How to Put the “Strategic” Back Into Strategy

Today, we’re going to explore your high school algebra recollection.  In the 1996 Harvard Business Review article What is Strategy, business visionary Michael Porter presented the preeminent definition of strategy. In short, Porter defined two ways in which organizations compete: on operational efficiency and on strategy. Broadly defined, operational efficiency is doing the same things everyone else does, only doing it better.  This is the basis for many business practices around process improvement, total quality, as well as for the implementation of business software to optimize and improve the efficiency of the organization. Conversely, strategy is the intentional decision to do things differently, or to do different things to create value. 

If we want to be strategically competitive we need to do something different than anyone else. Doing something different means becoming innovative. Here’s where your algebra prowess comes into play: if Strategy = Different; and, Different = Innovation; by the transitive property, Strategy = Innovation. See? Algebra can be useful!!!

Why is this equation important? There are any number of reasons why this distinction is important, but the most significant is likely how it relates to what most businesses call their “strategy”. By this definition most organizations have an operational plan, rather than a strategy; i.e., their “strategy” is not strategic.

So, how can you put strategy back into your plan? First, you have to have a plan, so let’s start there.

Getting Started

Before we get too far down the road, we need to understand that building a strategic plan begins with important precursors. First, you must have a mission and vision of an end state, which includes both a destination, as well as a reason. In addition, you must also have some values, or guidelines that help you choose how you are going to make that journey and the path to getting there. These not only serve as the initial vector of your journey, but also because they start to limit/influence the decisions you make. You don’t need to consider anything that doesn’t take you towards your goal; and, the “why” will also help you make choices about which paths should and shouldn’t be followed.

When I mentioned “mission and vision”, you probably had an immediate reaction and thought of the many organizational “mission” and “vision” statements you’ve either been part of developing or had shoved down your throat from on-high. Frankly, I can’t blame you. I have a particular aversion to mission statements because, at least in private-sector, for-profit companies, it is largely a bunch of hogwash. Their mission is to make money not only for the organization, but also for the shareholders, and employees. Anything beyond that is disingenuous at best; and, there’s nothing bad or wrong about that. In this case, however, I want you to think of mission and vision simply as “where are we going” and “why are we going there”.

Let’s imagine you are planning a trip to, say, California because you want to see all the movie stars. You now have a mission and vision; you know where you want to go and why you want to go there. You no longer need to consider anything that takes you to Denver. In addition, if your “why” is to see movie stars, your plan doesn’t need to include anything about seeing the redwoods or going to Disneyland. Your goal is constrained to a specific destination with a specific intent.

For business planning, this is more likely going to be things like “expand into new markets to increase our addressable market”, or “drive sales of product x to achieve 50% of total revenues”. Ultimately, these boil down to “make more money so our shareholders are happy”, but you need something a bit more specific to build a plan. They don’t have to be grandiose, but they do need to have specific targets and a rationale for why you want to achieve them.

Now, let’s talk about values. Again, you probably have a really bad taste in your mouth and instantly thought of things like “honesty”, “integrity”, and how they contribute to those meaningless mission and vision statements. Those are certainly what most people consider “values”; however, in relation to strategy, it might be easier to consider values as “ways of working” or “guidelines” to how you want to achieve your mission and vision. They help define what you will and will not consider as part of your plan.

Returning to our trip to California, we could imagine that our values might include “don’t like to fly”, “only want to stay at hotels less than $100/night”, or any number of parameters that will constrain your choices. If you don’t like to fly, then your plan will likely include buses, trains, or simply driving. If you only want to stay cheaper hotels, you may have to find more remote lodgings on secondary roads, affecting both your travel time and access to other services.

For business, yes, things like “honesty” and “integrity” are certainly values that contribute to ways of working and would limit your choices; however, so are things like “sustainability”, or “commitment to Open-Source software”, or any number of things that further provide guideposts to the choices you make. Not stating these values can not only lead to a lot of churn and difficulty, it can also lead to decision making that hurts the organization. Be clear about the values you will not sacrifice in your plan. You may even want to stack-rank these values based on your commitment to them as it may help later when we get to strategy.

We now know where we are going, why we want to go there, and have some basic constraints on what we are willing (and not willing) to do to get there. The next step is to collect all the relevant data you need to construct a plan.

Collecting Your Data

Now that you know where you want to go, why you want to go there, and know what things you will and will not do to get there, you must collect your data. You must estimate what you think it will take to get to your destination, inventory what you have to get you there, and figure out what you may need to acquire.

For our trip to California, this part of the planning will involve budgeting, determining if we have a vehicle we trust to drive, estimating how much time the trip will take, and how much time we have to make it. What would it cost to drive, versus take the bus, or fly? How much time does each of those require? Will you need hotels, food, etc. along the way and for how many days? How much vacation time do we have? Who else is going on the trip, and do they have any different values than you do that must be considered? Basically, you need all the facts to help determine the best choices based on your situation.

This is a little more complicated for business planning, but the idea is the same. In a business plan, your journey involves getting others to take the journey with you, so the first thing you must do is understand who your customers are (customer segmentation), and what makes each segment unique; e.g. market research about the others going on the journey with you. Then you should also look at what competitive organizations with similar visions are offering. Are you looking to expand into new markets? Should you build or buy? You should make an inventory of the competencies you currently have, as well as what you don’t have or need (either in equipment, people, etc.). All of this is just data at this point, collecting the pieces that will be part of your plan and giving you the data necessary to make good decisions.

Building a Plan

Now that you know where you want to go, why you want to go there, a list of value parameters and all of the data necessary to make your plan, you need to lay it all out.

For example, with our California trip, let’s say we’ve determined that our vehicle is not reliable enough and we must look at other forms of travel like bus or train. Because buses only follow specific routes, and trains have even more limited routes, this decision greatly reduces our choices. If this limitation is too onerous, then we have to look at other alternatives, like renting a more reliable vehicle which restores our route choice, but at a likely higher cost than the others. Typically, we will come up with multiple plans that have various time commitments, costs, and other advantages or disadvantages. Choosing any one plan over the other comes down to which one makes the most sense for our situation.

Building an operational plan is similarly an iterative process starting with the basic parameters (where are we going, why are we going there, and what constraints are applied to our trip based on our values). Then you have to model each plan, with each choice further refining and limiting your next choices. For me, this is one of the most exciting things about planning as it is like a logic puzzle where you have to keep trying a piece at a time until you can “solve” it; unlike most puzzles, though, there may be numerous solutions. This is often where balanced scorecards can help you score each plan based on how well each plan achieves your goals in terms of time, cost, effect, etc.

One challenge when going through this process is the tendency for many organizations to plan themselves into a corner. There is the old military quote saying “no plan survives contact with the enemy”. Having multiple potential solutions is a bonus because your plan should also account for potential risks, and risk mediation. I know of a friend who rented a car for a long distance trip because they didn’t trust their own, only to have the rental car break down during the trip. Having multiple options is a valid means managing risks. So, when you decide to choose your plan, don’t throw out the other plans as much of that work could be useful down the road. Another point here is that a plan shouldn’t be so specific as to further limit how you achieve your goal. There are significant differences between saying you are going to get to California by “public transit”, “by Bus”, and “by Greyhound”; each level of clarification limits your flexibility, and your options. Your plan should be more about direction/guidance and less about the specific actions you will take.

Taking all this into account, most organizations make a decision about which plan will be their “strategy” and they celebrate a job well done. But … is it?

Making your Plan Strategic

You’ve created multiple plans and have debated which one makes the most sense based on your needs, but is it a strategic plan or is it simply an operational plan of action. Going back to our original equation Strategy = Innovation, is your plan unique and/or differentiated from what any other organization or competitors might do? Is it innovative, or is it simply a plan for operational efficiency?

Going back to our California trip, let’s say that instead of just a trip to California to seek out movie stars, it is actually a competition. The winner is the one that meets the most movie stars within a given time frame. How is your plan different from all the other competitors in the contest? If it isn’t different, then it isn’t strategic; it is simply an operational plan and the only way to beat the others is to do it faster and cheaper; i.e. through operational efficiency. If we look at the “rules” of the competition, it doesn’t mention anything about California, just the number of movie stars you can meet. Did you base your plan on a false premise? It may make sense, but it would also make sense to all other competitors. Perhaps there is someplace different you could go to meet movie stars; maybe you can find a way to get movie stars to come to you. Instead of traveling via traditional means, could you make the trip using unconventional means (like roller skates?) to create publicity about your mission and its goal, getting movie stars to support your goal and seek you out? This is also a good place to look at the elements of discarded plans, and scrutinize whether you artificially limited yourself by being too specific in your planning. Did your plan call to travel on Greyhound buses because that was the only form of public transport that you could think of? Are there, perhaps, less well known or less conventional means of public transit that would prove more innovative in solving your challenge? Creating a strategy will test all of your plan, right down to the original mission and vision.

