"One Ring to rule them all, One Ring to find them,
One Ring to bring them all and in the darkness bind them
In the Land of Mordor where the Shadows lie"
“Lord of the Rings” by J.R.R Tolkien
We live in a volatile, uncertain, complex and ambiguous world, or a “VUCA” world in its acronymic form. It was a term coined by the US Military to describe the nature of the world post the end of the Cold War and attained common usage post the war in Afghanistan. It has now become a trendy managerial acronym as a catchall for “Hey, it’s crazy out there!” making it too easy to use VUCA as a crutch, a way to throw off the hard work of strategy and planning. The diagram below illustrates the key features of a VUCA world;
We are now living in the business world of the “unicorn”, a term coined for private businesses with a valuation of over $1 billion. Data tracked in 2016 by VentureBeat indicated that there are over 229 unicorns globally, with over 40% having achieved this lofty status in under 5 years. An extreme example is Jet.com, a new e-commerce shopping site which did it in 4 months! At the other end of the size spectrum represented by the S&P 500, extinction rates are rising, in 1958 the average company existed in the index for over 60 years, by 1990 it had dropped to 20 years and is forecast to drop to 14 by 2026.
Innovation at all levels (operational, product/service, strategic/business model, ecosystem and management) is now a business survival let alone a growth imperative. As a topic it is covered in every business magazine, broadcast on business radio, discussed at innumerable innovation conferences and a regular subject at boardroom level sessions. All this is on top of the over 400,000 links you could click on in a Google search for “become more innovative” or from reading the over 70,000 books on Amazon.com linked to the word “innovation”! This subject is really overwhelming and tackling it can be daunting!
One of the sexiest parts of the innovation spectrum is business model innovation , old business models are being renewed or disrupted, altogether new business models are being created all in a frantic attempt to survive in this VUCA world. The sad part of all this frenetic innovation is that much of it is unsuccessful. We no longer use the term “failure” it is simply one more result that does not work as we embrace risk-taking. We are being bombarded by a raft of new ways to innovate and build our businesses, all supported by new terminology and dreaded MLAs (multi-letter acronyms). Consultants and pundits are screaming from the rooftops that if we are not applying the current “best practice” thinking in our business we will not survive!
Feeling panicky? Many would say that panic is appropriate as this indicates an awareness that the status quo is no longer appropriate and it is from this place of awareness that change and progress is possible. This is a mental switch from “I don’t know that I don’t know” to “I know that I don’t know”, and you can now do something about it. This is just the first step in the stages of learning model illustrated below. Without this mental switch, you will continue to live blissfully in a state of unconscious incompetence. Moving through the other stages requires diligent and applied practice till we reach mastery at level 4.
The danger of combining a VUCA world with level 4 mastery is that the world changes around you faster than you realise and the shift back to level 1 status is often silent and unobserved. If not addressed you can slide into obsolescence and irrelevance before you know it! The way to address this risk is a combination of growing your self-awareness, maintaining a degree of healthy scepticism on what mastery means and staying on a life-long path of learning and skills development.
The challenge is, having made the mental switch, what is your next step in adapting your business to this new world? How do you sort through all the advice you have been given, all the research you (may) have done, the frameworks and processes, untangle the jargon and choose the right approach for the right part of the business to move you forward? The rest of this blog article will hopefully show you how.
2 SLOW DOWN AND STEP BACK
The starting point is to S L O W D O W N …. and take a step back. Acting too quickly in a VUCA environment could potentially improve the situation, but as likely not. You need to take time to step back and look at the overall system that you and your business are operating in and to assess the place in the system where maximum leverage is possible. I will introduce a tool to help you look at your “business system”.
Before introducing this tool, I will introduce an approach called “A3 Thinking” or more generically “Canvas Thinking”. The term “A3 Report” refers to a tool within a management thinking paradigm designed by Toyota after the Second World War called the Toyota Production System. One of the key methodologies in this system was a problem-solving approach that summarised a problem-solving model on a single A3 page, illustrated below;
It is a very simple model;
What is the background to the problem/issue/challenge?
What is the current reality?
Where do we want to end up?
What is the cause of the gap between the current reality and the target?
What are we going to do about it?
How do we know that what we did worked?
What else do we need to do?
In many ways, this is the cycle of life, everything we do is in the service of closing the gap between current reality and what we want in the future. The power of the A3 report, however, derives not from the report itself, but rather from the development of the culture and mindset required for the implementation of the A3 system. In other words, A3 reports are not just an end product but are evidence of a powerful set of dynamics that is referred to as A3 Thinking.
