Development "vs." sales dilemma in lean startup methodology

The lean startup approach forces adherents to focus on development and sales in new product / company development, which creates a hen and egg issue: you need to do both, developing and sales. One issue with developing the perfect product is that nobody (or too few for the price and development cost) will want to buy it - hence the requirement to go out and find customers (and learn what they have to say, how they want it changed and so on).

However, if you go out early with a crappy product / design, it may hurt you in terms of reputation esp. if you get a wide exposure and are 'burnt'. So you have to be really cautious in finding mainly those that are interested and not losing too many that will not like what you created.

It's an iterative process where you follow sales and tech development routes at the same time. That is likely to be draining your attention and resources. Basically you have to focus on two things at the same time. Impossible if you do not have the people to do the tasks and processes to interface them properly.

What is organization design? - Nicolay Worren

Blog post by Nicolay Worren on What is organization design?

“Organization design” involves the creation of roles, processes and structures to ensure that the organization’s goals can be realized.

Some people associate organization design with the mechanical arrangement of positions and reporting lines on the organization chart. It is certainly true that organizational designers also need to define the vertical structure, including reporting lines. However, organization design is much more than “boxology”. Organization design problems are often some of the hardest problems that leaders face. The decisions they make with regard to formal structure, roles and processes directly impact the jobs and careers of employees – and the ability of the firm to realize its strategic objectives. ...

For more see here.

Paper by Simon Robinson on Complexity, innovation and history of science

This paper of +Simon Robinson is really interesting as it points at the connections between the history / philosophy of science, information ecology and evolution, a complexity perspective, organisational worldviews and the need for complexity reduction in business. 

Personally, I take a Machian / Jamesian monist, pragmatist resp. radical empiricist position, which stresses the importance of considering the partial, evolutionary character of knowledge, which grows over time based on observation and inclusion of facts into thought systems, that happen to influence what is seen and collected as further observations. 

This matters also for organizations in general and businesses in particular that are build around values and cultures that define customer needs (problems), solutions (products), and approaches to identify and validate these through the lenses of market research, accounting / management information systems as well as softer foresight tools.

Institutional and organisational cultural systems are hard to change because underlying worldviews and information filters in internal and external data collection and analysis systems are strongly intertwined and reinfoce each other, creating a shared illusion which may be in alignment with market / stakeholders 'demand' - or not.

g+ keyword links: 
#complexity #philosophy of science #information ecology #innovation #strategy #foresight #organisational culture #worldviews

Models are dangerous!

We need to be aware of what we are doing when assigning probabilities - most people somehow seem to tend to forget that:

• they are mistaking the model for reality, and even worse
• they are forgetting about the reality check of the model in suitable intervals
• however, a bad model may be worse than no model at all.

Of course you can assign probabilities to your  guesses about future developments and use scenarios and decisions trees. However, that assumes we know the future states of the world in sufficient detail to make relative or absolute judgement calls about their likelihood.


Now, as Knight, Popper (and based on him Soros), and Taleb argue, the future is open and we cannot know it 'completely' enough to rely on our models.


Walking along river Danube we (may) feel confirmed about our (locally correct) belief in white swans by every observation of another white swan around the next bend - which we turn into a belief on the existence of only white swans - until we meet a black swan from Australia. In this, there is an epistemic problem that we cannot extrapolate from a limited observation / induction base to a 'totality' of states of the world.


We often cannot know the future 'completely' or sufficiently to make the assumptions we are psychologically and institutionally 'required' to make, because people (esp. in large and political organizations, without vision and / or strong leaders) cannot remain confident in the face of having to admit to (brutal epistemic) uncertainty.


Of course we can adapt our (inferred) states of the world and probabilities as we go along and learn, but that requires changing the model on the fly - however, what is your justification for the model if you have to update it frequently (in the large, political, visionless organizations above)?


If we are dealing with 'closed', simple systems that follow (or can be approximated by) linear models a probability approach is fine, we can assign probabilities and measure risks. If things get more complex and complicated we run into the epistemic limits described above and we face uncertainty and cannot assign probabilities anymore - as Knight argued.


Here is alink to Knight's book: Risk, Uncertainty and Profit

Strategy and Finance on Moving Landscapes

When implementing a new strategy, which time horizon do you set and how much negative cash flow are you prepared to accept until the realization of the outcome? 

That is how patient are 'investors' and how deep are their pockets (resp. how good management at selling their story).

In terms of time horizons and deep pockets I like the concept of fitness landscapes (which has probably not been interpreted 'right' in its original biological context), where organizations and strategies have to move through hills and valleys of relative fitness (another concept with some issues), respectively have to move on a landscape that is moving itself.

Nevertheless, as a metaphor with quite some abstract and mathematical apparatus associated it seems useful. For instance, one could argue that non-monetary (that is hard to financially value or associated with immediate financial returns) factors can be brought into such a conceptualization impacting on 'fitness' of an organization or strategy (composed of financial and non-financial factors).

Growing niches for products / services, which can build on their accumulated economics of scale and scope nicely fit into this conceptualization as well.

Strategy, Intuition and Analysis

I believe that the strategy toolbox offers a useful set of tools to order and frame thinking about strategic issues. So the tools are limited, if one or a few are taken as "the" approach, especially if used without understanding the tacit knowledge element they can convey. 

One of these elements should be to think differently, outside the usual box - to develop risk scenarios and to envisage new approaches to or domains of business. Otherwise, if every strategist thinks BCG and 5 forces most companies will end up doing roughly the same in better or worse ways. 

