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Advantage By Design

  1. Advantage By Design The Art and Science of Business Difference © 2014 Malcolm Ryder / archestra research
  2. Every business wants to get ahead by being special to its customers. In the open market, the train of thought that goes from Competition to “Advantage” to “Special” runs at over 100mph to Design. But if competitiveness is likely to come from design that way, why aren't more companies already good at it?
  3. How to use this discussion The following discussion compiles notes from frequently recurring direct observations and is purely descriptive. Note that no prescriptive intent should be anticipated, and none is implied. Nonetheless, there could be convincing similarities between these notes and your own observations, or an interesting strength of relevance to issues you are noticing now. The purpose of the discussion is to exhibit a line of thinking that can be used for the purpose of comparisons with other observations, from different sources or different times, that may be under interpretation. There are no citations provided to any particular external works, as they are unnecessary to the purpose. Furthermore, any publication of the content of this discussion is subject to change, without warning, at any time, based on continuing original observations and contributed inputs.
  4. The Buzz Most companies believe that being different is an important weapon in gaining competitive advantage. That belief is borne out by enormous coverage of success stories emphasizing the exceptional prominence and momentum already gained with innovation. But, without a basis of statistical evidence, it seems that most companies discuss getting different from a stance of unfamiliarity, uncertainty, or unlikelihood – which makes the company hold back. Getting past that resistance frequently features studying the moves of “leader” businesses known for great design. Those companies become role models. But what does design actually have to do with business differentiation?
  5. Why be different? Without economic transactions, there is no “business” to talk about. In that sense, it is obvious that the reason any differentiators of a business will count is because they support, cause, or protect transactions. It may very well be that in business competition, conventional economic advantages are necessary but now no longer sufficient to get ahead and stay ahead. Efficiency, quality and price* are still go- to-market strategies, but thanks largely to ubiquitous I.T., they may no longer assure a distinctive presence that generates benefits that are persistently superior to those of competitors. *singled out by colleagues in a discussion group on a popular professional network
  6. The new normal? Instead, many arguments about what now counts the most have focused on Brand; yet others have focused on Agility; and many more have emphasized Foresight. The common denominator of those three appears when we understand the following: Brand depends on what the transaction partner knows; Agility depends on knowing what is going on right now; and Foresight depends on knowing what is coming next. From that point of view, there is little surprise in the ascendancy and primacy of the so-called "knowledge-based economy" - which at a business-level of difference specifically refers to: - the reliance on knowledge... - to create the highest priorities in decision-making... - about transactions that must have ... - the highest worth to the provider and/or the receiver.
  7. What’s new, or why not… The new economy turns sources of knowledge into critical success factors of strategic advantage. Given the importance, and the consensus that the knowledge economy started over ten years ago, we might generally assume that by now business would already be pretty experienced in leveraging such sources. Note: easier said than done. For example, as readily available sources, Science and Art have numerous things in common. Most notably, both of them aggressively explore, discover, model, and express knowledge. Yet in general, businesses are not seen to have adequate experience or practice with them except as atypical tools. In the management world, there is a stubborn presumption that only businesses in certain specialties should use them, or will know how to use them effectively, or can “afford” to use them together.
  8. Getting Different The knowledge limitation represents a barrier or threshold behind which many a business is prevented from accomplishing the differentiation that could propel it ahead of its competition.
  9. Problem states A well-known and highly adopted source of knowledge is the contingent workforce of expertise that provides teaching, training and consulting to businesses. In that workforce, many parties promote the idea that differentiation now requires creative problem solving and innovative outcomes, a position that creates demand for hybrid approaches to formulating business production. The emphasis in demand there is on "hybrid“ – mainly because legacy and incumbent approaches that are not hybrids have not had the results needed for the way the business now wants to compete. Purely scientific, or purely artistic, have been inconclusive, expensive, disappointing, or some mix of those deficiencies.
