Outcome Centricity: The next frontier for agile organizations (Part XV)

Note: This is Part XV of the series on Outcome Centricity, focusing on outcome-centric culture. You'll find the first part of the series here, the second part here, the third part here, the fourth part here, the fifth part here, the sixth part here, the seventh part here, the eigth part here, the ninth part here, the tenth part here, the eleventh part here, the twelth part here, the thirteenth part here and the fourteenth part here.

I have reflected on a variety of different aspects and dimensions of outcome-centric organizations in the past. But for some reason or another I have not yet explicitly discussed one of the core dimensions: outcome-centric culture.

What are the hallmarks of an outcome-centric corporate culture? Or put differently: How do you recognize one when you see one? What are the cultural principles and practices which underpin outcome-centric organizations?

In what follows I'll describe the five hallmarks of outcome-centric cultures. As you can see below, they can be schematically mapped to the different parts of the "success formula" of organizations which shift from output to outcomes. The first three of these focus primarily on design, that is how these organizations approach opportunities and challenges as they arise. The last two revolve around delivery, or which principles and practices such organizations use to execute against their ideas.

Now let me say this upfront before we get into more detail: While the principles are easy to be claimed (who doesn't state or aspire to be entrepreneurial, for example), the practices are much harder to be sustainably implemented. So ask yourself as you go through these and reflect upon your own organization: Is this a principle or practice which you have truly internalized? Is this something you're actually living on a daily basis?

(1) Entrepreneurial: Outcome-centric organizations are characterized by a highly entrepreneurial mindset. But what does actually mean? One of practices typical of entrepreneurial-minded cultures is systems thinking. That is, employees continuously consider and optimize the entire "system": Is the output I am producing creating meaningful customer outcomes? Are we delivering shared outcomes in the sense that we as a business are capturing value from the customer outcomes we create? I have written before about tactical business model design here, which very much goes in the same direction. Take Haier, for example, which is one of companies with one of most radical entrepreneurial operating models in the world. They actually have a name for it, they call this Rendanheyi. I understand this to be a combination of three words: "Ren" for employees, "Dan" for user value and "Heyi" for integration. The core of Haier's operating model is therefore about deeply connecting or integrating employee output with customer outcomes, which is exactly the type of systems thinking I am here referring to.

(2) Customer-First: Sure enough, outcome-centric organizations are also characterized by a customer-first culture and mindset. What this means is the following: They put the customer at the center of strategy and planning, or what I call center-out planning. They are obsessed about the customer when they consider opportunities and challenges; they always start by thinking critically about delivering meaningful customer outcomes. To this day, so many companies significantly underinvest in delivering meaningful outcomes to their customers. Reversely, companies with this type of culture and mindset deeply understand that only by investing significant time and resources into identifying and delivering against meaningful customer outcomes will they create long-term value for their business (business outcomes).

(3) Challenger-Minded: This principle may at first appear a bit less obvious. Organizations with a challenger-minded culture are organizations where people are at ease debating conflicting ideas (which in Germany at least is surprisingly rare). Because here's the uncomfortable truth: It's very likely you have not yet found the right way to solve the "formula for success." That you aren't just as certain as you'd wish when it comes to the link between outputs and outcomes. That you just don't know whether the output you deliver will create meaningful customer outcomes, and much less certain whether this will then translate into business outcomes. That's where you need to rely on a culture and people which will challenge each other to formulate the best possible strategy. The actual practice related to this principle is what I call hypothesis-driven design. This is not unlike what Scrum.org calls evidence-based management (cf. here). Hypothesis-driven design requires data, sure enough, but more importantly: an acute awareness of the weak tie between the three dimensions of output and outcomes - and the fact that you may not able to control the entire "system" entirely. Take it from Roger Martin, who here reflects on planning versus strategy, and specifically on the (weak) link between customer and business outcomes:

Planning is comforting but it’s a terrible way to make strategy. Plans typically have to do with the resources you’re going to spend. Those are more comfortable because you control them. A strategy, on the other hand, specifies a competitive outcome that you wish to achieve, which involves customers wanting your product or service. The tricky thing about that is that you don’t control them.

(4) Resourceful: Outcome-centric organizations thrive on new ways of working, specifically Lean and Agile practices, to execute in the most resourceful way possible - to get the biggest bang for the buck, if you will. I assume this is pretty much self-explanatory, so I won't dwell too much on this aspect.

(5) Value-maximizing: This may well be the most typical culture principle which people have in mind when they consider and reflect upon outcome-centric organizations. Outcome-centric organizations have extremely high standards when it comes to being results-focused and are characterized by a systematic drive to value creation and value capture. Importantly, one of the core practices they employ related to this principle is validation rigor. Validation rigor means systematically validating whether your output has actually delivered the customer and business outcomes which you had originally assumed they would, and is therefore closely related to (3) above.

One important side note here, because I have come across this a lot lately when discussing outcome-centric organizations: For many managers, a results-focused organization is often contrasted with a learning organization. But that's a big mistake. Take Tom Willerer, a former VP of Netflix, who formulates it nicely here:

Learning matters just as much as results. Over time you want the quality of decisions to improve, from the CEO all the way to the intern. Board meetings, quarterly business updates, and employee performance reviews tend to skew a leader’s orientation towards an over reliance on metrics. But at the end of the day, these are just mechanisms that help a business deliver for the customer. The most successful leaders are focused on getting smarter about who their customers are and identifying the right problems to solve for them.

So these are the five hallmarks of outcome-centric cultures. If you were to put the five principles together, you could formulate a form of "manifest" - although it's admittedly a bit of a mouthful. But here you go:

As a outcome-centric organization, we solve problems with a deep entrepreneurial and customer-first mindset – and aren’t afraid to challenge each other to identify the right solution. We then ensure delivery excellence by way of resourceful and value-maximizing execution.

As always, I'd love to hear your thoughts and feedback! And thanks Nick for your help with this article.