rather than competing for existing ones. During the growth phase profits begin to rise the dominant design has emerged, however as the industry grows more competition enters and profits begin to slow down if not dip.
  • Mature phase: The market has now accepted the technology and growth slows down, the customer base is established and only a few dominant players remain in the market.

Between each phase products are service are changing as they pass through transition gates:

  • Annealing: at the annealing gate the emergence of a dominant design takes root in the market, a coalescing around a particular design for a product ore service becomes the standard expected by the customer base.
  • Shakeout: at the shakeout gate, we see a reduction in the number of organisations within a market, this happens because some organisation go bankrupt whereas others are acquired by the dominant players in the market.
  • Disruption: at the disruption gate a new business model or technology enters the market and disrupts in incumbent players. This can be the result of either or both a technology push or a demand pull.
Below is a snapshot of how one cycle at a macro level may look 

During the emergent phase there are few organisations, the margins are low, if not negate and little revenue has be gained. As the product or service passes through the Annealing gate, a dominant design is established and adopted across the industry, this dominant design becomes the customer expectation. 

During the growth phase incumbents ramp up production and sales increase, and margins and revenues increase accordingly, however more organisations enter the market. entrepreneurial and established organisations alike enter the space. As competition increases margins dip and cumulative revenues slow down. Eventually the cycle passes through the Shakeout gate, at this point the market narrows down to the the best organisations, competitors either go bankrupt or are acquired by the biggest players.

During the Mature phase, the product or service remains stable there is little room for cost effective innovation, eventually the industry can expect to enter the disruption gate, where some new technology or service providing superior value enters into the market. An example of this is the entry of the iphone into the mobile market. 

Thursday 9 March 2023

Creating a strategy

As mentioned before a digital strategy is a governance document with principles, values, and priorities that are used to guide decision makers to ensure consistency in expected outcomes. It defines ways of working to facilitate a digital transformation to a defined vision. A strategy is a set of guiding principles that, when communicated and adopted within the organization, generates a desired pattern of decision making. A strategy defines how people throughout the organization should make decisions and allocate resources to accomplish key objectives.

The digital strategy can be broadly looked at as two parts, the first is the Position Setters, these really explain the why, and Strategic pillars which explain the what.

  • Position Setters
    • Mission statement: Convey the transformations purpose
    • Vision statement: Explains why we are undergoing the transformation
    • Context: Describes the organisations background and the steps taken thus far and by who
    • Problem statement: Answers the five Ws and one H as to what the organisation is facing
    • Ambitions & Goals: ambitions of the transformation and SMART goals for ambitions
    • Financial projections: Financial gain from transformation
  • Strategic Pillars:
    • Business model(s): how existing business models or capabilities will change as well as new business models or capabilities will be created.
    • Product & Service: provide the guidance and support for delivery teams to digitally transform their product or service
    • Delivery: defined methodology for optimal delivery
    • Technology: Technology required to preform the delivery.

Section 0: Title & Content pages

Not much needs to be said here, keep it clean, keep it simple, that goes for both: your content page does not need to be an index, just high level overview setting expectation up front on what section the strategy will cover and more or less how long the session sill last; section 1 starts on the is page, section 2 starts on this page, and so on.

Section 1: Mission statement

Mission statements are straightforward and actionable which convey the transformation's purpose. They summarize what value completing the project will provided for customers and the organisation. In short, it's an explanation of what your going to do and why your doing it.

The mission for the most part already exists, whoever you are designing the digital transformation strategy for most likely already understands at a high level what they want/need done, it's up to you to extract this information from the champion as well as stakeholders. A great way to ensure buy in is to quote the CEO, the transformation champion and primary stakeholders, if you need to feed them the lines, so be it. Quote these lines in the strategy, this will ensure a shared sense of ownership, if you couple the success of the transformation to the leadership, they will go above and beyond to help you attain your goals. Making the executive team look and sound good will go a long way.

