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Collaborative Analytics and Insights: Uniting Strategy with Organizational Intelligence to Anticipate Industry Change

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My keynote presentation to the Business Forecasting 2014 - Predictive Intelligence Summit in San Francisco Monday 18 August 2014.

My keynote presentation to the Business Forecasting 2014 - Predictive Intelligence Summit in San Francisco Monday 18 August 2014.

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  • 1. Collaborative Analytics & Insights: Uniting Strategy with Organizational Intelligence to Anticipate Industry Change Business Forecasting 2014 – Predictive Intelligence Summit San Francisco USA Monday 18 August 2014 Arik Johnson Founder & Chairman, Aurora WDC Managing Director, Center for Organizational Reconnaissance
  • 2. Stochasm The difference between what you think you know and what you actually know. 3
  • 3. The Impact of the Highly Improbable The human mind suffers from three ailments as it comes into contact with history, called the triplet of opacity: 1.the illusion of understanding, or how everyone thinks they know what is going on in a world that is more complicated (or random) than they realize; 2.the retrospective distortion, or how we can assess matters only after the fact, as if they were in a rearview mirror (history seems clearer and more organized in history books than in empirical reality); and, 3.the overvaluation of factual information and the handicap of authoritative or learned people, particularly when they create categories – or "Platonify." THE BLACK SWAN
  • 4. U.S. Intelligence Community Failed to Evolve Unexpected new threats from non-traditional enemies like al Qaeda emerged on the geopolitical stage in the vacuum of America's return to international economic, political and cultural hegemony after the end of the Cold War.
  • 5. The Unstoppable Power of Leaderless Organizations Although spiders and starfish may look alike, starfish have a miraculous quality to them. Cut off the leg of a spider, and you have a seven-legged creature on your hands; cut off its head and you have a dead spider. But cut off the arm of a starfish and it will grow a new one, and the severed arm can grow an entirely new body. Starfish can achieve this feat because, unlike spiders, they are decentralized; every major organ is replicated across each arm. But starfish don’t just exist in the animal kingdom. Starfish organizations are changing the rules of strategy and competition and are organized on very different principles than we are used to seeing in traditional organizations. Spider organizations are centralized and built around org charts; on the other hand, Starfish organizations tend to organize around a shared worldview or ideology. And the Internet has helped them flourish. THE STARFISH & THE SPIDER
  • 6. Unsound Strategy, Policy and Decisions are the Product of an Intelligence Agenda Dictated from Above
  • 7. Marshall McLuhan “I don’t know who discovered water, but it wasn’t a fish.” Strategy is concerned with what the corporation wants to do in the world. Intelligence is focused on what the world wants next.
  • 8. Strategy should be a Response to Intelligence Not the other way around…
  • 9. Three Key Business Trends Driving Intelligence Evolution Human Capital & Enterprise Collaboration Everyone in the Firm becomes a Virtual Member of the Intelligence Apparatus, Better Engagement by Rank & File, Shared Visibility of Issues & Actions Corporate Governance & Risk Oversight Board-level Priority Ensuring Reliability of Management’s Earnings Forecast & Assessing Risks to Status Quo Business Model Disruption & Value Innovation Predicting the Outcome of Competitive Battles by Anticipating Changes in Product/Strategy Dynamics
  • 10. Intelligence 2.0 The Era of Asymmetric Interpretation • Intelligence 1.0 was about acquiring short-lived information advantages (Competitive Advantage through Asymmetries of Information), though fleeting and risky to the firm's reputation and ethics. • The transition is now complete to an open source world of "info-glut" where assymetric information gaps are increasingly difficult to obtain and maintain and interpretation becomes far more important as everyone looks at the same corpus of data but sees something different. • Web 2.0 and Enterprise 2.0 pinpoint a shift in organizational culture – the “Facebooking” of the workforce means everyone in the enterprise can become a casually-engaged virtual member of the intelligence apparatus and should be instructed how to help most productively. • Intelligence will extend into aspects of organizational culture and workforce engagement – which I differentiate from full-time intelligence staff as “reconnaissance” – but centralized, specialist intelligence staff will persist and embed themselves into the domains of organizational problem-solving.