The same holds true for a business plan. Far too often, a company’s “strategic” plan is to do exactly the same thing as everyone else, and their competitive analysis is solely an examination of what others are having success doing. Adopting industry best practices is certainly a plan, but it isn’t innovative; it isn’t differentiating; and, it isn’t strategy. It is the highest expression of operation efficiency. To make it strategic, your plan must be different than everyone else’s in a fundamental way. It requires a full examination of the entire plan, including the original mission/vision, the values you believed constrained your decisions, and the actions you plan to undertake. Was our mission/vision and rationale innovative? Were your values truly things you believed in, or were they artifacts of the status quo? When you examined the possible paths to achieving our goal, did you just look at the “normal” options (cars, buses, trains) or did you explore the unexpected or unusual? Did you over plan and try to dictate specific actions artificially limiting your options? If you can’t answer these questions, or your answers default to the status quo, then your plan is unlikely to be strategic.

If you want your plan to be strategic, you have to put in the extra, final work. If you want to win, be it in a hypothetical contest to meet movie stars, or in the real world of business, you have to be strategic and to be truly strategic, you need an innovative approach.

Final Thoughts

Still don’t think algebra is fun or useful? Try this: if Strategy = Innovation, then Innovation = Strategy (the property of symmetry). That is to say, there is a simpler way to be more strategic: be innovative. Don’t get me wrong, I absolutely love a good strategy planning workshop, balanced scorecard, SWOT and PEST analysis, etc; however, I’ve found that it is frequently much easier to do less planning than more. You still need to know where you are going and why. You still need some basic ways of working (values) to guide you and (for business) you should probably have a decent idea of who your customers are (or could be) and what they value. Anything beyond that tends to take a lot more time and creates a lot less value.

Instead, once you have the basics down, I just focus on creating innovation. I ask my teams to treat everything as an experiment. Everyone comes up with ideas they believe will get us closer to our goal, and proposes an action they believe will get us there. They have to have a specific action, define what they expect the action to accomplish, and a means of measuring whether it was accomplished. We evaluate the proposals, implement as many as we can, measure their success (or, often, failure). Things that fail (or can’t be fully determined) we stop doing; things that succeed, we do more of. While not all of these ideas are necessarily truly innovative, the approach keeps us thinking about rejecting the status quo and constantly evolving. By focusing on being effective innovators, we inherently become strategic.

The Versatilist on Dunning-Kruger

You may not be familiar with the “Dunning-Kruger Effect”; or, you may have only heard the colloquial explanation that “stupid people are too stupid to know they’re stupid”, most humorously explained by Monty Python alum John Cleese here.

In reality, if you read the Wikipedia entry or the actual research, what Dunning and Kruger discovered is that human beings have the tendency to rate our ability, in almost anything, to be at, or slightly above, the average of all people. This is not only an obvious impossibility, it also has some interesting ramifications.

The first, oft repeated, implication is that those with the least capability tend to overestimate their capability the most. That is to say, if we assume 50% is the “average ability” across the population, those with 0% actual capability will overestimate their ability by 50%, (or more) while those with 40% only overestimate by 10%. One explanation for this is that the skills necessary to evaluate capability are exactly the same skills necessary to have the capability; i.e., if you don’t know what you are doing, it is difficult to evaluate that you, or someone else, is doing it wrong. My favorite example of this would be something like English grammar or punctuation: if you don’t have a firm grasp of it, it is impossible for you to evaluate how well you, or someone else, is performing. You must know, in order to evaluate. This is where the “too stupid to know” comes from.

The second, much less discussed, implication is that those with the most capability tend to underestimate their knowledge and competence. Back to the 50% scale, if someone actually performs at the 80 or 90% level, they tend to severely underestimate their performance. This is frequently cited as a contributing factor to imposter syndrome, where those with superior capability don’t necessarily believe they are superior. I attribute this to the colloquial definition of an expert as someone who knows more and more, about less and less (purportedly coined by one of the Drs’ Mayo of Mayo Clinic fame). An extension of this says that an expert is someone who knows more and more, about less and less, until they know absolutely everything about nothing. While this was likely meant to be more humorous than anything, there is a certain kind of meta, philosophical element to it as the process of discovering more and more about an increasingly smaller area of expertise also has the tendency to make it obvious how little you really know about anything else. Experts, while becoming more knowledgeable about their area of expertise, become increasingly cognizant of how little they really know elsewhere.

In either of these situations, overestimating or underestimating, the challenge is that self-reported capability is a very poor predictor of actual ability; and, if you really need an expert because you aren’t one, it is very unlikely you will be able to determine if someone else is one or not.

Hedging Your Bets

Why am I going on about the Dunning-Kruger effect? I point out this well-known characteristic because it touches on my area of expertise … determining the best way to assess expertise, particularly when it comes to augmenting your organization’s capabilities; i.e. this is something we need to think about when we hire people. We need to take this into account and develop strategies to “hedge our bets”.

While resumes are useful, we all know that just because you’ve done something in the past, doesn’t mean you are actually any good at it; and, resumes, although not necessarily outright false, are generally over inflated. Some of this is smart marketing on behalf of the candidate, but some may very well be that the candidate actually believes they are more adept than they are. On the flip side, that expert you’re looking for may be a lot less comfortable touting expertise they don’t feel they actually have. Resumes and interviews are useful, but woefully inadequate and imprecise.

One way to address this is to ensure that the screening/interview process involves some kind of valid psychometric assessment of ability (like respected certifications and licensure) and/or the direct involvement of someone who you know has the appropriate skills to assess the candidate’s ability (if you can find one). You can’t rely on self-reported capability, and you can’t expect someone without that capability to evaluate candidate’s capability … even in the screening process.

Another, perhaps easier, way to hedge your bets is to broaden your horizons. When we post job opportunities, we frequently over estimate the skills required, producing a “wish list” that values “specific” experience over diversity of experience (as I’ve discussed here: Would You Hire Me?). However, if we limit ourselves to one dimension, it can be hard to determine what a candidate’s true capabilities are. If, instead, we look for people who have been successful or demonstrate knowledge of multiple domains, backed by work experience, we may get a better estimation of their knowledge on specific domains. That is to say, a Versatilist, with a broader set of knowledge in multiple domains, is more likely to underestimate their specific domain knowledge than overestimate it. If this doesn’t cause you to overlook these candidates, the only downside is that you may get more than you knew, not less.

Don’t be too stupid to know you’re stupid

The Dunning-Kruger effect is just another factor hindering employers from finding the best people. We all think we are better at everything, including evaluating prospective employees, than we generally are; and, the very people we want are likely to be overlooked because they undersell their capabilities. Using other, valid qualitative criteria like certifications certainly helps, and including experts, instead of AI engines and unqualified HR personnel, in the screening and interview process would also be beneficial.

For my money, until I find a way to fund continued research into better ways, I’ll continue to look for those Versatilists out there who have knowledge and experience, and likely undervalue their true capability.

Standardized Testing in Context of Diversity, Equity, and Inclusion: We need more, not less.

There was recently an article in the New York Times concerning the ongoing debate over standardized testing, specifically about the use of SAT and ACT testing in the college admissions process. The use of these tests has been debated for years, but during the pandemic, when in-person testing became impossible, many educational systems decided to remove this requirement and have simply not reinstated them. 

The point of the article was that, despite many concerns the exams themselves were biased in any number of ways, the use of standardized testing scores in institutions requiring them has actually increased the diversity of the student population (across all factors, race/sex/socioeconomic/etc.) over virtually any other means of admission standard.  In addition, the article points out that what many people see as bias in the tests themselves is likely misplaced: the tests accurately predict what they are intended to predict regardless of race and economics, namely, will the student do well in college or not. 

Herein lies, perhaps, one of the most misunderstood aspects of standardized testing … they can only reliably predict what they are intended to predict and nothing else. As a practicing academic who spends much of his days working on standardized testing programs in the technology industry, I am constantly confronted with these misconceptions. 

What are Standardized Tests?