Section 2: Vision statement 

Visions answer the question why are we doing a digital transformation,  they are the guiding star. Visions are quintessential to the Digital Transformation, they serve as a reference point to validate the alignment of work. If something does not align to the vision, then it shouldn't be done, if there are multiple options to do something, then the option best aligned to the vision should be done. This is why visions are so important.

The Vision is based on the mission, they are directly related. The mission defines the what we are aiming to accomplish, whereas the vision explains the why. That is not to say that vision is merely an explanation, it contains values which can be looked to for guidance.

To define our visions values, we must first extract our mission themes from our mission statement. If we look at the mission statement of Southwest airlines. 

We can clearly see that their Mission themes are:

  • Dedication to highest quality of customer service.
  • Making the client feel like a guest.
  • Consistency throughout.
from these themes we can extract the following vision values:
  • Holistic: the customer experience should be delightful from start to finish, from the moment they land on the homepage, or approach to desk at an airport, they customers is made to feel like they are a guest.
  • Support: the customer doesn't feel stressed, they aren't afraid to ask for help because they know they will get it.
  • Proactive: in obvious situations customers do not even have to ask for help they are offered it, elderly passengers are helped with their luggage.
  • Integrated: the customer should always feel as if they are in the hands or Southwest, even if they are rerouted through a partner airline, they are made to feel as if they are a guest.
Once we analyse our mission for it's themes and we use those themes to inspire our vision Values, we are ready to create a vision statement. Our vision statement could be something like the following 

"Air travel should be stress free, our passengers' travel with us, will be the most pleasant part of their journey. The only concern our customers should have is getting to the airport on time, we provide everything they need to know, from door to destination and go the extra mile to make pleasant journey. We support our customers via their mobile devices from the night before through to their destination."

A vision statement should be short and sweet, anywhere from 2 lines to 2 paragraphs, it is an iterative process, it may take multiple iterations to get it just right, the best approach is to get feedback often and quickly, remember the vision statement will be used align value to the digital transformation, if something is not aligned with the vision it will be deemed as superfluous.   

Section 3 Context 

The context provides the background about the current environment an organization is in along with the high level challenges associated with this current state of affairs. The context should also include the timeline of steps and activities, along with who has been involved up to the current point, in the creation of the strategy. Finally the context should also provide the role of the strategy, its value and how it is to be used for the digital transformation.

Section 4: Problem statement

Problem statements are clear explanations of the key challenges faced by the organisation which we are going to solve. To create a Problem statement, refer to you vision and context, here you will find your problem statement. To extract your problem statement from your mission and vision ask yourself the following:

  • What is the problem faced by the organisation today?
  • Who is impacted by the problem, the organisation, the customers, both?
  • Where is the problem happening?
  • How is the problem impacting the organisation and/or customers?
  • Why is this a problem and why must it be solved?
  • When is the aim to solve the problem by?
Once you can answer the above questions you'll have your problem statement, it is important to focus on one problem, if you find yourself tackling more than one problem, you need to revisit your vision and possibly your mission. Any transformation is an extremely complex process, trying to do two at once almost ensures failure. When it comes to the length of a problem statement, there is no hard and fast rule, Try to keep it on one slide, two at the most. 


Section 5: Aspirations & Goals

To define aspirations and goals we can use a divergent and convergent process, we begin with our Mission, Vision, Context and Problem statement; using what we've learned form these we begin by defining aspirational changes to our organisation, where do we want to to change to make the biggest impact to our problem statement. Once we define our aspirations, we then define concrete goals to aim for. The goals you set must be SMART: Specific, Measurable, Attainable, Relevant and Time-bound. Generally you want about 6 to 10 goal, the fewer goals the more attainable they are.