  10. Solution Ideas We've noted that science and art are a natural influence on knowledge. Additionally important is the huge overlap in their influence: both drive serious efforts in exploration, discovery, modeling and expression. That suggests a compelling opportunity to recruit them as elements of a hybrid production. Yet some difference between them is so pronounced that reconciling them appears only relatively recently as a business competency, enabled mainly through special facilitation… Given that "operations" are what actually defines an organization as a business, perhaps the underlying nature of the "difference" and its reconciliation is about predisposition.
  11. Options It seems safe to say that Science and Art have different priorities when it comes to purpose. Oversimplified, the conventional view is that science provides control, and art provides inventiveness. More specifically, there is a difference in operational discipline. The scientific method, famously (if somewhat mythically) prescriptive, lends itself to maximum accountability of the path taken to any discovery having acknowledged worth. The artistic method, famously (if somewhat mythically) non- prescriptive, lends itself to maximum leniency in the composition of elements having expressed value.
  12. Inhibitions Among much of the business management community, the disparity between "accountability for worth" and “leniency for value" is reflected as anxiety. Anxiety reflects undesirable risk. And so, the deep question is, what risk has such high priority that its undesirable aspects suppress interest in leveraging the natural relationship (overlap) between science and art, to exploit its influence on knowledge?
  13. Danger zone: competition One kind of risk, putting it bluntly, is losing while others are winning. This becomes a competitive anxiety amplified by being either unable (or unwilling) to identify or take advantage of gains produced during efforts resulting in a loss. The threat is that there may not be an opportunity to adequately recover from a loss. The feared damage is that at minimum, status and reputation suffer, reducing attractiveness and influence.
  14. Danger zone: production Another kind of risk is incurring penalties from failure to meet agreements. This becomes a production anxiety largely stemming from uncertainty about what controls must exist, at what level of intensity, in a chosen environment of action. The threat is that available resources might be overly committed to something that is insufficient and, as it turns out, must change. The feared damage is that at the least, change is distressing. Meanwhile, sunk costs and opportunity costs both take a hit.
  15. Mitigation Notably, the disposition and capability to harvest gains from loss is one of the essential lessons to be learned from artists. And very notably, scientists continually focus on process quality control within an explicit scope of significant impact. Given those leads, it is not difficult to imagine the following "hybrid": business managers, if allowed, would enjoy scientifically employing artistic competency. That amounts to an interesting inversion. To a results-oriented business, science normally represents predictability of worth, and art represents creativity in making discoveries having value. But in order to minimize risks, managers would pursue the value of science, by using its process to exploit the worth of art.
  16. Resistance Many businesses consider that combo effort to be "herding the cats" and reject it as being likely wasteful or inconclusive. That predisposition cannot be surprising from any organization that either has not tried, or has already tried and failed. But the actual distance from acceptance of the hybrid approach is far less due to skepticism about whether it can work, and far more due to a belief that it is inappropriate to the expectations externally imposed on the business.
  17. Compatibility Obviously, operational propriety must be taken completely seriously within the business. That said, the fact is that large sectors of the economy run on the efforts of companies that essentially get paid to be creative, rather than those companies merely "using creativity" to reinforce the chance of getting paid for some other reason. The difference in mindset is very substantial. And the methods used by successful companies that get paid to be creative are not mysteries, nor unproven, nor (excepting massive exploitations of the evolving internet) even a recent breakthrough or new idea. Ironically, while many creative efforts have not succeeded as businesses, successful creative businesses have long been celebrated and studied far more than most other businesses. They’re just very difficult to copy.
  18. Pay to play For the most part, funding is the principal determinant of whether exploratory research goes into controlled solution development. If it goes in, products may be generated from solutions. This includes services, which are simply, but importantly, a type of product. The punchline is that the biggest barrier to successful adoption of creatively differentiated production is not competency or production technique; it is lack of investment in an appropriate culture. Acknowledging that barrier can lead managers to consider the problem of how to motivate growth of a relevant culture for creative production.
  19. What to play The prevailing theory about getting that growth underway is simple. It says that since transactions constitute the business, and since "customers" now dominantly control the occurrence of transactions, then the central tenet of business opportunity is to discover and address the customers' idea of the customers' interests. That tenet becomes the organizing “top-down” principle aligning means, motives and opportunities that get recognized in operations. Means, motives and opportunities are each allowed variability for the purpose of discovering a collective alignment – an alignment that is "good enough" and "sustainable enough“ for its scale and scope of effort to be “worthwhile” to the business.