The first thing to understand is what, exactly, standardized testing actually is.  In short, standardized tests are specifically built to predict some aspect of the individual taking the assessment. In the case of the ACT and SAT exams, they are designed to predict how well the individual will do in the university setting, and nothing more. In addition, by “predict”, I mean that they make a statistical inference, not an absolute determination, as they are based on statistical science which describes a “group”, not any one individual. They do not specifically measure real world capability. They do not measure overall intelligence. They only measure/predict what they are designed to do. 

Two key aspects of this are “Validity” and “Reliability”. Validity is a measure of how well an assessment does what it says it does. Does a high score on the exam actually predict what was intended, or more succinctly “are we measuring what we said we were”.  Reliability is a measure of whether the same individual, taking the same assessment, consistently scores the same without any other changes (like preparation, training, etc.); i.e., does the test make the same prediction every time it is used without any other factors affecting the results. 

Despite what critics say, the SAT and ACT exams have both been proven to be valid predictors of what they measure with high reliability.  My score will accurately (withing statistical deviations) predict my ability to be successful in college and my score will be fairly consistent across multiple attempts unless I do something to change my innate ability.  As the NYT article points out, this remains true: the higher you score on these exams, the better your academic results in post-secondary institutions.  The fact there is a significant discrepancy in scores based on race, socioeconomic situation, or any other factor is, frankly, irrelevant to the validity and reliability of the exam. Using the results of these exams in any context other than how they were designed is an invalid use.

The Legacy of Mistrust

These basic misunderstandings of standardized testing breeds mistrust and suspicion in what they do and how they are used. This is nothing new and likely stems for the development and use of assessments from the past. The original intelligence quotient (IQ) test developed around the turn of the 20th century is subject to the same issues, including suggestions of racial and socioeconomic bias. In part this is because the IQ test is not actually a valid predictor of intelligence or the ability to perform successfully, but like the SAT and ACT exams, research has showed it is a predictor of success in primary and secondary educational environments.  Unfortunately, this was not fully understood when the assessment was born and IQ has been misused in ways that actually have contributed to societal bias.  This is the legacy that still follows standardized testing.

It is bad design, the misuse of standardized testing results, and the misinterpretation of those results that causes such spirited debate.  In the case of the original IQ test, it was originally purported to determine innate intelligence, but was actually a predictor of primary/secondary educational success. Furthermore, research suggests that IQ is a poor predictor of virtually anything else, including an individual’s ability to succeed in life. This is a validity issue; meaning that it did not measure what it purported to measure. Due to the validity issue, IQ testing was then misused to further propagate racial and socioeconomic inequity, by suggesting that different races, or different classes were just “less intelligent” than others, prompting stereotypes and prejudice that simply wasn’t founded. 

Given this legacy, it is easy to understand why many mistrust standardized tests and believe they are the problem, rather than a symptom of a larger problem.

The Real Issue is NOT Standardized Testing

The conversation around standardized testing has suggested the reason for racial and socioeconomic disparity is due to bias within the testing. However, if we can accept standardized tests (at least ones that are well designed to have validity and reliability) simple make a prediction, and that the SAT and ACT, in particular, make accurate predictions of a student’s ability to succeed in post-secondary education, the real question is why is there a significant disparity in results based on race and socioeconomic background? Similarly, why did the original IQ testing accurately predict primary/secondary educational outcomes, but also suffer from the same disparity? The real question is: Why can’t students from diverse backgrounds equally succeed in our education system?

The answer is rather simple and voluminous SAT and ACT data clearly indicate this: there is racial and socioeconomic disparity built into the educational systems. This is a clear issue of systemic bias; your chances of success within the system are greatly affected by race and socioeconomic background. Either what we are teaching, or how we are evaluating performance, is not equitable to all students. This is the issue we should be having conversations about, research conducted, and action taken. Continuing the debate, or simply eliminating standardized testing, is not going to affect the bigger issue. If anything, eliminating SAT and ACT testing will help hide the issue because we will no longer have such clear, documented evidence of the disparity. I don’t want to start any conspiracy theories, but maybe this is one reason so few educational systems are willing to reinstate ACT and SAT testing as part of their admissions requirements, especially when the research suggests they are better criteria for improving diversity than other existing means. They may be imperfect, but it is not the assessment’s fault, it is the system’s fault.

How to Improve? 

First, I want to be clear: I don’t have any specific, research-based solutions. So, before I offer any suggestions based on my years of being in the educational system as a student, my years of raising children going through the educational system, and over a decade working with standardized test design and delivery, I want to emphasize that the best thing we can do to improve is simply to change the conversation away from the standardized tests and focus on the educational system itself. We need research to determine where the issue actually exists; is it what we teach, or how we measure performance?  That MUST be the first step.

That being said, when it comes to “how we measure performance”, based on my background, education, and experience, I’m going to make a radical suggestion: more standardized testing. I know, I know. Our students are already inundated with standardized testing, but hear me out. While standardized test are frequently used in our education system, they are rarely used to measure an individual student’s performance when it comes to grades (the ultimate indicator of success within the system), but as an assessment of the overall school’s performance. My suggestion is that these standardized tests may be a more equitable way to evaluate performance for the individual as well.

From an equity standpoint, while there are some proven correlations between individual test scores on the US National Assessment of Education Progress (NAEP) assessment and those individual’s ACT/SAT scores, the correlations were not perfect. In addition, correlations were weaker across racial/ethnic minorities and low-income students. NAEP scores have also shown positive correlation with post-secondary outcomes, although they were not the only factor. Finally, since the NAEP assessment began in 1990, the disparity in scores based on racial and socioeconomic differentiation has significantly diminished. This suggests the NAEP assessment may actually be better at determining the student’s capability, rather then just predicting their post-secondary success, while also having some ability to predict success. Yet, NAEP assessments are not used in any way to actually grade the student’s performance. At the very least, NAEP results may be a viable way to augment current admissions and similarly reduce the racial and socioeconomic disparity. They may also be a better way to measure “success” in the primary/secondary educational system than current methods, leading me to my next point.

The reality is that well-constructed, standardized assessments with proven validity and reliability are NOT how most of our students are evaluated today. Across the primary, secondary, post-secondary, and graduate levels, our students are routinely evaluated based on individual teacher developed assessments and/or subjective performance criteria. Those teachers are inadequately trained in how to design, make, and validate psychometrically sound assessments (with validity and reliability); and, as such, the instruments used to gauge student performance routinely do not meassure that performance. Without properly constructed assessments, our students are more likely to be measured on their English proficiency, cultural background, or simply whether they can decipher what the instructor was trying to say, rather than the knowledge they have about the topic. Subjective evaluations (like those used for essay responses) are routinely shown to be biased and rarely give credence to novel or innovative thought; even professional evaluators trained to remove bias, like those used in college admissions, routinely make systematic errors in evaluation.  Subjective assessments, in my personal and professional opinion, are fraught with inequity and bias that cannot be effectively eliminated. Furthermore, I can personally report that educational systems do not care, if the reaction to my numerous criticisms is any indication.  Standardized testing would address this issue and, as we’ve seen with the NAEP, likely do a much better job of making more equitable and fair performance assessments across students.

On top of that, our students’ performance is also often judged on things like home work, attendance, and work-products created in the process of learning, rather than on what they have learned or know. This misses the point, and likely exacerbates the disparity in “success” in our educational system. Single-parent and low-economic homes, which also tend to be more racial segmented, can have dramatic effects on these types of assessments. First, you are out-sourcing the learning to an environment you cannot control where some students may gain experiential knowledge growth, but others cannot; second, you compound that by further penalizing those who cannot with poor grades. While some students/parents (regardless of situation) may still engage in learning/experience outside the classroom, making it mandatory and grading on it likely contributes to the disparity giving those students in the best situations with an unfair advantage. Finally, from my own research into the development of expertise, I know that not all students require as much experiential learning to master the knowledge. The development of expert knowledge is idiosyncratic, some require more while some require less. As such, we should not be measuring performance on how the knowledge is obtained, and focus more on whether they have it or not. 

I know the legacy of mistrust will make this a hard stance for people to support, but the use of standardized testing for assessing student performance would address a number of significant issues in current practices. It can be less biased, provide more consistent results across schools, and if used in place of subjective or other non-performance criteria, be a more accurate reflection of student capability.