If you look at the Toyota A3 report it is simply one mental model of how to solve a problem, drawn on a single A3 page for discussion in a small team. The example shown above uses mainly text but can also include graphics, hand drawings and post-its. If the group was larger the “model” can be printed on a larger sheet, and placed on the wall for all to access, add to and amend as illustrated in the graphic below.
An alternative term I will use going forward is the term “canvas” to represent a mental model on a topic of interest, drawn visually on a sheet of paper of any size, for use by an individual or a team.
A relevant quote at this point about models is “All models are wrong, some are useful” . A model is an abstract description or interpretation of some phenomenon or system in the real world, which, in reality, is much more complex. Einstein said: “Everything should be made as simple as possible, but no simpler”. By creating a simple model, it allows us to distil the essential elements and variables in the system and to work more easily with them. This allows us to live up to the Einsteinian view that “if you cannot explain it simply, you don’t understand it well enough”. In putting the model on a canvas, it introduces the additional dimension of being visual and graphic, making the use of the model by diverse groups significantly easier, adaptive and collaborative. We are visual beings, even when we are using verbal language, it is a representation of an internal visual model. Putting the model down on paper makes it explicit for all to see, hopefully for all to agree on and on which to base a collaborative discussion.
The next section will introduce a canvas designed to facilitate discussions around the design of a venture, for example a for-profit or a not-for-profit company.
3 VENTURE DESIGN CANVAS
The canvas below attempts to represent all the discussions that need to happen when considering a venture in its totality. The model has been inspired by the Business Model Canvas (BMC) by Alexander Osterwalder and Yves Pigneur in their ground-breaking book “Business Model Generation” , as well as the THNK approach to venture design (I am an alumni of the THNK School of Creative Leadership in Amsterdam, Netherlands) .
The authors of the BMC chose to put the design of the canvas out under a creative commons licence allowing others to use, adapt and modify the original. The BMC has moved like a wildfire through the business and startup community and spawned what I would call a “canvas revolution” of derivative works as well as completely new models, also published under creative commons licences. This was a very enlightened approach at the time when the conventional approach for consultants was to develop proprietary intellectual property (IP) and to hog it for their own consulting business.
There is nothing particularly unique or special about these canvas models, they do not give answers to the challenge. The final output quality from using any canvas model is a function of the group using it, the facilitator working with the group and the quality and robustness of the discussions in the group.
I have called the canvas the “Venture Design Canvas”
The Venture Design Canvas (VDC) is a systemic model, this means that there is no specific starting point or end point and all parts of the model are interrelated and interdependent where impact and consequences happen through information feedforward and feedback loops in the system. Over time all parts of the VDC are important and should be considered. However, at different times certain parts may be more important or critical to survival or growth than others.
It is a story-building and story-telling tool. It can tell a story about the past (what the venture is now, given its history) or the future (what the existing venture could become or what a new venture is planned to be. Stories always have a backbone/structure and the VDC helps you tell your story in a way that is coherent and easy to understand.
Each section of the VDC allows for significantly more detailed work than may appear at first glance. The VDC will be used as the central launchpad for several other canvas-based models that will be described in more detail in follow-up articles. This set of canvasses, together with the VDC form the base of a canvas library which I am calling “Canvas-OS”, which, like the iOS that is the “operating system” that runs your iPhone or iPad, Canvas-OS can be used as the management operating system to run your venture or business in a highly visual and collaborative way.
Each section of the VDC has a number of questions to prompt a discussion on that aspect of the model. It is the answers to these questions that guide the design and management of the venture. The sections below are primer questions to illustrate the approach, add your own as necessary for your own venture. Some of these questions may be better suited to the stage of your venture, start-up or established, for-profit or non-profit etc.
3.1 External ContextNo venture operates in a vacuum, it is always situated in the context of an external environment, for example a country and industry, a regulatory and business environment, a social context. This external context also has a past, a current and a future that the venture must adapt to in order to survive and preferably thrive. Understanding the external context requires you to analyse;
- Trends that are important to the venture, e.g. technology trends, demographic and population trends, market trends, product trends etc.
- The competition and industry, i.e. how the venture/company fits into the industry “system”.
- The market for the products and services offered by the venture
- The macroeconomy and the capital markets, both local and international
- The political and regulatory environment
- The environment itself
These external context factors can be viewed as impacting on the venture, hence the downward arrow on the VDC.