  • 11. Intelligence 2.0 Asymmetric Interpretation Depends on Both Decisive & Incisive Sensing Incisive Scanning for Trends, there may be no Decision made Historical Patterns & Anomalies Implications for the Reader Bottom-Up Exposition Driven by Trends Product is Observation Emergent & Skeptical Open Source Decisive Frame of Reference is the Decision Compares Options & Outcomes Recommendations & Trust Top-Down Imposition Driven by Issues Product is Decision/Action Factual & Hypothetical Confidential & Proprietary
  • 12. 16 Dr. Craig S. Fleisher
  • 13. Key Intelligence Topics (KITs) Process of Interactive Dialog with Decision-Makers through KIT Interviews Consists of 3 Protocols w/Subtle Differences:  Strategic Decisions/Issues  Key Marketplace Players  Early-Warning Topics
  • 14. KITs – Strategic Issues  Strategic Investment Decisions: Identify and assess changes in the competitive environment, possible future investments, including alliances, acquisitions, etc.  Should we expand our current production capacity or build new capacity with a more cost-effective manufacturing process?  What plans and actions must we take to maintain (our) technological competitiveness as compared with competitive alternatives?  New Product Development and New Market Launch: Assessment of leading competitors and the status of competing technologies. How and when will the competitors respond and how could they affect our plans?  Sales & Marketing Strategy as Positioning in the industry.  Protection of IP and proprietary information and technology: Competitors efforts to acquire or undermine it, and are there others interested in it?  Provide advice for developing the company’s ongoing strategic plan by assessing the role of risks and opportunities in achieving our business goals.  Globalization & Outsourcing in the Industry: How/with whom should we proceed?  International Market Development: Assess the current competitive situation and describe the most likely future situational scenarios.
  • 15. KITs – Key Players  Context-specific Company & Market Profile Assessments of our competitors, including strategic plans, competitive strategies, financial & market performance, organization & key personnel, R&D, operations, sales & marketing, etc.  Identify Emerging Competitors, particularly those coming from different industries.  Describe & Assess Current & Future Competitive Environment, including: customers and competitors; markets and suppliers; production and product technologies; political and environmental; and the industry’s structure, including changes and trends.  New Customers, their changing needs and future interests: What are they and how are our competitors trying to satisfy them?  Identify and assess new industry/market players, including: suppliers, distributors, customers and/or competitors, that are considering entry into our business.  New Technology Development: Who are they and what are their plans and strategies for competing in our industry?  Marketshare and Historical Growth Data, including that of our competitors for comparison.  Management support for regulatory and environmental activities for decision making.  Industry, financial & customer community views, attitudes and perceptions regarding the Positioning or Value of our brand, products and services.  Perceptions by Financial & Investment Community of our Business & Industry
  • 16. KITs – Early Warning  Potential Areas for Disruptive Technological Breakthrough that could dramatically affect our current and future competitiveness, positively or negatively.  Technological Process Developments affecting either production capabilities, costs or product development, and their uses by competitors and others.  Performance of Key Suppliers - financial health, cost & quality issues, potential acquisition or alliances.  Potential for Disruption in Supply Chain and Change in Industry Procurement Practices.  Change in Customer & Competitors Perceptions of our company, products and services.  Companies and/or Combinations of Companies, considering possible entry into our business or markets.  Changes in international political, social, economic, environmental or regulatory situations that could effect our competitiveness.  Regulatory Issues: near-term changes and deviations in long-term trends; legislative changes that could impact current regulatory status quo.  Intelligence on Alliances, Acquisitions, and Divestitures among our Competitors, Customers and Suppliers: Understanding the forces causing them and purposes of each deal.
  • 17. Success Breeds Complacency “It is a classic conundrum for business titans: How much money and attention should be focused on a new, but growing, operation that is far less profitable than the core business?” - Prof. Clayton Christensen, The Innovator's Dilemma
  • 18. Disruptive Innovation Theory Sustaining Innovations Better Products Brought to Established Markets Low-End Disruptions Target Overshot Customers with a Lower Cost Business Model New-Market Disruption Compete Against Nonconsumption Difference Performance Measure Time Nonconsumers or Nonconsuming Contexts Performance
  • 19. Customer Demand & Signals of Change 1. Non-Market Contexts: External Forces (Government, Economics, etc.) Increasing or Decreasing Barriers to Innovation 2. Undershot Consumers: Opportunities for Up-Market Sustaining Innovations 3. Overshot Consumers: Opportunities for Low-End Disruption, Shifting Profits by Specialist Displacements (Modularity) and the Emergence of Rules 4. Non-Consumers: Opportunities for New Market Disruptive Growth Established Companies almost always Lose to Disruptive Innovators
  • 20. Intelligence 2.0 Engages the Workforce in Collaborative Sensing to Anticipate and Act on Industry Change Signals of Change Strategic Choices Influencing Success Likely Outcome of Competitive Battles
  • 21. Managers caught in this kind of competition almost universally say they dislike it and wish they could find a better alternative. They often know instinctively that innovation is the only way they can break free from the pack. But they simply don’t know where to begin. Chan Kim and Renee Mauborgne Competing head-to-head can be cutthroat especially when markets are flat or growing slowly.