Conclusion

Standardized testing, especially the behind-the-scenes work done to properly create them, is a mystery to most people. When you add historical misuse and abuse of standardized testing, it is easy to see why many demonize them and question the results. The reality though, is that well constructed assessments, used properly, can not only help us uncover issues in society, but also help us address those issues. The data on SAT/ACT scores, both their ability to predict academic performance, as well as the disparity in scores across racial and socioeconomic background are a clear signal to the real problem: the racial and socioeconomic bias built into the education system. The education systems definition of “success”, or how it is determined is clearly biased. As such, we should not push to eliminate standardized testing, but look to see how we can improve our definition and measurement of success by doubling down on standardized testing instead of how we do it today.

Taking it on the Road?

So, you want to embrace the nomadic lifestyle, but haven’t figured out how to keep it digital? It would seem in today’s day and age, remaining connected while on the road or in the campground, should be an easy thing to do, but I have found that this is not the case. I have found three potential solutions: public WiFi, Satellite, and Cellular hot spots. Each has it’s merits, but they also come with some downsides.

In addition, we identified a few key criteria or use cases we needed to solve:

  1. Sufficient bandwidth with low-latency for making real-time video calls (ala Zoom or other). Ideally, you need the ability to connect just like you would at home or in the office without anyone suspecting that you are nestled by a secluded lake instead;
  2. The ability to connect while in motion. Obviously, when you are a nomad, you are going to be moving around and while you might not be doing a lot of typing or video calls while you are driving, if you are traveling with a partner, they should be able to work like they are in the office, even when the office is moving down the highway.
  3. Reliability and Simplicity. The idea of being a digital nomad, for many at least, is a less stressful way of living. Those hopes can be dashed if your solution is unreliable and/or difficult to maintain.

Public WiFi

It turns out that you can access public WiFi in many places, including truck stops, campgrounds, and the (still) occasional, non-secured WiFi access point found around town. The benefit of this method of connecting is that it is generally free, or low cost; and that’s where the benefits end in my opinion.

The downsides of public WiFi are nearly innumerable; however, besides questionable/inconsistent reliability and speed, I find the biggest challenge is re-configuring all of your devices to leverage the public WiFi. This can be made a bit easier if you have a WiFi bridging device like that found in many modern travel trailers. This allows you to have a consistent “internal” WiFi network that you connect all of your devices to, and you simply have to configure the bridge to connect to the public WiFi you want to use.  This works, well, should work. I had challenges with the one in our trailer that stopped us cold and the bridge itself is only as useful as the networks you attach to. In addition, those dreaded “splash pages” that many public WiFi networks use to authenticate users can be tedious to deal with. 

Lastly, the need to re-configure everything, even if it is just your WiFi network bridge, is exacerbated if you are truly mobile; i.e., if you are driving down the road. Public WiFi is not a mobile solution, but a solution for when you are not mobile. So, on our three use-cases, public WiFi fails #2 entirely, and scores questionably on the remaining two.

Satellite Internet

Satellite internet comes in a couple of flavors, high, geosynchronous orbit and low-orbit; e.g. Dish Network versus Starlink. Personally, I’ve never been a fan of the geosynchronous satellite internet, mainly for its generally limited bandwidth and its latency. While bandwidth has improved, latency is what it is … you cannot speed up the signal. In the past this was just a problem if you were a gamer, but as a digital nomad, it will also affect all your Zoom calls. Going mobile also has its limits as you need a motorized dish that can track the satellite if you want to try using it in motion, which significantly increases the start-up costs. Lastly, as anyone who has satellite TV will know, trees and other obstacles can prevent the “clear view of the sky” that is required to get consistent, reliable service. This is hard enough in a stationary environment, but when you are on the road, living in campgrounds (which often have … trees), it is less than desirable.

Low-orbit satellite, a.k.a. Starlink, does dramatically improve on the geosynchronous option when it comes to speed and latency. These satellites are simply greater in number, and much closer than their geosynchronous cousins providing low-latency and high bandwidth. That being said, you still have challenges when it comes to the “clear view of the sky”. In the standard configuration, with a free-standing antennae you do have a bit more flexibility to move the antennae out from under the tree in the campground, but you also sacrifice the ability to connect while in motion. Starlink does offer a configuration that can be mounted on your vehicle that allows for “in-motion” use, but it is not only significantly more expensive (both in equipment and in monthly fees), it also makes it less flexible when trying to get a clear view of the night sky. 

If we look back at our three use cases, geosynchronous satellite doesn’t quite meet our first one, could meet the second one at additional cost, and only scores half on the simplicity/reliability aspect. Low-orbit only improves by also meeting the first use case, but doesn’t fair much better than the other with the same caveats.

Cellular Hot-Spots

The last option is the good-old cellular hot-spot, which is a solution that we’ve relied upon many times in our preliminary travels. Most people are somewhat familiar with this approach by using their mobile handset as an emergency internet connection for their laptop and/or tablet when nothing else was available; most people are also, then, familiar with many of the challenges including poor signal, usage limits, additional monthly charges, and limits on the number of devices that can connect. While stand-alone hot-spots (either pocket devices or those installed in mobile platforms like cars, trucks, and trailers) do address issues with limits on the number of devices, most providers still severely limit the monthly throughput and you still have the same issues with signal quality as you travel around. 

On the other hand, cellular hot-spots do provide true “mobile” usage as long as you stay on major highways where the signal is consistent (if you don’t drive over 70 miles an hour, which is apparently about the speed at which you cross tower signals too quickly for proper hand-off).  So, cellular generally meets all three of our use cases, with a bit of variability.

An Alternative Solution

After going through the above exercise, I will admit that I was a bit concerned about how we could commit to a nomadic lifestyle while maintaining our digital connections. While cellular seemed to be the best option, our past experiences using hot-spots did not instill a lot of confidence in relying on them for our mobile connectivity needs. I was beginning to think that we would need some combination of low-orbit satellite combined with cellular to be certain we could connect, but didn’t like the idea of having multiple services (and multiple bills), nor did I look forward to doubling the initial start-up costs. That is when I discovered Nomad Internet.

  • Unlimited Data
  • Up-to 200Mbs (currently)
  • No Throttling
  • Nationwide Coverage
  • No Contracts
  • Pause/Restart Service Anytime
  • 7-Day Money Back Guarantee

Nomad Internet is, to be fair, essentially a dedicated cellular hot-spot just like many others. Where it is different, though, is where it counts. Nomad offers unlimited data (with no throttling), speeds currently up to 200Mbs (download), and not only eschews monthly contracts, but also offers a “mobile” option allowing you to pause/restart your service only when it is needed for a small up-charge. (Starlink also offers this on their “mobile” option). Nomad also works on the newer 5G “C-Bands”, which not only allows for higher speeds, but also provides good signal reception even when mobile phone service is dicey.

These changes were enough for me to buy my first Nomad router and put it through the paces. I installed an AC inverter in my truck and for a few weeks, we drove around with a Nomad WiFi network surrounding us at all times. We drove to the backwoods of northern WI where my partner’s mother lives and where both my partner (on Verizon) and I (on AT&T) often have difficulty getting solid cellular reception and our data connections have been slow as molasses. In all these cases, we got solid connectivity, without disruption while driving or at rest.

Out of curiosity, I did a speed check at my partner’s mother’s house. First, I checked her hardwired broadband connection (4Mbs down/.2 up). Then I checked the Nomad connection (40Mbs down/1Mbs up). For Christmas, we replaced her broadband with my original Nomad (this time registering 62Mbs down/ 1.6Mbx up), leaving her with a monthly bill 33% lower than she had before. It’s no wonder Nomad’s original business plan was to provide rural areas with better Internet; here, they delivered exceptionally well. 

Final Thoughts

All-in-all, so far, Nomad has addressed all three of our initial use cases with flying colors. Add that my new Nomad modem came with a 7-day back-up battery, all at less than many others charge for their devices alone, and I’m feeling a lot less anxious about maintaining our digital connections as we explore a more nomadic lifestyle. That’s not to say I am completely at ease and this coming spring/summer we’ll be putting it through its paces in some of those more out-of-the-way places (like Yellowstone and Glacier National Parks), utilizing that back-up battery to see just how far off the beaten track we can go. But, so far, it has shown to be a reliable and simple solution that provides sufficient bandwidth to provide the ability to work on the road, in-motion and at rest.

The Advantage of the Novice in Innovation

Most organizations are in a constant battle to find the best, brightest, and most experienced talent to assist them in their innovation efforts; however, this may not be the best way to foster innovation.  In much the same way more common diversity targets (race, sex, age, etc.) are critical to seeding innovation success, diversity in experience is, perhaps, just as essential.  Individuals with the most experience, competence, and expertise are surely valuable, but may fail to ask the basic questions that frequently spawn true innovation.  Sometimes, having to take a step back helps change perspective.