3.2 Venture Components
A venture/business exists within the overall external context and can be viewed as comprising of a number of building blocks, each also divisible into sub-blocks. Each of these blocks relates to a specific aspect of the venture/business that needs to be thought through. In order to stimulate thinking a set of questions has been proposed for each building block. There are no “right” answers to these questions but the quality of the answers will very much depend on the robustness of the process to discuss them and the process of testing and refining possible answers. These are just kick-starter questions, add your own based on your specific context.
3.2.1 Purpose, Vision, Strategy, Plans, KPIs
This is the higher level of the venture and is traditionally seen as the domain of responsibility of the C-suite, although this need not be the case.
1) Purpose –
a) What is the organization’s purpose that spells out what the company wants to do for the world?
b) Why does it do what it does?
c) Why does it exist?
2) Vision –
a) What does the future look like if you have lived up to your purpose? The more visual and emotionally compelling the better.
3) Strategy -
a) How do you make sure both long-term direction and day-to-day actions receive equal attention (“bipolar focus”)?
b) Does your strategy allow for quick change of course when required and to navigate challenges?
c) How will you time market entry to “catch a wave” of market momentum?
d) Do you have a balanced portfolio of existing operations, big bet step-ups, and a set of longer term options (the so-called “3 horizons”)?
e) Do you have an international scaling strategy to start serving, and leading, international customers?
f) Do you know what it takes to win or excel in your chosen area or industry?
4) Plans -
a) What are your short to medium-term plans and priorities to deliver on the strategy?
b) What are the key initiatives you will be undertaking?
5) KPIs -
a) What will you measure to ensure you are on track to deliver on the plans
b) What targets have you set for these KPIs?
In follow-up articles, I will show how the answers to these questions can be delved into in more detail through subsidiary canvasses and finally combined into a single canvas called a One-Page Strategic Plan (OPSP).
1) What user group(s) is your solution primarily designed for? For whom are we creating value?
2) What is your primary user profile and what are their most important needs?
3) What “jobs” are these users trying to get done? What problem are they trying to solve?
4) What pains are they experiencing with existing solutions in completing this “job”?
5) What is the most important user segment within each user group?
6) Who are your early adopters?
7) What attributes do we need to deliver to the Customer? Attributes can be functional, emotional or social.
8) Which of our Customer’s problems are we solving with these attributes?
9) How are Customer’s solving this problem or job today?
3.2.3 Value Proposition
1) What societal problem are you solving that is really relevant and urgent?
2) What user problem are you solving that is really relevant and urgent?
3) What is your creative question (CQ) ? (“How might we help <user> to accomplish/do <Action or Job-to-be-Done (JTBD), given that <insight or constraint>, so I can <expected outcome>“).
4) What solutions are you providing to your target users?
5) What are the key features, benefits, experiences that you are providing?
6) What are the value propositions of your main competitors and what are your differentiators?
7) How are the users solving the problem now?
8) What are the positive effects and the impact you will have on society?
3.2.4 Delivery Model
1) Customer Interaction and Channels –
a) What is the unique approach you take to design the customer interaction with regards to;
iv) Delivering your product or service?
2) Core Activities –
a) What activities (processes) should your organization be excellent in to be able to deliver the value proposition? e.g., sales, procurement, distribution.
3) Core Resources, Assets and Capabilities –
a) What distinctive assets (financial, intellectual, physical), superior skills or privileged partnerships are your basis for success?
b) What resources are needed for the value proposition, the economic model and the delivery model?
c) How will you making sure they continue to be distinctive?
3.2.5 Economic Model
This is the financial engine of the venture;
1) Revenues -
a) What are the core drivers of financial performance?
b) How will you monetize your services?
c) What transaction types are your using: for example, direct sales, subscription model, rental, pay-per use, performance based, etc. and what pricing choices have you made, i.e. fixed pricing, negotiated pricing, dynamic pricing, value-based pricing, etc.
2) Costs -
a) What does it all cost to deliver?
b) How will you achieve a cost advantage, i.e. lower costs than alternative offerings?
c) What externalities result from offering the product/service and how will you minimize them (impact on the environment, other negative impacts on society)?
3.2.6 Organisation, Team, Culture
“There are a handful of companies who understand all successful business operations come down to three basic principles; People-Product-Profit. Without top people, you cannot do much with the other two.” (Malcolm Forbes, publisher of Forbes magazine)
This is the people engine of the venture. In modern businesses driven by knowledge workers, this is an ever-more important aspect to survival and growth. Global averages for employee engagement are 60-65% , implying that 35-40% of your staff are disengaged, a significant cost and energy drain on a venture. It feels like in knowledge management businesses, your business leaves work every day and you pray that it comes back the next morning!