  • 22. Collaborative Insights Team
  • 23. 27 Decision / Selection Map is used to identify: •Customer needs/wants •Which competitor represents the most serious threats now and potentially in the future •Which strengths should be emphasized •Which of our weaknesses will competitors exploit •What new needs/wants should we try to create Probability / Impact Grid is used to: •Ensure goals are aligned to those of key stakeholders •Highlight those competitor moves that the company should take action to counter and monitor •Create group consensus on the potential contribution that this planning effort would have, and the likelihood that we could make it happen Why Wargames?
  • 24. Wargame Example - Strategic Ch23. 28 Improve ROI of our R&D Determined our risk profile was substantially more conservative than our competitors, and that this was unexploitable. Consolidated R&D under the corporate umbrella, ending internal conflict for resources and reducing inefficiencies. Group consensus on using consistent measures to track market opportunities and Deliverables Purpose Industry Consumer Products Company size Fortune 500 Planning level Strategic Wargame Purpose Company was looking to increase throughput from their R&D unit, which was not keeping pace with competitors on launching products. Wargame Outcome The wargame showed that it wasn’t just one problem that was slowing things down. As expected, the company’s risk profile played a part. What also became apparent was that R&D had no clear reporting format and ended up working on many projects that were either not likely to go to market, or were pet projects with little or no market opportunities. Understanding who their true stakeholders were, the BUs, was a key learning that lead to change.
  • 25. Wargame Example - Tactical Ch23. 29 Industry Pharma/Biotech Company size Fortune 500 Planning level Tactical Wargame Purpose Company was launching a product with new MOA into a crowded market. They were looking for ways to counter messaging from existing competitors before they launched. They also wanted projections on how long it would take to capture significant share. Wargame Outcome What the game showed was that it was unlikely that their new product was going to displace any of the existing products, given the safety profile and demonstrated efficacy. They were unwilling to play with price too much, and decided to delay launch. The competitor that “won” the game had production issues in the real world, and this lead to the company purchasing the “winning” product at a bargain. Prepare for launch Determined customer was more price sensitive than previously thought. Wargame “opened eyes” about home team being significantly behind competitors in terms of safety and efficacy. EWI tracking set up because of the game allowed them to respond quickly when chief Purpose Deliverables
  • 26. The Market Team took assessment of their more significant needs, by Customer group, and decided which were Drivers (more is better), and which were Satisifers. The critical point here is that when you over-deliver on a particular need or want, you face diminishing returns and you don’t have the resources to address those issues that the customer has validated as Drivers. They then ranked each of the Competitors on how well they meet these needs today, from the Customer’s perspective. The Competitor’s job was to move the needle on these performance metrics. The Market Team took assessment of their more significant needs, by Customer group, and decided which were Drivers (more is better), and which were Satisifers. The critical point here is that when you over-deliver on a particular need or want, you face diminishing returns and you don’t have the resources to address those issues that the customer has validated as Drivers. They then ranked each of the Competitors on how well they meet these needs today, from the Customer’s perspective. The Competitor’s job was to move the needle on these performance metrics. Unsatisf’d Satisfied Happy Need or Want Customer Groups Comp 1 2 3 4 5 6 7 8 9 10 11 12 Home                         Cost Institutional R1             Corporate R2              Post-secondary R3                         Home                   Portfolio Profile Finance heads R1                 Actuaries R2                  R3                       Benefit Admins Home                         Ease of Client Uptake / Application Processors R1         Regulators R2                  Service Agents R3                         Home                     Convenience Plan Members R1                 Service Agents R2              R3                         Home                         Marketing Plan members R1                   Retire admins R2                    R3                         Home                 Services / Support Beneficiaries R1                 Service agents R2                  R3                         After Action Sample: Using a Decision / Selection Map 30 This critical tool helps the competitor teams clarify the most important needs and wants of their various customers groups. This critical tool helps the competitor teams clarify the most important needs and wants of their various customers groups. 30
  • 27. After Action Sample: Key Issues and Outcomes Key Issue Competitor Will… Our Response Defend lack of customer service data Competitors message this issue to  mitigate launch • We will set up feedback loop for representatives and customer  account team to gauge impact of lack of time-series data at  launch; share best practices on how to handle • Develop rep response indicating that several other recent product  launches did not have time-series data at launch Messaging • Tout their longevity in the product  class. • Claim our product is “too radical,”  untested, barely passing  regulatory review • 5 successful beta clients • Rivals products have had negative returns for 5 years cumulative  • Educate on what is required and how to manage • Can utilize heavier social media communication, particularly via  our large FaceBook and Twitter presence Competitor Increase in Ad Spend We expect that the incumbents will  increase their spend in an effort to  lock up key institutional clients • Leverage consumer demand for new retirement options • Maximize the impact of the news event around the availability of a  new class of product Feet on the Ground and Selling We expect at approval that there  may be some financial options  data that we won’t be permissible  in promotion.   • Right-size the new prods team to a competitive size  • Via the Blue Guide can we share product data that is still under  review • Ability to communicate regularly with speakers via intel network  wiki on relevant product data The issues highlighted below were derived from our Contribution / Feasibility Grid exercise.The issues highlighted below were derived from our Contribution / Feasibility Grid exercise. 31
  • 28. Contribution / Feasibility Grid Example • The following 2 slides show an example of how we begin  the Planning Round, the most important component of a  wargame. • Everyone is brought back to the main room, where as a  plenary group, we discuss the various competitor moves,  and more importantly, the actions that you should take to  proactively disrupt them. • Once the group has reached consensus on what these  scenarios are, the Sponsors meet to select those that  they feel are most impactful and the teams head back out  to the break-out rooms to develop Action or Contingency  Plans to deal with them.