Section 6: Financial projections 

Financial projects are very difficult to predict with any level of certainty and are notoriously inaccurate. There are four key dimensions when it comes to calculated financial projections:

  • Capital investment: Funding needed to make changes 
  • Operational investment: Funding needed to keep the transformation operational
  • Optimised Profit: Profits generated from existing transformed business models
  • Opportunity Profit: Profits generated from new business models resulting from the transformation.
Keep in mind that this is very early in the the transformation, the organisation has yet to commit to the work to be done, these are very high level and, the cost of the transformation will be far more accurate than the projected profits. As the various work-streams deliver transformations, they projected profits can be refined to more accurately represent reality.

Section 7: Trends & opportunities 

Trends are observable market level changes, from a macro perspective they can seem as sudden shifts in behaviour and/or expectations, however they are generally made up of many small shifts which add up to a visible trend which is currently occurring or will occur in the future. To execute an effective trend analysis:

  • Identity: what it is you want to understand
  • Narrow: down to 3 to 5 key trends that impact your business
  • Overlap: find where the trends align looking for higher level market trends
  • Opportunities: Align trends with opportunities to take advantage of
The sole purpose of identifying trends is to then use them to identifying opportunities which can be leverage to increase profitability. Trends and can be observed in many different dimensions: customer expectations, customer values, customer knowledge, customer interests, basically it's identify what your customers and potential customers are doing, expecting, valuing.

Section 8: Business models

Business models are representations of products or service that generate revenue, there are a number of ways to represent one but in essence you want to understand at the very least the following 9 aspects of your business models:

  • Value: What product or service are you offering that customers find valuable.
  • Customers: Who is using your service and providing you with value in return (
  • Channels: How do your customers access your product or service
  • Relationships: How do you create and maintain relationships with customers or/and segments
  • Revenue: How is capital generated based on your value proposition
  • Resources: The things do we need to deliver value to the customers
  • Activities: What actions must we preform to provide value to our customers
  • Partnerships: Who do we need to provide value
  • Cost: What are we spending money on to provide value.

For each capability we need to understand the above thoroughly, once we have this understanding we can begin to digitally transform the business model, optimising it to maximise value to both our customers and organisation. 

Optimising a model is great, however we shouldn't limit ourselves with existing models, we should ideate as well as investigate on how digital technology aligned with our core values can create new Business models that previously did not exist or where not possible. 

Section 9: Customer experience

Here we identify each product and service which our Business models define and how they are directly related to our aspirations and goals. Our goal is to understand every product and service how the customers use them at a macro level and how to 

  • Customer journeys: how do our customers interact with our products and services from beginning to end, these need to be defined for every interaction between the organisation and it's customers
  • Tone of voice: Consistent vocabulary, constant messaging, constant copy.
  • Style guide: Consistent colours, logos, spacing, typescript, for all channels, mobile, web, chatbot, phone, video, etc.
  • Interpretability: Customers must be able to move between products and series seamlessly, a customer should be able to begin an interaction via phone, switch to mobile app and then finish on their desktop.
  • Customer insights: each product and service is designed with insights, this tracks customers usage to better understand their journey as well as their product and service usage.

At the end of the day each product and service must be seamless, customers should not know the difference between channels and should be able to move between them without realising it. The customer experience should be so consistent so simple that once a customer interacts with one product or service, they will be familiar with all of them.

Section 10: Delivery

Choose the appropriate delivery methodology for your organisation, that could be Agile through and through, it could be Waterfall at the strategic level, and Agile at the product or service level, or it could even be waterfall at all levels. It really doesn't matter which you choose as long as you make an informed decision that works for the organisation and the product/service teams which will have to implement the transformation.

When it comes to delivery, there is four fundamental values that the strategy team must adhere to: 

  • Support: provide the delivery teams what they need to get the job done, that includes everything from guidance in the form of customer experience guidelines as mentioned in the previous section to the tools and expertise they need to get the job done.
  • Trust: believe in the delivery teams, they know the products best and will do the best job implementing the solutions, do not micro manage at the product & service level, focus on providing guidance and feedback.
  • Respect: Let the team focus on one product or service at a time, they are experts do not use them as disposable resources who can be pressured into delivering at the cost of burnout. Make room for failure, let the delivery teams experiment, take risks and provide them the space needed to deliver something delightful.
  • Open: The delivery teams are not on a need to know basis, keep two-way communication open with the teams, being open with your challenges will encourage them to be open with you regarding their challenges.