The advantages of expertise are fairly well-known.  Experts can process information faster, with less cognitive load.  Experts can make accurate predictions and decisions using less information,  and can recover from mistakes much faster.   In addition, experts can often identify similarities between seemingly dissimilar problems, bringing new perspectives to innovation efforts (an example of where diversity in domain experiences can be beneficial).    All of these benefits derive from the development of sophisticated and optimize mental models.

All of these benefits make hiring experts (and versatilists) a goal of most organizations.  Yet, there are some negative aspects of expertise.  The most significant of these is that the highly refined mental models of experts often create blind-spots for experts.  Mental models are cognitive shortcuts allowing experts to ignore the details once they’ve identified the appropriate context.  In most cases, the experts experience and knowledge are correct; however, when there are minor inconsistencies between the expert’s assessment and the actual circumstances, experts can miss those details.  Even worse, if fundamental aspects of a process change, experts can have difficulty integrating those changes into their well-defined existing mental models. Experts are less adaptable to changes, which is often what innovation is all about.

Novices to the Rescue

Novices, on the other hand, have none of the advantages of experts, but excel where experts falter.   Novices are intimately aware of the details as they are still learning and internalizing them, developing their own, fledgling mental models.    While they may not be able to correctly determine the results of a change in the process, they are better able to identify and adapt to those changes.  Not only are novices better positioned to quickly adapt to changes in the process, their lack of sophisticated mental models also allows them question why things are done the way they are, and this is the true value of the novice in innovation: the dumb question.

You commonly hear the phrase “there is no such thing as a dumb question”.  Although simplistic questions may grate on the experts who take such knowledge for granted, the “dumb” question from a novice can be the jumping point for true innovation.  Why do we do this step?  How does this help the process?  What happens if we don’t do that step, or do something different? These questions force a decoupling of the individual steps in a process from the codified mental model and open the process up for innovation and re-engineering. They force the expert to see the details, rather than the big picture, and lay bare the assume rational and reasoning for why things are the way they are.

Add Novices to Your Innovation Strategy

Having diversity, depth, and breadth of knowledge is critical to innovation strategy.  Yet, it is important to understand this means not only having diverse experts involved, but also having diversity in experience levels.  Ensuring that novices are part of the innovation team adds a new dimension of diversity that may be the key to unlocking new innovation.  In addition, it helps you develop and train the next generation of experts.

Would You Hire Me?

An increasingly heard complaint in the business world today is the “tightness” of the talent pool.  Organizations are routinely reporting they simply cannot find job candidates with the appropriate skills to fill the jobs they have.  Although I have no data to counter this assessment, I do suspect the way businesses select and hire employees is a more significant factor to their belief that “the right people aren’t out there”.  Not only that, but these same biases are also likely a factor in the lack of diversity within many roles in corporate America.  Let me explain . . .

Job Posting Bias

The most significant factor contributing to the belief that there is a lack of talent, is the innate bias in the hiring process starting with the job posting.  By this, I mean organizations go to great lengths to detail and explicate the exact skills, knowledge, and experience they require to even be considered for a position.   However, this list of requirements can be flawed in a number of ways.

First, the list of skills believed to be necessary to fulfill the role are normally based, not on explicit job-task analysis or empirical study, but the beliefs and assumptions of those already in the job.  Although these “experts” are likely to have valuable insights, they are biased in several ways.  First, and foremost, experts are notoriously unable to accurately identify the characteristics necessary for their own success, let alone someone else’s.  Expertise is derived through the application of tacit knowledge, which by its very definition cannot be articulated. Second, successful practitioners may be biased towards the skills that helped them be successful, while discounting skills and knowledge they do not have. Finally, this list of skills often becomes an ultimate “wish list”, rather than minimum requirements presenting a list of capabilities far beyond what many people would achieve in a lifetime.  This has been shown to be a barrier for applicants, particularly for women and minorities who are less cavalier in representing or exaggerating their past experience compared to white males.    In other words, the jobs being posted are often skewed towards maintaining the status quo, leading to another job posting bias.

The second bias in job postings is they are almost always created for the job as it always has been, rather than for the job the company really needs; it is based on status quo, rather than for the future. This is particularly dangerous in a time when organizations are going through significant change, from organizational models all the way down to basic business models; and, this doesn’t even begin to account for the significant changes in society or employment patterns. The skills and knowledge required to adjust to new ways of doing business, new social standards, and new technologies are unlikely to be the same as those needed previously.  Even the velocity of change in today’s business environment necessitates new perspectives on organizational culture, risk tolerance, and business strategy.  Hiring new talent based on the old models, rather than looking for the new skills and knowledge needed, not only limits the candidate pool (both in size, and in diversity), it is also detrimental to the business in the long-run.

From the get-go, the hiring process can be significantly biased, creating the illusion that candidates simply don’t exist when there are plenty of talented people simply not being engaged with.

The Hiring Bias

During the hiring process, these same biases continue to pervade.  While many applicants have already been dissuaded from even applying, those that do apply are either rejected because they don’t meet the staid job requirements, or because  biases are prevalent within the actual hiring process.  These biases come from many angles, from misconceptions to the inability to accurately evaluate subjective experience.

One common bias is the persistent belief that “management” and “leadership” are not actual jobs, but personal capabilities or characteristics.  A seasoned engineer, with no management experience or education, is often hired to manage other engineers because it is believed the engineering capability is more important than the management/leadership capability; yet, it is also well known that expertise in one domain is not directly transferable to another.  Being an expert engineer has no more effect on being a competent leader, than being a competent leader makes you an expert engineer; they are two unique and differing roles.  Yes, research does suggest that managers are more effective when they understand the work of the people they manage, but experienced and effective leaders are adept at overcoming these challenges and would likely be a better choice regardless of where their experience came from.  These misconceptions, based on instinct rather than actual evidence, further constrain the perceived talent pool.

While expertise in one domain may not be directly transferable to another, unrelated domain, there can also be a bias towards believing that no experiential knowledge is transferable between domains.  This often arises when organizations have significant indifference to skills/knowledge obtained outside the specific industry or context.  For instance, research suggest great similarity in process between highly technical troubleshooting capability and retail customer support capability; while both processes differ in context and discrete knowledge, the basic process of assessment, identification, and resolution of issues is nearly identical.  Thus, while not completely transferable, the underlying capabilities are not without value.  This hidden value is not only true for many basic capabilities, but can also be a great source of innovation giving new perspectives.

There are also subjective evaluation biases.  A common one here often plays out in terms of organizational titles.  Someone who currently has a title of  “Sr. Director” is more likely to get an interview for a VP role, than someone with simply a “Director” title; and, certainly more likely than someone with a “Manager” title.  While these roles are often viewed as quantitative rankings, organizational titles and promotion requirements are rarely equated universally across organizations making them more subjective in nature. As a result, without context, organizational titles can be arbitrary and reflect less about the title owner’s actual capability than they do about the environment in which the title was achieved.  This has been empirically demonstrated with GPA rankings, promotion decision making, etc.  Furthermore, since it has been shown that even expert evaluators are subject to these biases, it is unlikely that HR recruiters and/or hiring managers are any less susceptible to falling prey to them.

Again, not only do these biases create artificial limits on the “talent pool”, they perpetuate the existing biases of other organizations and their hiring, promotion, and recognition practices.

The Versatilist Perspective

As a practitioner of strategy and innovation, it would be reckless to suggest the continued investment in developing and growing the talent pool is without merit.  Since knowledge/skill is the single greatest organizational asset, it is absolutely imperative we continue to find new ways to expand and develop our workforce in every possible way.  At the same time, until the board-rooms, executive offices, management ranks, and rank-in-file positions in our organizations reflect the same diversity as the society from which we hire them, it is also reasonable to suggest we may have a problem in our recruitment and hiring practices.  Until every employee is utilized to their fullest potential, we cannot simply suggest there isn’t enough “talent” to go around.

Instead of evaluating prospective hires based on what required skills they might not possess, we should also evaluate them based on the skills they do possess that could bring great value to the organization.  Does the candidate who has spent years working in social services bring valuable perspective to a technology company?  What about the candidate who has worked in retail for 20 years; might they not have value to a digital transformation initiative?  Is it easier to teach basic finance skills and understanding or is it easier to teach leadership skills?  Perhaps a seasoned leader, without years of finance experience, could bring new ideas to a finance leadership role.  Perhaps someone who has spent multiple years in various roles like engineering, sales, marketing, and product management might be more valuable in a leadership role in any of those areas (or an entirely different one) than someone who has simply spent an entire career in one alone.

