Russell McGuire

On Monday we began a week-long series on how to plan through this current pandemic. We identified four steps that every organization should be taking within the context of three planning horizons. Today we finish up the series by looking at the final step: Strategy Development.

Undoubtedly you’ve been asked “what’s your strategy” for getting through this crisis. You’ve probably had an answer, but maybe one that you weren’t even sure of yourself. Hopefully this week’s articles have provided a stronger foundation. But to answer that question, we first need to identify what a strategy even looks like. My definition is a bit unorthodox, but I like to think of a strategy as a framework that makes hard decisions easier.

Over the years, I’ve adapted some existing tools into what I call the Purpose Pyramid:

The Situation Assessment that we talked about on Wednesday provides the Panorama within which we develop our strategy. That strategy starts with our Purpose – what we are trying to accomplish. Below the Purpose are three Pillars – what are the three things that absolutely need to be true for us to accomplish our Purpose. Under each Pillar are three Proofs – the three most important things we need to do for that Pillar to become true.

Normally I think of a strategy as a long term framework, but these aren’t normal times. Many organizations will experience more change between February and December of 2020 than they’ve experienced over the past five years. This is also a period of unprecedented uncertainty, so it is completely appropriate and worthwhile to develop a strategic framework for each of the four scenarios in each of the three planning periods.

For example, your Purpose for the “right now” may be “Survive this crisis, retaining the ability to serve our customers and love our employees.” The Pillars under that Purpose may be “Cut Operational Costs”, “Launch New Delivery Models”, and “Retain Key Employees”. The specific Proof actions taken under each Pillar may differ significantly under the different scenarios for the “right now.”

The Purpose Pyramid for the “new reality” would look more like a traditional long-term strategy. For example, for my business, the Purpose might be “Honor God by helping businesses develop sound strategies.” My three Pillars might be “Deliver Customized Advisory Services”, “Develop Tools To Accelerate Strategic Decision Making”, and “Tell Tales and Share Tools”. Again, the specific Proof points will likely differ significantly under different scenarios.

Proverbs 24:3-4 tell us that “By wisdom a house is built, and by understanding it is established; by knowledge the rooms are filled with all precious and pleasant riches.” Of course, the fear of the Lord is the beginning of true wisdom, but I hope that I’ve been able to provide a framework and some tools to help you as you seek the Lord’s guidance in building a business that will withstand this current storm and those storms that will undoubtedly come in the future. Let me know if there’s anything I can do to help you through this process.

Top Photo credit: Anastasia Petrova

On Monday we began a week-long series on how to plan through this current pandemic. We identified four steps that every organization should be taking within the context of three planning horizons. Today we are looking at Business Modeling. This is a big topic, so today’s article is longer than normal.

The Business Model Canvas was developed by Alex Osterwalder starting in 2005. It effectively summarizes an entire business into nine elements. The Business Model Canvas has become an essential element for entrepreneurs following the Lean Startup methodology.

When you look at the canvas, there’s an obvious break between the top section (business decisions) and the bottom section (the financial impact). Less obviously, the canvas can be broken in half left and right. At the center is the “Value Proposition” and this truly is the core of the business model. We like to call the right half, the “Front End” of the business model, and it represents the decisions made in order to bring that value proposition to market. The left half, or the “Back End” of the business model, represents all the decisions that enable the business to successfully deliver that value proposition to the target customers. Successful execution of the Front End results in the Revenue Streams. Successful execution of the Back End requires investment represented here by the Cost Structure.

While your business model has likely already been well established, it is important to understand how it might change, or where there may be stresses on the business model during each of the three planning horizons under different scenarios.

The most important elements to deeply understand first in building out a business model are the Value Propositions and the Customer Segments. Osterwalder and his team at Strategyzer have developed an additional tool for understanding these elements, which they call the Value Proposition Canvas.

On the right side of the Value Proposition Canvas is the Customer Profile which provides a structured approach to understanding the targeted customer segment and their thought process in purchasing a certain type of product or service. This profile is developed entirely from the customer’s perspective using their language and based on their values and perspectives. The Customer Profile begins with the Customer Jobs section which describes what customers are trying to get done in their work and/or non-work lives. The Gains section describes the specific benefits they hope to receive and the outcomes they hope to achieve through those Jobs. The Pains section captures the risks, obstacles, and bad outcomes that make it hard to achieve the Gains when doing the Jobs.

The left side (the Value Map) corresponds to the Customer Profile, but starts with the list of Products and Services being offered to help customers do their Jobs. The Pain Relievers section describes how the Products and Services (and how they are delivered) specifically work to reduce the Pains, and the Gain Creators section similarly describes how they specifically work to deliver the hoped for Gains for the customer.

For many businesses, customers’ Jobs, hoped for Gains, and anticipated Pains will vary significantly across the scenarios and different planning horizons. Similarly, what you and your partners can do, and how best to reach and serve customers are likely to change over the coming months and under different scenarios. Therefore, it’s important that you create versions of your business model for each of the twelve combinations of scenarios and planning periods. You need to understand what changes between scenarios so that you can be ready for whatever happens. It’s also important to think through what will change when you move from the “right now” to the “restart” and finally to the “new reality”.

Proverbs 19:2 warns us “Desire without knowledge is not good, and whoever makes haste with his feet misses his way.” Take time to understand your customers and your own operations through these transitions. Your employees and customers depend on it.

Top Photo Credit: JESHOOTS.COM

On Monday we began a week-long series on how to plan through this current pandemic. We identified four steps that every organization should be taking within the context of three planning horizons. Today we are looking at Situation Analysis.

Yesterday we talked about the scenario planning for three planning periods: “right now”, “restart” and “new reality”. Scenario planning will give you four different named scenarios for each period. The remaining planning steps will be performed for each of the scenarios. I know that sounds like a lot of work when you’re already overwhelmed — developing 12 different sets of plans — but there’s likely lots of overlap in plans across scenarios and deeply understanding the differences will be critical to being prepared in this time of very high uncertainty.

In Luke 14 Jesus warns us to understand our situation before charging forward, saying “For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?… Or what king, going out to encounter another king in war, will not sit down first and deliberate whether he is able with ten thousand to meet him who comes against him with twenty thousand?”

In business, Situation Analysis is traditionally captured as a SWOT – strengths, weaknesses, opportunities, and threats. I’ve found it helpful to start with the external environment — opportunities and threats. Two frameworks that can help think through these external factors are six segment analysis (demographic, sociocultural, political/legal, economic, technological, and global) and Porter’s five forces (buyers, suppliers, substitute products, new entrants, and competitors). For each of these eleven sectors or forces you will document the current situation, known trends, and uncertainties and then evaluate how those realities, trends, and uncertainties all translate into opportunities and threats for your business.

The internal environment (strengths and weaknesses) is evaluated within the context of the external environment and relative to current and future competitors. A tool I like to use in developing the internal environment is the Blue Ocean Strategy Canvas.

In their book Blue Ocean Strategy W. Chan Kim and Renée Mauborgne introduced the Strategy Canvas which plots performance of different competitors against key factors upon which the industry currently does or could compete. Creating a Strategy Canvas for your industry will make clear where your organization underperforms or outperforms competitors. Focus on those areas that matter the most to customers and where there’s a significant difference in performance.

The resulting Situation Analysis provides a critical perspective for continuing your planning. As I’ve said before, it’s important to do this 12 times – once for each of the four scenarios in each of the three planning periods.

Top Photo Credit: S O C I A L . C U T