Section 11: Technology

Generally technology can be grouped these  high level buckets:

  • Venders: Leverage of the shelf solutions, sometimes building a perfectly bespoke solution is of little value when a potential partner already offers a turn key solution, that may just need light customisation.
  • Knowledge: Hire externals to fill temporary gaps and upscale people for operational ones.
  • Data: collect and leverage customer insights to better understand how to provide value.
  • DevOps: Break down the barriers between development and operations, ensure that there is a smooth pipeline from product & service development through to delivery

Section12: Road map

Provide a high level roadmap, a graphical representation of what will be executed and in what order, the dates are not to be specific, months or quarters are sufficient the role of the roadmap is to provide a high level overview. Schedule frequent internal pilots creating a two way communication stream between strategy and delivery teams.

Section 13: Accelerators 

Identify potential assets (frameworks, products, service) that you may have that could accelerate the digital transformation. As well as recommendations for quickly implementing some low hanging fruit which could gain early confidence among senior leadership. These low hanging fruit do not have to be fully delivered and validated products or services, they could be prototypes or early iterations that demonstrate immediate value. 

opportunities: how to get delivery accelerated and see some quick wins to validate the strategy. 

next steps : house keeping what needs to get done to make this happen.

Monday 6 March 2023

Strategy phases

There are four phases when it comes to defining a digital strategy, however it is an iterative process, meaning that a digital strategy team shouldn't pass through each phase only once, they should keep iterating over these four phases until all of their questions are answered and all of the blanks are filled.

Phase 1: Discovery 

During the discovery phase the digital strategy team, analyses to understand the opportunities across existing business capabilities as well as discovering new potential capabilities which the organisation could derive value from. The goal of understanding existing capabilities is to ensure that they are optimized and future-proof to generate the maximum value to the organisation as well as it's customers. The transformation team also aimes to identify new potential capabilities which the organisation can bring to market. It is important to note that on the first pass of the Discovery phase the odds are that the transformation team will not be able to discover new potential capabilities, and should focus on existing capabilities. Only on subsequent iterations, when the design of the strategy is defined at least in part will they be able to effectively discover new potential capabilities.

Phase 2: Design

During the Design phase the digital transformation vision and strategy are defined, this is where the transformation team along with the executive team define a cohesive vision and strategy for the organisation to digitally transform. The appropriate products and services are identified as well as prioritized for transformation.

Phase 3: Validation

The bottom up experimentation and implementation of the digital strategy, this is where the delivery teams with their leads implement the strategy to best provide value in the defined way for the customers and the organization itself within their business units, product, and/or service lines. They validate what resources they require and come up with a granular plan of action on how to implement the digital strategy.

Phase 4: Iterate

This is where the delivery teams work with the strategy team iterating on experiments looking for the most optimized and highest value implementations for customers and the organisation. They also mature and adapt the strategy over time as market forces evolve over time.

Friday 3 March 2023

Digital strategy

A digital transformation is made up of four key aspects:

  • Vision: Why the organisation is undergoing a digital transformation
  • Strategy: How is the organization going to transform, high level values, principles and priorities
  • Missions: What is going to transform, which products and services need digital transformation
  • Resources: Who is going to execute the transformation.

A digital strategy is a governance document with principles, values, and priorities that are used to guide decision makers to ensure consistency in expected outcomes. It defines ways of working to facilitate a digital transformation to a defined vision. A strategy is a set of guiding principles that, when communicated and adopted within the organization, generates a desired pattern of decision making. A strategy defines how people throughout the organization should make decisions and allocate resources to accomplish key objectives.