An Exercise

Let’s do an exercise; a thought experiment if you will.  Would you hire me?  What would you hire me for? I am not suggesting that I should be hired for any particular role, but the point of this exercise is to start looking beyond the way we do things today in an effort to find the hidden talent that might be sitting right in front of us.

Look at the various jobs available in your organization and ask yourself if you would reasonably consider me for those positions (feel free to check out my LinkedIn profile).  If not, I challenge you to ask yourself “why not?” Do I not have the specific experience required?  Do I not have the educational requirements? List specifically the reasons I would not be a good fit.

Then I challenge you to do a little thought experiment and look beyond the specific accomplishments and roles, and try to imagine how any of these experiences could bring new insight and value to those roles.  Would my technical background bring new insight to the roll?  Would social media, marketing, or product management experience be a boon to that job responsibility?  What about leadership, personnel development, assessment, data science, strategic innovation?  I challenge you to look for the reasons you would hire me in that role rather than not.  Look for the positives, instead of the negatives and then compare the two lists.

Now, go back to those job postings and, whether you are the hiring manager or not, think about the people you work with, both internally as well as externally.  Think about the people you know socially.   If you are the hiring manager, go back to the prospective candidate resumes (all of them, not just the ones curated by recruiting) and look through them again. How many of those people have knowledge, skills, abilities, or experience that could bring interesting value to those jobs?  Does their potential value exceed the missing requirements?  Are you potentially missing great employees?

As long as we keep throwing away the stones that don’t have gold in them, we will never realize how many of them contained diamonds, or platinum (a precious metal that was once simply discarded).  Maybe you are looking for gold, but that doesn’t diminish the value of everything else; value that might exceed what you were looking for in the first place.  We don’t lack for talent or diversity in our candidates; we lack the ability to identify and see them for what they are.

 

Innovation, Meet Strategy

Just like strategy, being innovative or creative is useless unless ideas can be executed on.

While academics and practitioners alike still argue over whether innovation can be dictated and prescribed, these arguments tend to revolve around the act of creativity or inspiration, rather than the process of innovation.  Just like strategy, being innovative or creative is useless unless ideas can be executed on.  The innovation strategy framework does not attempt to regulate the act of inspiration, only to provide an environment fostering both the identification of ideas as well as the development of these ideas into successful projects.

InnovationModel

Figure 1. The Innovation Strategy Framework

One of the single greatest challenges in developing sustainable innovation practices is not the lack of ideas, but the inability to focus on those ideas most likely to succeed, both in the market as well as within the organization.  Organizations are awash in good ideas, but lack the resources and capabilities to develop all of them into viable products, services, and processes.  Rather than selecting and curating the best ideas, the ones most aligned with the organization’s capabilities and direction, ideas are often selected solely at the whims of organizational influencers using idiosyncratic criteria.  Innovation tends to be born out of circumstance rather than cognizance.

This is where strategic domains fit into the innovation strategy framework (figure 1).

Strategic Innovation Domains

Every company has a set of strategic goals, either explicit or implicit.  These strategic goals help orient the organization, prioritize spending, and become the yardstick by which success is measured.  It only makes sense that these same goals should help an organization identify, develop, and manage its innovation efforts.  Strategic innovation domains align the innovation process with the overall organization acting as agents in the innovation process to seek out innovation opportunities contributing to organizational success.

The inclusion of strategic innovation domains is the key difference between the innovation strategy framework and many other approaches to sustainable innovation.  Innovation is frequently addressed as something that everyone in the organization should do, or be a part of.  Again, this is likely a result of confounding ideation from execution; however, even regarding ideation, expecting organizational participants to be more innovative or creative simply because they are told to do misses the mark.  Employees see this as another task they are expected to perform in addition to their existing duties, without additional compensation.  In addition, this approach is based on the notion that organizations lack ideas, rather than lacking a focused approach to seeking out and executing on the right ideas.

Applying Focus to Innovation Efforts

Strategic domains focus on innovation execution.  Each strategic domain is responsible for identifying, developing, and managing innovation aligned with its strategic focus.  Rather than relying on happenstance to surface the right innovation ideas, strategic domains leverage the innovation processes (attracting, foraying, and experiencing) to seek out appropriate ideas as well as develop the most promising ones.  There are several benefits to this approach.

Imagine if an organization refused to invest in accounting and just told employees to be more accountable.

The most obvious benefit is the alignment of innovation and the strategic trajectory of the organization.  There should be as many strategic innovation domains as there are strategic goals within the organization.  If the organizational strategy changes, then the strategic innovation domains should change to reflect this.  In this manner, the organization’s innovation efforts are focused on those most likely to fit within the organization’s capabilities and long-term focus.  This significantly reduces the signal to noise ratio by eliminating those ideas unlikely to be successfully executed by the organization.

By making an individual (or group) specifically responsible for innovation efforts, you also gain ownership.  If everyone is responsible for innovation, then no one can be held responsible for the success or failure.  Using the innovation pipeline approach of the strategic innovation framework, the innovation efforts of each strategic domain can be measured; and, that which can be measured, can be managed.  Strategic domains make innovation just as much a part of business operations as HR, accounting, sales, or product management.

Finally, making innovation the primary function of an individual (or individuals), leads to more consistent performance.  Making innovation “everyone’s job” in addition to their existing roles means either innovation or operations will suffer when the two objectives compete.  Employing people with dedicated innovation functions ensures continued focus on developing innovation and raises the chances of success significantly.

Importance of Strategic Domains

The number of organizations believing they will be successful with innovation without investing is staggering.  This would be a ridiculous approach to any other business activity.  Imagine if an organization refused to invest in accounting and just told employees to be more accountable.  Yet, when it comes to innovation, leaders somehow assume that telling employees to be more innovative will somehow launch the next market-leading product or service.   Investing in strategic innovation domains not only creates an environment where innovation can succeed, it also telegraphs the organization’s commitment to being successful.  It’s easy to say you believe in the importance to innovative, but until you are willing to invest, it is hard to believe it.

 

 

Google Does Not Obviate “Knowing”

There is a strange notion making the rounds of social media in various forms, used to argue against traditional learning and assessment standards.  This reoccurring theme suggests the ubiquitous ability to leverage Google search, Wikipedia, or other online resources to find answers obviates the need to learn anything for yourself.  I.e., if we need to know something, we can just look it up in real-time and don’t need to waste time learning this information before we need it.  This theme has come up in discussions of our educational system curriculum, the supposed uselessness of standardized testing, and even in employee assessment criteria.

The Internet was never intended to be a replacement for independent knowledge.

Perhaps this is a special case of the Dunning-Kruger effect (Dunning, Johnson, Ehrlinger, & Kruger, 2003; Kruger & Dunning, 1999), but there are at least two clear reasons why access to knowledge is not equivalent to actually knowing it.  The first is a complete disconnect from the way human beings develop skill and competency.  The second is the assumption real-time knowledge, although ubiquitous, is accurate and will always be available.

Having Facts is Not “Knowing”

The most incongruous part of this idea is the assumption that knowledge is the result of just having a bunch of facts.  Thus, if you can just look up the facts, you have knowledge.  Unfortunately, unlike in the Matrix, human beings cannot simply download competence and expertise.

Learning something, and becoming good at it, is a process of building mental models on top of the foundation of rote facts

The study of experts and expert knowledge has well established the difference between experts and novices is not in what they know (the facts), but in how they apply those facts. It is based on how each fact fits with other facts or other pieces of knowledge. Expertise is the result of a process of integrating facts, context, and experience together and defining more refined and efficient mental models (Ericsson, 2006).  Learning something, and becoming good at it, is a process of building mental models on top of the foundation of rote facts.  This cannot be done without internalizing those facts.

In addition, returning to Dunning-Kruger, without building competence, individuals are incapable of discerning the veracity of individual facts.  Our ability to understand whether information is accurate, or of any substance, results from being able to rectify new information with our existing mental models and knowledge.  Those with less competence are the most unable to evaluate this information making them the most susceptible to not only accepting incorrect information as fact, but also of developing mental models incorrectly reflecting reality.

