Wednesday, December 17, 2014

The Discipline of Business Experimentation
•  Stefan Thomke
•  Jim Manzi

A critical, critical article. Experimentation is the underpinning of commercializing  innovation.

Soon after Ron Johnson left Apple to become the CEO of J.C. Penney, in 2011, his team implemented a bold plan that eliminated coupons and clearance racks, filled stores with branded boutiques, and used technology to eliminate cashiers, cash registers, and checkout counters. Yet just 17 months after Johnson joined Penney, sales had plunged, losses had soared, and Johnson had lost his job. The retailer then did an about-face.How could Penney have gone so wrong? Didn’t it have tons of transaction data revealing customers’ tastes and preferences? 
Presumably it did, but the problem is that big data can provide clues only about the past behavior of customers—not about how they will react to bold changes. When it comes to innovation, then, most managers must operate in a world where they lack sufficient data to inform their decisions. Consequently, they often rely on their experience or intuition. But ideas that are truly innovative—that is, those that can reshape industries—typically go against the grain of executive experience and conventional wisdom. 
Managers can, however, discover whether a new product or business program will succeed by subjecting it to a rigorous test. Think of it this way: A pharmaceutical company would never introduce a drug without first conducting a round of experiments based on established scientific protocols. (In fact, the U.S. Food and Drug Administration requires extensive clinical trials.) Yet that’s essentially what many companies do when they roll out new business models and other novel concepts. Had J.C. Penney done thorough experiments on its CEO’s proposed changes, the company might have discovered that customers would probably reject them… 
…To obtain that kind of knowledge—and ensure that business experimentation is worth the expense and effort—companies need to ask themselves several crucial questions: Does the experiment have a clear purpose? Have stakeholders made a commitment to abide by the results? Is the experiment doable? How can we ensure reliable results? Have we gotten the most value out of the experiment? Although those questions seem obvious, many companies begin conducting tests without fully addressing them. 
Checklist for Running a Business Experiment 
Purpose Does the experiment focus on a specific management action under consideration? What do people hope to learn from the experiment? 
Buy-In What specific changes would be made on the basis of the results? How will the organization ensure that the results aren’t ignored? How does the experiment fit into the organization’s overall learning agenda and strategic priorities? 
Feasibility Does the experiment have a testable prediction? What is the required sample size? Note: The sample size will depend on the expected effect (for example, a 5% increase in sales). Can the organization feasibly conduct the experiment at the test locations for the required duration? 
Reliability (remember, we start out to prove our hypotheses wrong--the scientific approach)
What measures will be used to account for systemic bias, whether it’s conscious or unconscious? Do the characteristics of the control group match those of the test group? Can the experiment be conducted in either “blind” or “double-blind” fashion? Have any remaining biases been eliminated through statistical analyses or other techniques? Would others conducting the same test obtain similar results? 
Value Has the organization considered a targeted rollout—that is, one that takes into account a proposed initiative’s effect on different customers, markets, and segments—to concentrate investments in areas where the potential payback is highest? Has the organization implemented only the components of an initiative with the highest return on investment? Does the organization have a better understanding of what variables are causing what effects?

Monday, December 15, 2014

Build an Innovation Engine in 90 Days

Scott Anthony
David Duncan
Pontus M.A. Siren

For those who are familiar with the MDG process and the Kellogg class on Organic Growth Through Innovation, this fits into the work of the Business Builder.

Practically every company innovates. But few do so in an orderly, reliable way. In far too many organizations, the big breakthroughs happen despite the company. Successful innovations typically follow invisible development paths and require acts of individual heroism or a heavy dose of serendipity. Successive efforts to jump-start innovation through, say, hack-a-thons, cash prizes for inventive concepts, and on-again, off-again task forces frequently prove fruitless. Great ideas remain captive in the heads of employees, innovation initiatives take way too long, and the ideas that are developed are not necessarily the best efforts or the best fit with strategic priorities… 
…For the past decade we’ve been helping organizations around the globe strengthen their innovation capabilities, and that work has taught us that there’s an important intermediate option between ad hoc innovation and building an elaborate, large-scale innovation factory: setting up a minimum viable innovation system (MVIS).