The following are just some of the questions you could be asking;
1) Organisation -
a) How will your organization scale rapidly and successfully? What is the right mix of centralized and distributed decision-making?
b) What cohesive forces will you implement to bind it together? Consider the “guard rails” such as common purpose; coordination mechanisms; people selection, on-boarding, training; etc. Describe this as concrete and real as possible.
c) What is the (legal) enterprise structure? e.g. a social enterprise; a B-corp; a public/private partnership; an intervention financed by a social impact bond?
2) Team -
a) What is the profile of your creative leadership team, which defining experience, competences, knowledge, relations do your team need?
b) What makes your creative leadership team a dream team? How will you work together successfully, what will be key elements of a team charter?
c) Who will be on the team?
3) Culture -
a) What core values and rituals will your organization adopt to embed an enduring innovative drive in your organization?
The legal boundaries of a venture may be fixed but increasingly the practical boundaries are becoming ever-more permeable. These are some question starters to consider;
1) Community -
a) How will you turn your enterprise into a community?
b) How are you inspiring people to become part of your community?
c) How will your users become your biggest fans and turn themselves into advocates?
2) Privileged Partnerships -
a) Which partner is so critical to the success of your enterprise that you want to develop the relation into a privileged partnership?
b) Why are you partnering with them?
c) How will you leverage each other’s capabilities (transactional) and how will you develop the shared trust, experience, success (relational)?
3) Ecosystem Positioning -
a) What is your positioning in the wider ecosystem you are operating in (i.e., in relation to all other actors such as suppliers, service providers, competitors, customers, shareholders)?
3.3 External Impact
It has been argued that the “classic” corporation is a societal cost externalising engine. It pushes all costs that are not in the service of the shareholders return on capital out to government, the environment and society in general to pick up the tab for these costs. Why else would we need legislation forcing mining companies to set aside funds to rehabilitate the areas they mine. This approach to running a business is still far too prevalent but there is a growing consciousness in the corporate sector that this “shareholder first” driven approach at the expense of all other stakeholders is not sustainable and that management should pay equal attention to the “triple bottom line” of Profit, People and Planet (PPP). This section of the canvas model allows for a reflection and assessment of the impact of the venture on PPP, illustrated by the outward pointing arrow.
3.4 The “Simon Sinek” View of the Venture Design Canvas
Simon Sinek, visionary, speaker and author of the book “Start with Why” asks us to reorder the priority of our thinking from What-How-Why to Why-How-What, in order to re-inspire ourselves, our employees and ultimately our customers. If we look at the VDC through the Simon Sinek lens and also make some verbal extrapolations it reduces to the diagram below;
Why do we do what we do (purpose and vision)?
How do we deliver on the why (strategy, plans, KPIs)?
Who do we do it for (the customer)?
What do we do (for the customer)?
How do we do what we do (for the customer)?
How much does it cost and how much do we make (from delivering the what to the customer)?
Who is all of this done by (organisation, team, culture)?
Who is all of this done with (community and privileged partnerships)?
3.5 The Business Model Canvas View
As an example of how the Venture Canvas can be broken up to do work using a more detailed model, the following diagram highlights the middle 4 blocks: Who For?, What?, How? and How Much?
These sections can be discussed in more detail using the Business Model Canvas (BMC), designed by Alexander Osterwalder and Yves Pigneur;
The details of the BMC will not be covered in this article but in a follow-up post on its specific use. In practice, much of the required work will be done on a subsidiary canvas such as the BMC which is then used to populate essential details in the Venture Design Canvas.
In section 3, I alluded to how the Venture Design Canvas will be used as the launchpad for a suite of canvasses, which I have called Canvas-OS. This is illustrated conceptually in the graphic below and will be discussed in more detail in up-coming articles.
To close I have taken the poetic liberty of re-phrasing the famous prose from Lord of the Rings that I opened this article with, to describe the Venture Design canvas;
"One Canvas to rule them all, One Canvas to find them,
One Canvas to bring them all and in the business bind them
In the Land of VUCA where businesses die"Graham Smale
+27 (82) 375-2035
- “What VUCA Really Means
for You” an article by Nathan Bennett in the Jan-Feb 2014 issue of the Harvard
The Innovation Stack by Gary Hamel, described in his book, “The Future of Management"
As distinct from product, service or management innovation
Developed by psychologist Thomas Gordon, also called the Stages of Competence model
For more information see http://a3thinking.com/index.html
Box, George E.P.. (1976), "Science and Statistics", Journal of the American Statistical Association, 71: 791–799
A “creative question” is a term from the field of Design Thinking and is used to frame the design of products or solutions that solve the problem or exploit an opportunity.