Visualizing Paths to Value

Customer obsession doesn’t always contribute to commercial success–the previous post made this point. Which means it can be an unhealthy obsession at times. The pursuit of an unhealthy obsession is never admirable but it can be downright dangerous during lean times, which is what the present time is becoming.

Overcoming Unhealthy Obsessions

So how can we help product leaders differentiate between healthy and unhealthy customer obsession or any other obsession (design, SEO, ratings, awards, tech prowess, etc.) that doesn’t always correlate with commercial success? They need a way to understand how their idea for a new product variant or feature or capability fits into the overall scheme of the business. To this end,  it helps to have a commonly understood narrative of what makes the business tick. How do we come up with this narrative? Over the years, management consultants have come up with a few approaches.

Theory of the Firm

A diagram of reinforcing loops could illustrate the narrative. In 1957, Walt Disney drew up such a diagram to explain the synergies between his lines of business–theatrical films, comics and other publications, TV content, music, merchandise licensing, and the place where they all came together, Disneyland. Publications of the Harvard Business Review later named this approach as a corporate theory or a theory of the firm. A systems thinking practitioner might describe it as a variation of a causal loop diagram. Here, for example, is a simplified theory of the firm for a professional services or consulting firm.

It suggests that the primary markers of success are revenue, brand, and margin. A good brand attracts great people who go on to do great things which further enhance the brand. Many other forces also contribute to overall success, as shown.

The Flywheel

In 2001, Jim Collins’ book, Good to Great, introduced the metaphor of a flywheel. Synergistic forces within the business keep building up the momentum of the flywheel until one day, the outside world perceives a breakthrough. That same year, the Amazon flywheel illustration was born. It depicted a virtuous cycle of better customer experience leading to more traffic leading to more sellers leading to greater selection thus adding to the customer experience and all over again.

And that was just the inner cycle. It contributed to the outer cycle of growth leading to lower cost structure leading to lower prices and thus adding to the customer experience and all over again. A flywheel that has built up enough momentum can be unstoppable.

Extending the Flywheel

Note that the inner cycle goes round in months while the outer cycle might take years. This representation might be useful for strategizing across product categories or lines of business but it does not capture the world of individual product leaders. Here is a version of the flywheel that includes the impact of the work of product leaders working to improve buying, fulfillment and returns experience.

Product Leaders could map their ideas against such artifacts to see if it aligns with the overall synergies. Does it rub with or against the flywheel? Does it have side-effects that rub against? Let’s take the example of the previous post. How do we understand the impact of excluding product information from order and delivery confirmation emails? These emails are only a fringe element of a customer’s buying or fulfillment experience. Although the sharing of product information inside these emails is good for customer experience it does not help protect sales information. Email analytics vendors might package it as market insight to competitors. That could ultimately have an adverse impact on growth. This is depicted below.

Switching to more practical Representations

As we can see, these types of visuals tend to get clumsy as we add more detail. Although they are useful for a shared understanding of the big picture at a 35,000 feet level, it might be useful to switch to other visual representations to work at a level of detail that’s useful and actionable for product leaders. That’s where KPI trees come in. Assuming we can come up with a metric for each of the nodes in the previous visual, here’s what a KPI tree with features mapped to KPIs might look like.

I’ve linearised it to make it less unwieldy at the expense of some loss of visualization of longer-term effects. The tree depicts the contributions of various features (bottom row in dark) to the metrics that matter. It brings out the information leakage aspect of emails that carry product information. With a shared artifact like this, product leaders find it easier to discuss and align on the relative merits of proposed features. Indeed, the KPI tree is a key part of the alignment module of Business Retrospectives–a six-module method to improve the commercial impact of tech investments.

In Sum

Visual representations of what makes a business tick can be effective in improving shared understanding and driving alignment. Different representations may be useful at different levels of detail and for different purposes. You might want to consider developing and maintaining a couple of such representations to aid you in feature selection, prioritization and benefits validation. The payoff is usually well worth the effort, as this testimonial from a client demonstrates.

Until next time, take care and prosper.

Sriram

agileorgdesign.com

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