Friday, December 12, 2014

Rethinking the role of the strategist
Strategic planning has been under assault for years. But good strategy is more important than ever. What does that mean for the strategist?

November 2014 | byMichael Birshan, Emma Gibbs, and Kurt Strovink

This is a critical study and strongly suggest you read the whole article.

Many companies have an executive to guide their strategies. The discipline’s professionalization, which began in earnest in the 1980s as it evolved from the chief executive’s domain into a core corporate function, prompted the creation of heads of strategy, strategic-planning directors, and, more recently, chief strategy officers (CSOs). Who better than a professional strategist to help meet the big new uncertainties of the 21st century? 
Yet today’s unpredictable environment is utterly incompatible with what, historically, has been one of the chief responsibilities of many strategists: leading the annual strategic-planning process. While nothing new, the weaknesses of traditional strategic planning—characterized by a lockstep march toward a series of deliverables and review meetings according to a rigid annual calendar—have been amplified by the importance of agility in a rapidly changing world... 
…Our research also supports one of our major observations about what it takes to innovate in the development and delivery of strategy: over and over, we’ve seen that the chief strategists best at driving more dynamic approaches have a professional credibility that extends well beyond a traditional process-facilitation role. At the same time, we’ve seen tremendous diversity in the characteristics of effective strategists. In a quest for greater precision, we applied statistical cluster analysis to the 13 facets that chief strategists responding to our survey described as most important to their efforts. The analysis yielded five clusters in which the strategist’s role becomes more than the sum of its parts 
The architect
These strategists, 40 percent of the executives we surveyed, make the most of their talent for using fact-based analysis to spot industry shifts and to understand their own companies’ sources of competitive advantage as a foundation for clear, differentiated strategies. Organic growth is a core concern, and driving business performance to meet tough organic targets is a critical part of the architect’s role.
The mobilizer
An additional 20 percent of CSOs surveyed fall into a mobilizer role, developing the strategic muscle of their companies, building capabilities, and delivering special projects. Mobilizers play critical leadership roles in company-wide efforts to build what one CEO in an operationally intensive industry describes as a “higher organizational IQ on strategy.”
The visionary
A key strength of visionaries (14 percent of respondents) is trend forecasting, which at its simplest involves scanning the landscape for trends and shocks that may create opportunities or risks for the business. The best visionaries are using the advent of big data to create unique perspectives on where the next growth pocket will come from and, specifically, on what will be needed to serve it
The surveyor
Surveyors are the 14 percent of strategists who define themselves by spotting potential disruptions and quickly advising their businesses on the impact and opportunity such shifts could produce. These are the people with their eyes on the furthest horizon.

Wednesday, December 10, 2014

A Strategist’s Guide to the Internet of Things
The digital interconnection of billions of devices is today’s most dynamic business opportunity.
by Frank Burkitt

This dynamic cannot be ignored

Humanity has arrived at a critical threshold in the evolution of computing. By 2020, an estimated 50 billion devices around the globe will be connected to the Internet. Perhaps a third of them will be computers, smartphones, tablets, and TVs. The remaining two-thirds will be other kinds of “things”: sensors, actuators, and newly invented intelligent devices that monitor, control, analyze, and optimize our world. 
This seemingly sudden trend has been decades in the making, but is just now hitting a tipping point. The arrival of the “Internet of Things” (IoT) represents a transformative shift for the economy, similar to the introduction of the PC itself. It incorporates other major technology industry trends such as cloud computing, data analytics, and mobile communications, but goes beyond them. Unlike earlier efforts to track and control large systems, such as radio-frequency identification (RFID), the Internet connection gives this shift almost limitless versatility. The IoT also opens a range of new business opportunities for a variety of players. These opportunities tend to fall into three broad strategic categories, each reflecting a different type of enterprise: 
“Enablers” that develop and implement the underlying technology “Engagers” that design, create, integrate, and deliver IoT services to customers “Enhancers” that devise their own value-added services, on top of the services provided by Engagers, that are unique to the Internet of ThingsHow will your company build value in this new world? That will depend on the type of business you have today, the capabilities you can develop for tomorrow, and, most of all, your ability to understand the meaning of this new technology.