Saturday, May 24, 2008

Analogy #180: Simple Grids

It’s a funny thing about choice. If you give people too many choices, they will get confused. There would be so many options, that a person wouldn’t be able to figure out with confidence which choice was the best for them. All the variations would be mind-boggling. Time is too precious to waste pondering over the merits between 50 different choices of peanut butter. As a result, most people would never be fully satisfied with a purchase in this type of situation, because of a nagging feeling that there might have been a better option among all those choices.

On the other hand, if you simplify the process and give people only one option, they typically aren’t happy, either. It feels too much like a cruel dictatorship to be told that you have only one choice. Resentment builds due to a lack of freedom of choice. People don’t like to be told what they should like. They want to feel important in the process, by having a choice in what they buy.

So people want choice…just not too much choice.

I personally discovered this principle when I was doing some consumer research on clothes shopping. I showed women a number of photographs of clothing departments and asked them which store they would prefer to shop in.

The women immediately rejected the stores showing a narrow assortment. They just assumed that a store with such few choices would not have anything they wanted in their size.

However, they also rejected the photos showing stores with a huge number of racks of clothing. That was too intimidating. The women tended to gravitate towards preferring the photos of stores with a medium number of racks.

Back in the old days of the Sears catalog, they tried to optimize the process by giving three choices for each type of product. They labeled them “good,” “better,” and “best.” It was simple. If you were most concerned about price, you got “good.” If you were most concerned about quality and performance, you got “best.” If you were looking for the optimal blend of features and price, you got “better.”

This gave people a choice without overwhelming them. It worked for many decades.

We talk a lot in business about the product assortments we provide to the consumer. We try to optimally manage the breadth of assortment. The goal is to find that optimal middle point between being a cruel dictator and overwhelming the customer, just as the old Sears catalog did.

However, I rarely hear people talk about managing the assortment level of ideas provided to the management of the business.

To move a company forward strategically, choices need to be made by top management. If too many strategic options are offered, management can become overwhelmed, just like the consumers in the story. This slows down the process and makes it hard to get a business decision.

Inevitably, with too many choices, management tends to tell the presenters to get their act together, narrow the choices and come back at a later date. Time is too precious to waste on endless strings of meetings without decisions. While your management is gridlocked with too many choices, the competition is moving forward.

Worse yet, in an attempt to get a quick decision, the company may decide to try too many options at once. This tends to lead to disastrous conclusions. The lack of a clear focus confuses employees and customers. There aren’t enough resources (especially human resources) to adequately perform well on all options at once. Hence, rather than doing one thing well, one ends up doing many things poorly.

At the same time, if you only present one option strategic option to management, you can also create problems. The top decision makers want to make decisions. If you give them only one choice, then you have robbed them of their chief role. The only choice you have given them is to agree or disagree with the strategic option. And if they disagree, there is no fallback strategy. They are left with nothing.

However, the worst result from providing only one option is that you run the risk of not offering up the best option. The option may be good, but there may be something else which is better. Without comparisons of strategic options, how can management have confidence that they chose the right one? There is always the suspicion that the presenter has “stacked the deck” in favor of their pet project instead of the right project.

This can often lead to the “strategy of the month,” where a single option is presented and accepted, only to be upstaged at the next meeting when a different single option is presented and accepted. No option is fully realized, because of the constant shifting from one proposal to the next. Each succeeding proposal of a singular option looks good, because it isn’t pressure tested against options. So the continual shifting occurs, and no strategic direction is embedded into the organization.

By contrast, if all of those options were presented at the same time, a clear choice can be made which will be adhered to longer, because it has already won the debate against opposing ideas. There is greater confidence that the choice was the right one, so it will be implemented with greater levels of commitment.

The principle here is that to achieve strategic success, one needs to present management with the optimal blend between too many strategic options and too few strategic options. As we saw in the example of the women’s apparel and the Sears catalog, a middle ground tends to be most successful.

So how do you create the impression of an exhaustive analysis of all the options (completeness) while making it easy for management to select an option to make a commitment to (simplicity)?

I like to use a two step process. The first step is to provide a simple conceptual framework. The second step it to then provide a list of specific strategic options in those areas of space most interesting in the conceptual framework.

For a conceptual framework, I try to stick to something simple like a two by two grid. Some popular 2x2 grids are variations of the ones illustrated below (the actual words on the axes will vary based on your particular situation). They include:

1. The Source of Growth Grid (Where do you want to look for future growth?)
2. The Risk/Reward Grid (How balanced is your Portfolio?)
3. The Consumer Appeal Grid (What is your point of differentiation in Targeted Consumers?)
4. The Competition Grid (What is your point of differentiation versus your competition)

Sure, modern statistical techniques and whiz-bang computer graphics can create all kinds of complicated multidimensional frameworks. The problem is that:

a) They are hard for management to comprehend.
b) They are hard for your employees and customers to comprehend.

If your position is so nuanced that it takes complicated multidimensional presentations to point it out, then your potential customers will never figure it out. That’s why I stick to simple 2x2 grids. They give enough completeness without overwhelming.

Then, once management decides on which squares in the grids to focus on, you can have a second discussion on which is the best available option in those boxes for your company.

Strategic planning is about making the right choices about strategic options. In order to get top management to decide and stick behind a choice, one needs to find the optimal blend between too many choices (which overwhelm management) and too few choices (which can lead to constant switching of priorities). I suggest a two step process of first getting agreement on which area of the conceptual space is most important (through the use of 2x2 grids. Then, once the space is agreed on, a small list of specific options can be evaluated, and a final choice made.

Presentations which focus on “special effects” may wow the audience for a moment, but may not have much lasting value. Simple, easy to grasp concepts, like 2x2 grids may not appear as exciting, but can create great long term decisions. In the end, the goal is great decisions, not great entertainment.

1 comment:

  1. Would select a store with more savings, that's why used to shop at DHgate for online coupons for discounts & free shipping.