Limits of Ubiquitous Knowledge Access

Although those of use living in developed economies take ubiquitous access to knowledge for granted, this is not the case for all human beings, nor is it guaranteed to always exist.  It is estimated only about 50% of the world’s population is connected to the Internet, over two-thirds of which are in developed economies.  Even these figures bear further investigation, as those in developing countries with Internet access are far more likely to be connected by slower, less reliable means keeping their access from being truly ubiquitous.  Furthermore, while China contributes significantly to the world’s total Internet users, the Chinese government does not allow full, unrestricted access to the knowledge available via the Internet.  This leaves the number of people with true, ubiquitous access well below 50% of the population.

Even for those of us fortunate enough to have nearly ubiquitous access to an unrestricted Internet of knowledge, access is fragile.  Power outages as a result of simple failure, natural events, or even direct malice, can immediately render information inaccessible.  Emergency situations where survival might rely on knowledge also often exist outside the bounds of this seemingly ubiquitous access. Without a charge, or cellular connection, many find themselves ill-equipped to manage.

Dumbing Down our Society

The idea that access to knowledge is the same as having knowledge portends a loss of intellectual capital.  Whereas societies in the past have maintained control by limiting access to information, we are creating a future where control is maintained by delegitimizing and devaluing the accumulation of knowledge through full access to information.  We are positioning society to fail in the future because they will have not only become dependent on being spoon-fed information instead of actual learning, but will have also lost the ability to differentiate fact from fiction.

Not only is the idea that access to knowledge equates to having knowledge founded on shaky foundations lacking any kind of empirical basis, it undermines the actual development of knowledge

Although it would be nice to assume this is a dystopian view of the future, we are already seeing the effects of this process.  As social media becomes increasingly the way our society views the world around us, we can already see how ubiquitous access to information is affecting our perceptions of the world around us.  Without the ability to think critically, something only developed through the accumulation of knowledge and experience, in evaluating the real-time information we receive, our society is being manipulated into perspectives not of our own choosing, but the choosing of others.  We are losing the ability to process the information we receive and find ourselves increasingly caught in echo-chambers only presenting information supporting potentially incorrect world-views.

The Internet was never intended to be a replacement for independent knowledge.  It was developed to expand our ability to access information in the pursuit of developing knowledge and capability.  Not only is the idea that access to knowledge equates to having knowledge founded on shaky foundations lacking any kind of empirical basis, it undermines the actual development of knowledge.

 

 

Resources

Dunning, D., Johnson, K., Ehrlinger, J., & Kruger, J. (2003). Why people fail to recognize their own incompetence. Current Directions in Psychological Science, 12(3), 83–87. http://doi.org/10.1111/1467-8721.01235

Ericsson, K. A. (2006). An introduction to Cambridge handbook of expertise and expert performance: Its development, organization, and content. In The Cambridge handbook of expertise and expert …. New York, NY: Cambridge University Press.

Kruger, J., & Dunning, D. (1999). Unskilled and Unaware of It : How Difficulties in Recognizing One’s Own Incompetence Lead to Inflated. Journal of Personnality and Social Psychology, 77(6), 1121–1134. http://doi.org/10.1037/0022-3514.77.6.1121

 

Ecosystems Thinking for Social Change

Ecosystem, or “system” thinking is not necessarily about ecology, but uses an ecological metaphor to explore the interconnectedness of various aspects of any system (Mars, Bronstein, & Lusch, 2014).  This is a critical skill for business organizations to aid strategy and innovation.  It is also an area where versatilists often shine, because versatilists are uniquely adept at taking deep knowledge from one system and applying it to their understanding of new systems, often leading to unique insights.  However, that is not what this blog is about.  This is about how a lack of systems thinking is trapping our society into repeating the same issues repeatedly.  This is about how electing people who comprehend systems thinking might be a better means of bringing about social change.

The Heart of Systems Thinking

At the heart of systems thinking is to keep in mind that no problem, no solution, no individual exists in a vacuum.  The whole world is a set of interrelated systems that influence and affect those around it; changes in one system ripple throughout our entire society.  Systems thinking involves attempting to understand and evaluate any problem or solution within the context of the bigger picture.

For instance, take constraint theory (Tulasi & Rao, 2012).  Constraint theory suggests that any system or process is constrained by the least capable or least efficient step in the system; this is often equated with the “weakest link” idea that a chain is only as strong as the weakest link in the chain.  The idea behind constraint theory, however, suggests that if you fortify the weakest link (solving that problem), you have simultaneously created a new “weakest link” (formerly, the next-to-weakest link).  In addition, the newer, stronger link may also have other unintended consequences (maybe by making it stronger, you have also made it bigger, which affects some other function).  In essence, the process to creating a stronger chain is a never-ending task as each solution has ramifications.

In systems thinking, you must evaluate how a solution to one problem may create a new problem or change the dynamics of another system.  This potential new problem must also be evaluated to determine if it is a bigger problem than the one you are attempting to solve, or makes the solution you have proposed untenable.  Problem solving, like creating a stronger chain, is a never-ending process.  However, the intended result is improving the overall whole, ensuring one solution doesn’t create a bigger problem somewhere else.

Unfortunately, without systems thinking, we are failing to create an overall better society, but are remaining mostly stationary.  Solutions examined and evaluated within a vacuum, create ripples that, instead of moving us forward, keep us in a constant state.

Examples of Non-Systems Thinking Challenges

The worst part of failing to apply systems thinking to the problems of our society, is when the same groups of people argue for two independent solutions, which are counterproductive; i.e., when the same group argues for one solution that aggravates another problem they are trying to solve and vice-versa.  It is important to understand that, in and of themselves, the proposed solutions may be perfectly good solutions; it is only when you combine the system effects that issue become apparent.  It is also important to note that this is not an analysis of the merits of any particular solution or point of view.  There is no intent to endorse or oppose any of the individual solutions, simply to illustrate the systems effects of those solutions.

Immigration Reform and Free Trade Agreements

By itself, building a border wall, while economically questionable, is a perfectly legitimate solution to preventing illegal immigration via our southern US borer.  It is not the only solution of course, but it is a possible solution.  We can debate this one way or the other, but even opponents must admit that it is a solution whether they agree it is the right one or not.

Similarly, eliminating or significantly reducing free trade, particularly with low-cost labor countries like Mexico is a legitimate solution to reducing job-loss in the US via off-shore outsourcing by US companies and keeping US investment in the US.  Again, not the only solution, but certainly one way to address the issue.  We can once again debate this, but it must be accepted that it is a solution.

However, when put together, these solutions are counter-productive.  By eliminating the ability for Mexico to continue to develop and build their economic capability (by granting them easy access to US markets and US investment), their standard of living will likely decline.  A decline in standard of living (loss of jobs and the income from it) only perpetuates the growth of illicit enterprises (e.g. drugs) as well as makes illegally emigrating to the US more attractive.  As such, from a systems perspective, reversing free trade agreements will likely compound the issue of illegal immigration, as well as drug smuggling and other issues.  This places even bigger demands on the needs of border protection and immigration control.  These are misaligned solutions from a systems perspective.

Welfare Reform and Birth Control

Another counterproductive combination of arguments is simultaneously arguing for reducing the US welfare system, while simultaneously arguing to eliminate birth control options, including sex education and access to safe abortions.  Again, in and of their own, each of these arguments are perfectly reasonable and can be understood.   Without applying personal judgements on them, they are reasonable goals and can be respected.  From a systems perspective however, these are not isolated issues or goals, they have complex interactions which makes arguing for both less reasonable.   The only logical result of limiting sex education and access to birth control measures is an increase in women and children within the welfare system.  It is illogical to argue for both actions, even if either one of them in isolation can at least be recognized as reasonable.

Cyber Security and Encryption Strength

Just this last week, there were two articles published.  The first one detailed how Russian hackers have been targeting the personal (non-government) cell phones of NATO soldiers to track, intimidate, and spy on them.  The second one detailed the Department of Justice (DoJ) pushing for US technology firms to make it easier for law enforcement to access the encrypted (personal) devices of accused criminals.  Again, arguing for improved safety and security of our personal information, particularly through strong encryption is a reasonable solution to rampant cyber crime.  It is also reasonable to argue that law enforcement should be able to access the information they need to convict criminals for breaking the law.  Unfortunately, you cannot reasonably argue for both as the one comes at the cost of the other.  Arguing that we need to better protect our personal information from thieves, while simultaneously arguing to hobble encryption for government access are mutually exclusive goals.

Understanding the Bigger Picture is Essential

Systems thinking requires us to look at the proposed solutions and understand their ultimate effects.  It asks us to better understand how seemingly separate systems interact and how changes in one creates ripple effects in others.  Besides allowing us to mediate between counter-productive arguments, systems thinking also provides an opportunity to discover new solutions.

