Internal & External

The road ahead

Friends,

I hope that all is well with you and yours.

As noted last week, in a month’s time, I will be making my debut at the Cannes Lions festival alongside my friend and co-author James Hankins. On June 21st, we will be presenting a talk called The Gravity of eCommerce on the WARC stage as a precursor to our white paper due to come out in September.

Although I do not yet have the precise timings, I can reveal that it will be a 40-minute talk (plus Q&A) around midday. As soon as I have more information, I will share it. What I can say for certain is that the session will be open and that the talk will be excellent, so if you happen to be in the area, do swing by.

Those who have been taking part in the book club should by now be finished with The Management Myth by Matthew Stewart – and I hope that you have enjoyed it as thoroughly as I have. E-mails detailing virtual session slots for our concluding thoughts will be sent out soon, after which we will move on to book number two: the very strongly recommended Life After New Media by Sarah Kember and Joanna Zylinska.

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Now onto the topic of the day.

As previously discussed, diagnosis is an inescapable part of what I, and many others, consider ‘proper’ strategy. Regardless of whether one adheres to the traditional planning school of thought or prefers a fully agile approach, identifying where one is remains key to understanding where one might go. To steal a line by Richard Rumelt in Good Strategy, Bad Strategy, if there is no diagnosis of the malady, there can be no action toward a cure.

Failing to perform a diagnosis turns strategy into Jeopardy – the answer is provided before any questions have been asked. Unfortunately, this is but all too common. As John Kay wrote in reply to Rumelt, value in corporate settings is habitually measured not by the accuracy of the diagnosis but by the confidence with which the prescription is dispensed. A dominant reason why is an inability to conduct proprietary analysis; if we are unable to find answers ourselves, we look to others to provide them.

The key to change, therefore, is understanding how to perform a diagnosis and clarify what, to put it colloquially, the hell is going on. A thorough investigation will not only guide strategic decision-making, but also allow one to continuously evaluate decisions made and adapt to new contexts.

Internal and external

As I have emphasized over the years, there are very few context-free rules in strategy and even fewer one-size-fits-all solutions. Each company is unique and has its own set of facts. The essence of diagnosis is to make sense of (and ultimately a judgement about) them.

Establishing the domain of potential action is key. Not only do different situations warrant different responses, but the steps that we may take will be constrained by the context in which we act. Diagnosis, in other words, must include both the internal and the external; just as shifts in customer behavior may dictate novel approaches, a lack of organizational capability may effectively take a number of them off the table. Without the financial power to act upon learnings, insights into emergence lose their practical value.

Crucially, diagnosis should primarily be concerned with the present, not the future. We may, naturally, draw conclusions about the actions of tomorrow based on the findings of today, but we can only ever know what is currently happening or has happened.

What we ultimately end up doing will also inevitably have an impact on what the future becomes. Strategic choices cause strategic events that trigger important changes in strategies, leading to new strategic choices and so on. Reactions thereto, based on ever-updating diagnoses, make the difference between long-run success and failure.

There is one caveat, however. The importance of acknowledging that no diagnosis will ever be ‘complete’ cannot be understated. When I write that we can only know what is currently happening, I am being careful to avoid the word ‘why’. This may strike some as odd – surely that is a large part of diagnosis? But when one is dealing with emergence in complex adaptive systems such as firms and markets, identifying the root cause is not merely difficult but literally impossible.

The real-world starting point should thus be one of both depth and breadth of analysis. Diagnosis is best when concerned with recognition of what is happening and what one is doing about it, so that one can consider what could be done differently or instead. This, in turn, defines the strategy; an unrelenting attempt at nudging the organization in a wanted direction by managing large-scale problems in increasingly effective ways; through learning, adapting, improving and evolving.

So, over the next few weeks, we are going to break down a number of popular methods for diagnosis and sense-making. Specifically, we will be looking at

• capability audits,

• performance audits,

• product audits,

• channel audits,

• pricing audits,

• market analysis,

• customer analysis,

• competitive analysis, and

• environmental analysis.

This will include both breakdowns of the topics in theoretical thought and practical application, models, frameworks and approaches such as SWOT, PESTLE and the five whys – in addition to, at long last, Cynefin. Porter’s Five Forces will not be covered as I have done so previously.

Once finished, lest I fuck it up, we should have a better understanding of how to identify what levers might need pulling before we get into the nitty gritty of how to do so.

We begin in seven days’ time with organizational capabilities.

Until then, have a lovely weekend.

Onwards and upwards,
JP