Thus, what matters is the teachable but difficult to formalize way of thinking of a strategist, which means that economics, politics, history, philosophy as well as psychology and sociology as well as math, statistics, OR, and natural science (physics, chemistry, biology) can offer relevant models and mind sets to engage in strategy. For instance, I liked history a lot and learned I believe quite something about thinking in developments and scenarios as much as I learned about macro systems and variation from evolutionary theory. 

Knowledge about pertinent business domains is obviously useful - however, only up to the point that it does not blind the strategist - but how do you discover the cut-off point?! - Let's assume it is the mid to end 70s: Is the young guy in front of you talking about ... say computers on every desk and how to place them there a wacky lunatic or visionary business man - and if he is one of the two for you ... how big is the divide between the two? 

For me this points to the importance of the combination of creativity and intuition with formalized research and analysis, the specific tools are secondary, but what they can create in 'prepared mind' matters.

How can strategy models be developed further on the academic level?

As argued in a discussion on the limitations of strategy models, I would seek to extend strategy concepts, models, or frameworks in two areas to cope with the shortcomings of strategic decision making: 

a) by researching and formulating the psychological of strategy to deal with framing issues, filtering and selection of information that is used in deriving and 'updating', resp. challenging strategy conceptions in firms.

and

b) it still remains an issue why relevant information is not 'used' by an organization, even if individuals take account of information.

Thus, the psychological perspective needs be complemented by a organizational perspective on how the different views of actors are aggregated into strategic decisions and actions on the relevant organizational levels: How do organizations weigh the different pieces of information and 'compute' the strategy / action result(s)?

What is your opinion on this approach?

A discussion I have started in Strategy Professionals Group on Linkedin:

Towards improved strategy concepts

Where and how do we need to beyond existing models of strategy? 

What are the issues that need to be tackled by 'improved' strategy models? 

How should strategy models address these issues?

There seems to be a certain need to go beyond existing strategy concepts based on an increasingly complex and changing competitive landscape. This requirement does not result only from a thirst for novelty and marketing, but rather an inability of existing approaches to deal with today's situation. However, how these models should look like, what they should address in terms of structural features and on which level of granularity they should be constructed remains unclear.


As argued in the discussion existing strategy models, I would look into issues such as:
a) Why are certain players (not) seen as potential competitors or entrants? 

b) Why are developments not perceived? 

c) How are current and potential markets 'defined'? 
How are alternatives perceived, framed and 'sold'?
d) What is filtered out and discounted in strategic decisions and why?
How can the above view and questions be operationalized from your point of view? Or: Why might they be wrong?

A discussion I have started in Strategy Professionals Group on Linkedin:

Research Interests: Schumpeter and Strategy

Presently, a rapid pace of technolgical, business and social changes begs the question in how far "creative destruction" by entrepreneurs favors the emeregnce of new companies versus established old and often large scale organizations.
The reason to connect strategy and Schumpeter is that industry development seems to involve a shift from entrepreneurial small companies to large scale bureaucratic ones, that produce innovations in a mechanized, routinized fashion. This shift in technological characteristics and organization size requires a switch between different tools and methods of strategy formulation, planning and implementation if companies go through the transition. Companies that are in different phases on this path or are faced with these different environments need different market entry (or defense) and innovation strategies. Companies that operate under different conditions need different tools and approaches that reflect their needs, obviously.

Entrepreneurs need different strategies than established companies. Likewise they have different sets of resources and capabilities. However both may posses what the other needs such that they could learn from one another.

Schumpeter has described the entrepreneurial type of company in his "Theory of Economic Development", while he the second one is depicted in "Capistalism, Socialism and Democracy". The later description is influenced by observations on industry concentration in the US running up to and large scale research projects during WWII.

In the 1980s, Foster and Kaplan's book on the Attacker's Advantage put small innovative companies back onto the screen, management literature-wise and academically, after increasing limits to growth had been experienced by established large companies in the 1960s and 1970s.

Nowadays, the creative and innovative virtues of young companies are widely acknowledged. There are calls for organizational giants to learn to dance (like these small companies). Successful change and rejuvenation programs such as GE's six sigma initiative have been implemented. However, the question is whether the emergence and importance of small companies, high speeds of technological change and associated fluid organizational forms are there to stay at relatively elevated levels - which also involve cost in terms of social strain and coordination cost. Alternatively, one can ask whether there will be a (relative) shift back to more routinized, bureaucratic, large-scale organization regimes, when todays start-ups grow into large organizations. These then explore the incremental possibilities of radical breakthrough innovations that have been discovered and developed until a certain point in time (which we might already have passed unwittingly). This issue is about the relative importance of radical and incremental, small and large scale organizations and fluid or stable patterns of development, not complete either-or scenarios.

These questions have important practical implications in terms of managing organizations and technologies and for strategy formulation and implementation.

Research Interests: Strategy and History

Laws of strategy and creativity? Are there laws of strategy, of strategic action in reaching defined goals? If so how does this reconcile with the notion of strategy as a creative process, in which individuals creatively recombine existing elements and discover new approaches to attainig goals and solving problems. Best suited seems an evolutionary perpecitive / framework that allows for patterns and laws of development and creative variation.

Laws of history - if processes of social development follow evolutionary principles, they should follow some kind of (possibly abstract) laws of development which can be translated into a perspective of laws of historical development. If these exist they can be linked to and used for the understanding of social processes around us.