  • 29. Scenario # Scenario Title Feasibility Contribution 1 Disruptive low cost systems for WHO become a catalyst 75 2 2 Chief competitor drops price significantly ahead of schedule 25 3 3 Development of non-invasive solution 50 2 4 ABC seeks additional indication 25 4 5 FDA certification lost for plant in Ireland 75 1 6 Black box warning issued for competitor’s product in this therapy 50 2 7 The Street expects us to gain additional indication within 3 yrs and we deliver 25 6 8 We convince customers that we are a front-line therapy 10 3 9 ABCs looses litigation to XYZ 50 3 10 Healthcare reform makes price more important than function impacting our products 80 5 11 ABC acquires XYZ 10 3 12 ABC partners with DEF for worldwide distribution 20 2 13 Competitor locks in large healthcare network essentially freezing us out 50 ? 14 DEF acquires local India company 70 1 Contribution / Feasibility Grid The above table has been truncated and sanitized to provide an example of what the exercise might look like. Those that are highlighted were selected for planning activities.
  • 30. Feasibility Contribution Code 0 1 2 3 4 5 6 7 13 31 9 8 23 33b 22 6 11 12 24 25 27 28 3 19 18 45 20 1 5 2 4a 29 25% 50% 100% 32 33a 16 1715 21 30 34 26 ? 14a 14b 10b 10a The Grid
  • 31. Related Techniques
  • 32. RECON  RISK  EFFICIENCY  CUSTOMERS  OUTLOOK  NOVELTY Intelligence Should Concentrate on Five Domains of Business Problem Solving
  • 33. RISK Ensuring against risk to the core business is critical to making sure there is time for investments in new growth to start paying off. Maintaining a positive status quo by protecting the core is the chief role for managers in every business, with one caveat: good businesses can often be the foremost enemy of great businesses. Cannibalization of a company’s current market share should not exclude innovative ideas that might be foreign to the corporate immune system.
  • 34. EFFICIENCY The ruthless cutting away of unnecessary costs in the value chain is essential for a new market innovation strategy to work. Create or build up that which is not yet good enough and diminish or destroy that which is unnecessary. Most of the unnecessary elements in the incumbent value chain have long-since outlived their usefulness or were never very important to customers in the first place.
  • 35. CUSTOMERS Companies become too dependent on their best customers’ input for signals about how they should innovate, but new forms of competition usually present themselves at the current consumption market. The day your customers begin complaining about how complicated or expensive or difficult your product is, you should ask, “why was it good enough for them yesterday” and who has offered an alternative?
  • 36. OUTLOOK Traditional market segmentation based on demographic, geographic or sociographic data are fleeting at best and illusory at worst and many decisions have been based on flawed definitions of the fastest growing markets. Defining the market by the “jobs” customers wish to accomplish is more helpful in defining fast growing target markets. Focus groups are often the worst mechanism of market testing.
  • 37. NOVELTY Differentiation is mandatory for all organizations to master and new market or “novel” solutions to customer problems are often ecosystems of providers working together to produce sought- after value. Companies must build a business model designed to test breakthroughs in the market more regularly but kill off those that do not work early on, so support and development resources can be allocated to those that do.
  • 38. Feel free to ask for help:  Email: Arik.Johnson@AuroraWDC.com  Phone: +1 (608) 630-4242  Twitter: @ArikJohnson  LinkedIn: http://linkedin.com/in/ArikJohnson  Skype: ArikJohnson  Web: http://IntelCollab.com & http://AuroraWDC.com What’s Next? Leadership to Act is Based on Confidence Intelligence Combats the Paralysis that Accompanies Uncertainty Benchmark Your Readiness http://go.aurorawdc.com/benchmark