A digital strategy it is not a roadmap, it is not a micro step by step instruction set to implantation, but rather a high level aspirational direction with a set of core values which are aligned to a unified digital direction. A digital strategy is a reference for product and service owners, providing them with a high level direction to support them in micro level decisions when digitally transforming their own product or service lines. 

The digital Strategy like the digital vision is a living and breathing entity, it does not exist in a frictionless vacuum, and as markets evolve and situations change the digital strategy in all likelihood will need to course correct, this is normal especially in large organisations where a digital transformation my be a multi year program rather than an simple project.

Now that the organisation, knows where they are, where they want to be, and why they want to get there, they are ready to define their digital strategy. There are four reasons to define a Digital Strategy:

Strategies ensure that the Executive team are all on the same page, they define the digital direction that the organization is bound for, I use the word direction, rather than destination for a reason. As technology evolves and changes, the digital strategy must course correct; true digital transformation never ends. The initial phase is meant to catch an organisation up to the current value added digital trends, once this is accomplished the organisation must stay diligent to not fall behind. 

Fill the gap
Strategies fill the gap between the Executive team, and the various Delivery teams, they can be thought of as a governance document which can be referred to for guidance when it is unclear as what to do and what is important.

Strategies excite and motivate the organisation to take action. Digital strategy provides the high level principles and values to inspire delivery teams and their leads, while leaving enough breathing space for them to interpret and implement the strategy at the product or service level to maximise customer and employee value.

Strategies accelerate a digital transformation, by having a defined starting point and a clear direction, it far more straight forward for the organisation to move as a whole when it is clear where they are going.

Good digital strategies have the following common characteristics:
  • Values: Define what is important and why, how it will provide value to customers as well as employees
  • Flow: A good strategy flows, they principles and values are cohesive and complement each other clearly aiming the organisation in one unified direction.
  • Simple: needs to be easy to understand and implement, if a strategy becomes too complex, the chanced of implementing it correctly diminish. Thus keep it as simple as possible. 
  • Bottom Up: Though the digital strategy is defined at the executive level, it needs to be implemented from the bottom up, this is why change management is so important when it comes to digital transformation.   
  • Culture: due to the fact that digital transformation is best implemented from a bottom up approach, the organisation must provide a safe space for business units to experiment and fail, to learn from their failures and try again. It's the business units who interact with the clients that are best positioned to know what the customers find valuable.

Wednesday 1 March 2023

Digital vision

A digital transformation is made up of four key aspects:

  • Vision: Why the organisation is undergoing a digital transformation
  • Strategy: How is the organization going to transform, high level values, principles and priorities
  • Missions: What is going to transform, which products and services need digital transformation
  • Resources: Who is going to execute the transformation.

Before committing to a digital transformation, an organisation needs to understand where they are on their digital journey and where they want to go. The first phase is the assessment: understanding what the current digital strategy is. An organisation may not have a defined digital strategy, however they may very well have an organic strategy that has not been defined, but has grown from necessity, whichever the case organic or defined it needs to be assessed. The current direction should be projected into the future to establish where the organization will be on the current course in, 1, 2, even 5 years. 

Next the organisation needs to define there digital vision: 
  • Where they want to be, what strategic digital direction do they want to take?
  • Define their vision of what good looks like in concrete terms?
  • how they want to change or augment their business model? 
  • how these changes will provide value to the customers and employees? 
understanding the value added of this digital vision will establish the why to transform.

Digital transformation visions are living and breathing entities, they do not exist in a frictionless vacuum, as markets/industries evolve and situations change your organisations vison may, and in all likelihood will need to change with the landscape, this is normal especially in large organisations where a digital transformation my be a multi year program rather than an simple project.

In short a digital vision helps the executive team acknowledge the fact that a digital transformation is necessary. It establishes where the organisation is, and where it needs to be to remain relevant and competitive.