  20. How to play In effect, at the level of "Business process", the customer-centricity principle puts the concepts of "viability" and "scale" front and center -- ahead of cost, standardization, and "maturity". But how does this turn into superior competitive advantage?
  21. Who’s the boss The customer profile has key factors that are the main indicators for advantage. Scale translates into the availability and accessibility that customers want on demand. Viability translates into a perceived reliability that the offering is sufficiently relevant to the customer's need. Together the viability and scale must allow the customer to easily obtain an offering that gives the customer an experience they prefer to alternatives. That is, the business challenge of being differentiated is to be met within the scope of being "preferred on demand".
  22. Practice over Product Naturally, that challenge varies along with the nature and disposition of the particular candidate customer. Operationally, the challenge is the need to fit the offering to the customer's ability to generate the preferred benefits. There is nothing new about this challenge at all: it is, exactly, the fundamental purpose of Design. That purpose of design is the reason why design occurs in so many aspects of production. To create a fit with the profile of a target prospective customer, all aspects of production and provision – across means, motives and opportunities – can be subject to exploration for discovering viable configurations of their alignment at necessary business scale.
  23. Who plays However, in business management, the "customer" is simply the receiving party of benefits in a transaction, and this customer may actually be a client, a partner, or a supplier. Meanwhile, the production system may employ design in many ways across different elements of the delivery system, for example showing up as organizations, architecture, process, communications, product, or other contributors to be aligned. Result: customer types and production systems exist in a many-to- many relationship. Differentiation requires choosing and navigating the variety of associations and connections among them, in an arrangement that distinguishes the presence of the business from other businesses.
  24. Business logic Despite the potential variations or complexity of combining customer types and production systems, one generic outline of efforts does stand out persistently for all “for-profit” business competitors. If the purpose of the business is to make money: - make money by making transactions - make transactions by making customers - make customers by making “preferability” - make preferability by making relevance and convenience That amounts to a framework of requirements, presenting “problems” that need to be solved in specific ways for each given business. Some problems may be easy to solve; others, difficult. The solutions need to be aligned with each other.
  25. Design Logic By definition, good solutions fit a response to the need at hand. The “problem” of determining the best fit is the reason why the final offering is called a “solution” for the Provider. Some offerings, inevitably, are going to be better than others, and one competitive goal of design is to generate not just an acceptable solution but the better solution. This often comes with the assumption that an unprecedented offering will be the best solution. However, the responsibility of design is not to force innovation. And innovation itself is not achieved exclusively through design. Neither is differentiation an effect available only through innovation. Rather, there are many opportunities for design to be valuable. One of the most desirable values of design is the chance to find a solution in a situation where none before has been found or attractive.
  26. Market Logic A generic outline of being competitively advantaged based on differentiation focuses on practical production optimization: - specific: define difference in terms of the impact on a customer's intent - exceptional: pursue the scope of impact that is sustainable and unusual at scale - obtainable: identify production values for generating that scope and scale - selective: promote conditions where available value (generated by design) has high worth Optimization challenges are ones that clearly lend themselves to the efforts of design, which may discover, align and fit them to the business need, for a meaningful “window of opportunity” (timespan).
  27. End Note The value of design – meaning, the importance of the difference it makes – can be to generate a fit to a need that is exceptional in its demands on capability of production and/or in its impact (when fulfilled) as a catalyst of customer benefits. That does not mean design automatically generates something unprecedented, anywhere. The essence of design’s value is that the fit created by design is highly appropriate to the situation hosting the need. A need for something exceptional may require something new. “Differentiating the business” makes sense to do primarily when the difference also means being exceptional and the exception creates privileged business opportunity. Actionable opportunities are the basic business need. Exploiting a privileged opportunity is the objective of the differentiation.
  28. © 2014 Malcolm Ryder / archestra research