Does long-term, top-down strategy still work in today’s complex world? Or should organisations take a more experimental approach, saturated with customer empathy, learning and adaptability when it comes to creating world-leading customer experiences? After working with some of Australia’s largest organisations and watching their struggle to find a balance between planning (trying to create certainty) and innovation, I ask myself these questions.
Companies that have traditionally held industries for lifetimes are now getting turned upside-down by companies not yet in their teens. Whilst this phenomenon has been blogged to death, there is no doubt that today’s consumers are less ‘sticky’ than those of yesteryear. To survive such a ferocious environment, organisations today not only need to work differently, they need to take a very different approach to strategy.
Why do we need a new approach to creating game-changing customer experience?
Creating unique and innovative customer experience in the digital age is inherently complex. Organisations cannot predict what a customer’s heart will desire and in the words of Henry Ford, not even customers can predict what they want:
“If I had asked people what they wanted, they would have said faster horses”.
David Snowden introduced the Cynefin Framework as a way to understand the different decision making contexts we operate in as humans and how we should approach making choices in each context.
The Cynefin Framework helps us understand how we make effective choices.
Source: Harvard Business Review
Snowden’s framework defines the following five domains:
Simple / Obvious:
Context: The relationship between cause and effect is known
Action: Find the pattern and apply the best practice
Complicated:
Context: There are multiple correct answers and the relationship between cause and effect isn’t clear
Action: Assess and analyse facts and apply good practice
Complex:
Context: There are no right answers and the relationship between cause and effect can only be known in retrospect
Action: Experiment, see what happens and respond accordingly
Chaos:
Context: The relationship between cause and effect is unknown and it’s too confusing to make sense of it
Action: Just do something
Disorder:
Context: A situation where the domain is unknown and multiple perspectives jostle for prominence
Action: Break the choice down to understand which domain it resides in
To determine an appropriate approach when creating great new customer experiences, we first need to consider the level of uncertainty that surrounds creating them. The greater the uncertainty, the less we can plan.
Game-changing new product and service innovations often have greater levels of uncertainty than other types of work.
Whether we’ve always operated in such a complex and uncertain environment is up for debate, but most will agree that digitalisation and technological advances act like an accelerant to the complexity and uncertainty fire many incumbent organisations face today.
With endless information at their fingertips (literally through mobile devices), it’s never been easier for customers to pick and choose the experience they desire.
Given that new products and services are a key competitive differentiator, we need to ask ourselves why organisations still insist on detailed up-front research and analysis (before acting), as if staring into the tea leaves won’t help them solve problems where cause and effect are unknown. Don’t get me wrong, I’m all for using data to understand the outcome of these experiments and what to do next. However, in a complex environment organisations need to immerse themselves in customers’ lives and experiment, sense, and adapt their way to what they really want and need (and what they don’t yet know they want and need).
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What are the other options?
So how might we approach things differently? We can start by categorising strategy into four key problem areas, building on Cynefin -and with some inspiration from agile ways of working and human-centred design – propose a new emergent approach in place of traditional plan-driven strategy.
Comparing a traditional approach to new emergent approaches for creating new customer experiences.
Setting Direction
Traditional deeply researched static three-year visions don’t work in today’s dynamic and uncertain world. Instead, organisations need to embrace an emergent approach led by ‘safe to fail’ experiments, learning from feedback and responding accordingly. This continuous validation of direction significantly reduces risk whilst opening up space for further innovation – who knows where the path will lead, but it will certainly be exciting and rewarding if it’s led by experimentation and learning!
What to do
The best solutions aren’t dreamt up by executives sitting in a board room; they’re developed by getting out there and understanding how existing solutions are being used by customers. Organisations need to get as close as possible to customers, listen to them and let them guide and validate what’s good. Finally, organisations need to deeply understand their customers lives and how to make them better. ‘Build it and they will come’ strategy doesn’t work for organisations today.
Investment
We won’t know exactly what we’re going to do in uncertain environments, so how can we possibly predict the cost of doing this? And worse still, too often we try to make this prediction and when things change in the future, it’s difficult to adjust (even if the adjustment is to the customer’s benefit). To properly embrace adaptability and encourage innovation organisations need to fix funding for a particular customer experience – fund a problem; not an unvalidated solution.
Fixed funding and time investment models favour adaptive value driven planning.
The return of this fixed block of investment can easily be measured by improvements in that particular customer experience (e.g. Net Promoter Score, decreased customer churn, etc.).
Making it Happen
Decentralise in a clever way! We’ve all seen organisations agonise over ‘linking’/’laddering’/’rolling’ up team level work to higher and higher levels of abstraction, yet all this witchcraft rarely results in any meaningful big picture vision. By decentralising, leaders spend less time driving alignment and are instead free to focus on value add things like understanding customers and enabling teams. For decentralisation to be effective, teams need to organise themselves around customer experiences – this makes rolling up to higher layers of abstraction relatively simple.
Customer experiences can be broken down into several smaller experiences – when teams organise around these, understanding the bigger picture becomes easier.
An emergent approach to strategy builds on agile ways of working
The good news is, many organisations have the building blocks in place to do much of this already!
With a focus on agile ways of working, many organisations have become great at cranking the handle faster, but they’re still struggling to deliver game changing innovations that shift markets. Steve Denning proposes a distinction between operational agility and strategic agility. The approaches we just covered can help organisations evolve to a more emergent customer centric way of working.
The evolution an entire organisation needs to make to truly innovate and create new markets.
Conclusion
Organisations can’t continue taking a static ‘long-range bet’ approach to strategy if they want to remain relevant in today’s complex environment. To truly delight their customers and create new markets, organisations need to move away from a centralised, top-down approach to strategy and instead take an approach where experimentation and understanding customers’ lives is core to the way of working. And with this in mind, perhaps the only strategy an organisation really needs is to continue striving towards agility and enabling greater customer centricity.
It’s certainly something worth experimenting, sensing and responding with.
