Thursday, September 6, 2007

A Puzzling Picture

My wife used to love to do jigsaw puzzles. It is challenging enough just to do the puzzle, but she also seemed to have extra challenges. For example, when we had young children and a dog in the house, puzzle pieces would often end up missing from the table or chewed upon.

Sometimes my wife would swap puzzles with someone else or pick up a puzzle at a garage sale. These people would claim that all the pieces of the puzzle were in the box, but often there would be a few missing. Sometimes the box would include a few pieces from a different puzzle which did not belong there.

However, the challenge I never understood is that my once my wife started a jigsaw puzzle, she would never look at the picture on the box to see what her puzzle was supposed to look like. She enjoyed the challenge of not knowing exactly which piece comes next.

One of the first steps in the strategic process is to gain an understanding of the environment in which your strategy must succeed. If you don’t understand the consumer environment, the competitive environment or the internal environment of your organization, it becomes difficult to choose the strategy which will win in these environments.

Therefore, early in the process, one needs to conduct research in order to determine what that future environment will most likely look like. One can think of the picture of that future environment as being like the picture you have when one has completed a jigsaw puzzle. The goal of the research is to gather up the jigsaw puzzle pieces so that one can begin to build the picture of the future.

However, even though my wife had numerous challenges in building her jigsaw puzzles, the challenges in building the strategic environment puzzle are far greater. First of all, since we are looking into the future, not all of the jigsaw puzzle pieces are fully developed yet. Even if we get the entire handful of available puzzle pieces in the right place, there will still be lots of holes in the puzzle. The missing pieces of the future will need to be guessed at based on what we see with the pieces we do have. If we wait until all of the pieces have been made, then it is often too late to take advantage of that environment. The entire picture is already set so that we can no longer influence it to our advantage.

Second, not all of the puzzle pieces will be in the same location. It is not as if all of the information needed to get a point of view on the future environment can be found from a single source. This puzzle comes without a box. You will need to do research in many different areas using multiple sources in order to find your puzzle pieces—the clues to what lies ahead.

Third, some of the information you gather will end up not being useful. It is like gathering up a pile of puzzle pieces and not knowing how many of those pieces actually belong to your puzzle and how many are part of a different puzzle. When you look at an individual puzzle piece, it is often hard to know what it is you are looking at. It may not be until much later that you can tell whether that piece of information will help you develop your view of the future or not.

Fourth, since there is no puzzle box, there is no photograph on a box lid showing you what your puzzle is supposed to look like. You have to start putting all the pieces together without knowing in advance what you will discover when the picture becomes more complete.

Finally, the future can change depending upon your actions or the actions of others. Therefore, the picture on your puzzle pieces may get altered over time and morph into something a bit different.

Now how’s that for a challenging puzzle?

Here are a few principles to help in this challenge. The first three have to do with where to look for the puzzle pieces, while the fourth is about how to interpret the pieces after you find them.

1) Look for Leading Edge Fringe
What will be commonplace in the future often already exists today on the fringe of society. Look for the people and places and businesses which operate on the fringe of society and tend to always be ahead of the curb. They will help you gain a glimpse into what is next. If you want to learn about future technology, look into what is currently getting the technology geeks excited. Figure out which projects are getting the priorities in research labs like at MIT.

If your interest is in lifestyle changes, there are certain spots on the globe which frequently exhibit these trends first. Check out what these places are up to.

Find out what the leading edge people read and listen to. Then do the same.

2) Look for “Parallel Universes”
Often times, unrelated industries and business ecosystems go through similar stages of evolution. The trick is to find one of these industries which seems to operate similar to yours, except that it is further along in the evolution. Watching its path is like seeing into a parallel universe of your own path, only you get to see further ahead, because they are further along.

As an example, when I was working in the grocery wholesale industry, it seemed like the drug wholesale industry was facing many of the same challenges, only sooner. By watching the current environment in drug wholesaling, I often got a glimpse into the challenges that would soon impact grocery wholesaling. By understanding how successful drug wholesalers dealt with the issues, I could get insight into which strategies might be most suitable for the wholesale grocery industry.

3) Look for Experts
Fortunately, you do not have to go on this journey by yourself. There are expert puzzle piece gatherers out there who do this full-time. These trend experts have already done a lot of the gathering of information already. Take advantage of their years of experience.

For example, one time I was working on a project where we needed to gather a lot of information on the teen market. At first, we thought about doing a massive consumer research project with a large sampling of teens. This approach had a number of drawbacks—it would take a long time, it would be very expensive, and we weren’t sure we even knew enough to ask the right questions.

Then we though about hiring an expert on the teen market and pay them a small fortune to do a major part of the project work. This also had drawbacks—it would be very expensive, there was a risk that we would hire the wrong “expert,” and by outsourcing the work, we would not be internalizing the knowledge as much.

As a result, we picked a third approach. We contacted a large number of different groups which all claimed to be teen experts. We told each of them we just wanted to “borrow” a couple of their experts for about a half a day to chit chat and get their top line opinions of what was going on in the teen environment. About six or seven groups agreed to do this, and to do it for very little money.

So, over a short period of time, we spent a few hours with each of these groups to understand their point of view on the teenage environment. We looked for commonalities in their perspectives. It was sort of like interviewing people who had already interviewed thousands of teens, so we got the benefit of far more data gathering than we could have done on our own (and much quicker and cheaper as well). Because we talked to multiple experts, we minimized the risk of being lead astray by false expertise. And because many of the experts came to similar conclusions, there was comfort in the reliability of what we heard.

4) Look for Connections to Universal Truths
In general, the needs and wants of society do not change all that much. What changes are the ways in which we satisfy those needs and wants. It goes back to the basic Maslow’s Hierarchy of Needs. We want to feel loved. We want to feel like we belong. We want to feel secure. We want to eliminate stress and find ways to better cope with the everyday pressures of life. The better you can link your puzzle pieces to these universal themes, the more powerful and more accurate you picture of the future will become.

So when interpreting your puzzle pieces, look for the pieces which point to a superior way to solve universal problems. If they truly are superior, they should eventually replace the current solutions. If you can jump on these quickly, you have an edge in enjoying the fruits of future growth.

Great strategies look for ways to exploit the evolving environment. Therefore an understanding of the environment is a critical early step in the strategic process. However, since the future is not completely known, your quest for a future vision can be very difficult. It is made easier if you look on the fringe, look for parallel universes, look for experts and look for connections to universal truths.

To quote Richard Rumelt, professor of business strategy at UCLA, “There are only two ways to get [a pathway to substantially higher performance]. One, you can invent your way to success. Unfortunately, you can’t count on that. The second path is to exploit some change in your environment—in technology, consumer tastes, laws, resource prices, or competitive behavior—and ride that change with quickness and skill. This second path is how most successful companies make it.”

Building this type of puzzle may be difficult, but the rewards can be very great.

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