By broadening our thinking, systems thinking allows us to uncover new solutions to old problems.  If we see how changes in one system can ripple into others, we can harness these ripples for positive change in our society.  It asks us to look at why things happen, at root causes, rather than addressing the ramifications or symptoms of those problems.  It allows us to explore how numerous problems in our society may be linked by ripple effects of similar issues we haven’t imagined.  For instance, could the rising costs of US health care (and its effects on treatment of mental health issues) be a progenitor of the rising threats of violence and recruitment of disaffected youth by terrorist organizations?   Could the antiquated US tax system be a progenitor of immigration challenges, job-loss through outsourcing, and increased income divisions?  Could US foreign policy be a bigger source of terrorist threats than religious extremism?  Systems thinking helps us see how solving one challenge may also have positive benefits on others.

Unfortunately, we do not look at problems as components in a unified system of systems, we tend to look at individual problems and argue solutions without thinking about the ramifications of those arguments.  We frequently miss the forest for the trees.  The effect is to leave us in a perpetual state of uncertainty, never moving society fully forward no matter how many problems we try to solve.  We never address the true source of the problem, only applying patches that don’t align and don’t solve the underlying problem.  We would all do better if we took a more holistic view of the problems we face, rather than reactively addressing symptoms.

 

References

Mars, M., Bronstein, J., & Lusch, R. (2014). Organizations as ecosystems: Probing the value of a metaphor. Rotman Management, 73–77.

Tulasi, C. L., & Rao, A. R. (2012). Review on theory of constraints. International Journal of Advances in Engineering & Technology, 3(1), 334–344. http://doi.org/10.2307/25148735

 

4 Steps to Initiating Business Model Innovation

Business model innovation is an increasingly common topic.  The advent of freemium and non-linear revenue generation is shaking the foundations of many established organizations whose tried-and-true business models are feeling constrained and sluggish. Even large organizations with strong track records of innovation are feeling consistent pressure to keep up with these rapidly changing market dynamics (Terlep, 2017).  Ironically, many business leaders and strategist have given very little thought to their business model.  Here are four steps, and resources, to assist in getting a grip on initiating business model innovation.

#1 Understand What Your (a) Business Model Is

Perhaps it is an artifact of our technology driven culture where massive companies are built without ever even having a business model, but before you can innovate a business model, you need to understand what a business model is in its most basic form, and what your specific model is.  At its core a business model comprises two basic concepts:

  1. Value Creation (how do you create value); and,
  2. Value Capture (how do you capture some of that value as profit) (Matzler, Bailom, von den Eichen, & Kohler, 2013).

While perhaps pedantic, understanding this basic construct of a business model is highly informative and the progenitor to all other business decisions. They are also the starting place for business model innovation.  Increasing the perceived value of your product without changing the cost to produce it can increase market penetration by being seen as a value offering if you don’t increase price, can increase profit if you capture this new value as profit by also raising prices, or both if the increase in perceived value is greater than the increase in price.  Conversely, maintaining perceived value, but reducing price or the costs to create the product can affect profit.  All business decisions start at this basic level and the business model informs every other aspect of the business.

The part of a business model most misunderstood is the effect of perceived customer value; yet this is one of the most important factors.  Even if your product is no different from competitors, if customers perceive it as more valuable, you have created more value – value you can capture either as market share or in direct profit.  This makes understanding your product’s value proposition a key part of business model innovation.

#2 Understand Your Product/Service Value Proposition

Many businesses either don’t understand the true job that their product performs for their customers, or believe it has no effect on the bottom line (Christensen, Anthony, Berstell, & Nitterhouse, 2007).  Yet, understanding how and why a customer is using your product or service is a key component to evaluating the perceived value.  If you don’t know what job your product is performing, it is difficult to properly affect the perception of how well it does that job.  Christensen, Anthony, Berstell, and Nitterhouse (2007) document several examples of how understanding the right job for your product is essential to understanding perceived value.

For example, how does the value of certain features of your product change depending on how the user is using it?  Does a soccer mom have a different perception of her vehicle than a travelling salesperson?  Does this perceptual difference affect the perceived value of your current product?  Understanding how your products and services are perceived and what their true function is in the lives of its consumers is critical to your business model.  Not only will it help you find ways of maximizing your current business model, it may also lead to new ways of capturing and/or creating value (Bettencourt & Ulwick, 2008).

Understanding how the perceived value of your offering differs, and what contexts affect this perception is a gateway to finding new ways of value capture.  Instead of just offering a product, there may be services when combined with the product could greatly elevate the value.  The easiest example of this is the iTunes store added to the iPod.  Not only did the iTunes store add a significant new revenue stream to apple, it greatly increased the value of the iPod because it worked seamlessly with iTunes to make finding and exploring new music simple.  Capturing “out-of-band” value is an excercise in nonlinearity.

#3 Understand Nonlinearity

Linear bias, the tendency for humans to think in straight-line correlations, can lead to very costly mistakes (Bart de LangheStefano PuntoniRichard Larrick, 2017).  While understanding we live in a nonlinear world is important in and of itself, it can have pronounced effects on business models.  This linear thinking process can severely limit your ability to understand or comprehend business model innovation; we are taught from day one in business school that profit is generate through the difference between the cost to create a product and the price we sell the product for.  In Competing Against Free (2011), Bryce, Dyer and Hatch examine how this linear approach to business models can prevent successful organizations from competing with start-ups using nonlinear business models to capture value indirectly.

The reality is we generate profit based on the cost to create value, and how much of that value we can capture.  This does not suggest that we must capture value directly from the sale of the product, nor does it say we can’t. This is most readily visible in software subscriptions (Microsoft, Adobe) and other technology sectors, but companies like Gillette, HP, and others have built their business similarly for decades.  By selling their “products” at, or below, cost and captured value through the supplies necessary to keep those products functioning they have moved from “product” companies to “service” companies by realigning how they create and capture value.    Evaluating the cost and benefits of these approaches is why understanding nonlinearity is especially important to business model innovation.

#4 Understand Whether to Innovate, How, and When

One of the lessons of Competing Against Free (Bryce et al., 2011) is just because someone else has a different business model, doesn’t necessarily mean you should change yours as well.  Business model innovation is not a simple process and can depend on the conditions of the market and internal dynamics like the presence of leadership capable of making tough decisions and building organizational consensus (Giesen, Riddleberger, Christner, & Bell, 2010).   This is not a process for the faint of heart as it likely affects every aspect of your business from how you market and sell your products, the partner organizations you work with, and even basic accounting, cost-controls, and financial reporting.  Since the business model is the most basic statement of your “theory of business”, changing your model changes everything.

The positive side is that even if you don’t implement a complete business model change, going through these steps will surely uncover a host of ideas about how you can elevate customer perceived value or better capture the value you already create.  It may also help you better understand what new competitive business models might be lurking out there, how they operate, and how you can address them should they come knocking.  Lastly, it may lead to a business model refresh, softening the organization for the day a full business model innovation needs to take place.

References

Bart de LangheStefano PuntoniRichard Larrick. (2017). Linear Thinking in a Nonlinear World. Harvard Business Review, (June). Retrieved from http://hbr.org/

Bettencourt, L. A., & Ulwick, A. W. (2008). The customer-centered innovation map. Harvard Business Review, 86(5), 109–114. http://doi.org/Article

Bryce, D. J., Dyer, J. H., & Hatch, N. W. (2011). Competing against free. Harvard Business Review, 89(6). Retrieved from https://hbr.org/

Christensen, C. M., Anthony, S. D., Berstell, G., & Nitterhouse, D. (2007). Finding the right job for your product. MIT Sloan Management Review, 48(3), 38. Retrieved from http://sloanreview.mit.edu/

Giesen, E., Riddleberger, E., Christner, R., & Bell, R. (2010). When and how to innovate your business model. Strategy & Leadership, 38(4), 17–26. http://doi.org/10.1108/10878571011059700

Matzler, K., Bailom, F., von den Eichen, S. F., & Kohler, T. (2013). Business model innovation: Coffee triumphs for Nespresso. The Journal of Business Strategy, 34(2), 30–37. http://doi.org/10.1108/02756661311310431

Terlep, S. (2017). Procter & Gamble vs. Nelson Peltz: A Battle for the Future of Big Brands – WSJ. Retrieved October 9, 2017, from https://www.wsj.com/articles/p-g-vs-nelson-peltz-a-battle-over-the-future-of-big-brands-1507485229