With our firm’s Virtual Ocean Strategy (VOS) approach, getting some good press within the blogosphere, we decided to answer one of the key questions, that gets, often asked during our strategic planning engagements, in one form or the other - how does VOS stack up against, other popular strategic planning approaches - and more specifically, how does VOS address the major shifts, that are happening within the 21st century strategic planning engagements?
First of all, for the benefit of the larger audience, let us recap some of the major shifts, that are happening within the strategic planning world, to help answer this question, within its right context-
- Shift from “correlation/causality driven imaginative possibilities/choices, represented in the form of novel hypothesis” to the “reverse scenario of imaginative possibilities/choices driving the correlations/causality, that are needed to make the possibilities to come to life”.
- Shift from “designing the tests for the winning choice, after the choice is made” to “designing custom tailored tests for all possibilities ,and let those test results, leading us to the final choice”.
- Shift from “rules guided correlation/causality driven strategy diagnosis/prescription” mindset to “nature’s scientific principles driven causality/correlation driving the diagnosis needed to prescribe the possibilities” mindset.
- Shift from shareholder value (with a CSR component) to Porter’s “Creating Shareholder Value” based value (and now to our firm’s Triune Shared Value (TSV) – as explained in one of our other CapitalismPlus articles).
- Shift from capital economy driven strategy formulation” to “capital/behavioral economics balanced driven strategy formulation”.
While all of these shifts may or may not be happening simultaneously, “SHIFT #5”, in our opinion, is the foundational shift that causes the remaining shifts.
One might ask how?
While most modern day strategic planning approaches have done a great job of helping companies, to develop some great strategies, history is also filled with many examples, where great leaders, at times, have ended up making some irrational choices. Part of the reason for that behavior is that, humans, often times, get influenced, heavily by the social and psychological type behavior economic factors, which is what, sometimes leads us to those irrational choices, in spite of some great rational choices are available to us.
The question however is - how do we make sure, that we avoid those irrational choices? This where, we recommend our clients, to step back and first understand the underpinnings of this so called “possibilities/choices” driven approaches, in a larger context with a behavior economics lens, using a hypothesis that “causal relationships, within the psychological dimensions of Motivations, Beliefs and Actions, are the starting point for diagnosing/prescribing, strategies in both life and business situations”?
What do we mean?
- Purpose(or Passion/Compassion) in the form of Motivational/Emotional energies, that get birthed in Heart /Spirit dimension, happens to be the root event for all imaginative possibilities and diagnosis, as guided by nature’s energy management principle -> Energy dimension
- Which then causes Beliefs to get propelled in Mind /Soul dimension, which then sets the nature’s seedal chain principle in motion -> Force dimension
- Which then causes Actions to be landed in Body/Environment dimension by balancing nature’s balancing opposite’s principle, with a "doing both" mindset-> Power dimension.
Simply put, the PURPOSE SEED (that is made up of Vision, Mission, BHAG, Values and Codes), in its essence, is what, germinates into an encapsulated capsule, with this three dimensional MBA causal map. Once this MBA causal map driven purpose seed capsule is framed up correctly, using nature’s top three scientific principles, strategy under VOS, in its essence is just navigating up and down the nodes of the choice trees within this capsule, effectively and efficiently, with an end goal of bringing the imaginative (and yet rational) possibilities to life.
Virtual Ocean Strategy comes to life, in three steps and three questions, using PURPOSE SEED capsule
As it turns out, all of our firm’s approaches (VOS, Capitalism Plus and VizPlanet), happen to be guided by the same three scientific principles, using this PURPOSE SEED capsule, as well i.e. “birthed” by the energy management principle, “propelled” by the seedal chain principle and “landed” by “balancing the opposites” principle – as outlined in the schematic on the top of the page.
In other words, strategy under VOS is, all about serendipitously discerning the motivational seedal whisper(s) from the seasonal events, and then transforming those whispers into a seasonal choice(s), before executing them as action steps as explained in detail in the VOS article. Simply put, strategy under VOS is a seedal whisper (possibility energy) manifesting as seasonal choices (force) within the constraint of capabilities (power) by answering following three questions, in three steps as outlined in the picture on the top of the page.
QUESTIONS:
- How FAR would we want to go to find our customers? – Establishing the geographical market boundaries to help answer “where to play to win” question- Scientific Force in Play – Remember Force=Energy/Space
- How FAST we need to get there, to get their jobs done? – Setting the timeline expectations to help answer “when and what to play, to win” question – Scientific Power in Play ->Remember Power=Energy/Time
- How MUCH would it take to execute this “FAR” and “FAST” value propositions? – arriving the resource or capability choices to help answer “How do we win” question – Scientific Energy in Play
STEPS:
- Seedal Motivation Driven Whispers
- Seasonal Beliefs Guided Choices
- Sequel type Triune Shared Value (TSV) Focused Actions
Once we frame up these three questions using this “capital/behavior economics balanced MBA lens”, the rest of the shifts, happen to get addressed, automatically, using the same set of three scientific principles as well.
One might ask, why bother using these three principles, in the first place?
Among many benefits, these three scientific principles help us to borrow lots of the insights from the scientific energy management/aeronautical engineering/Physics disciplines, and apply them to value management within the business world, which by itself is a great benefit, as we can analyze the possibilities, with different lenses, with a multi dimensional balancing mindset (value, cost, velocity, growth and purpose), as opposed to the traditional value-cost balancing and/or tradeoff mindsets, that are popular in the modern day approaches.
Now that we have grounded ourselves with a solid understanding of these three principles with a MBA lens, let us dive deeper, and answer our earlier question of how VOS stacks up against other strategic planning approaches, within the context of these five shifts?
STEP 1: Reveal and Communicate the Seedal Motivational Whispers in the form of imaginative possibilities!
First natural follow-up question is - what does it mean to serendipitously discern the seedal whisper(s) from the seasonal events? In other words, how does this whisper get “revealed and diagnosed” as part of our strategic planning engagements?
Motivational Seedal Whisper (or Purpose Energy driven imaginative possibilities) in a larger sense, is all about uncovering the seedal energies of the PURPOSE SEED with our creative imaginative power, and then look for those data whispers in the form of situational events, behaviors and environmental data points, that are needed to bring those imaginative possibilities to come to life.
- Qualitative/Intuitive whispers (causality based whispers from serendipitous observation or by studying of one sample company or a person over a period of time)
- Quantitative whispers (correlation based whispers from historical data from various geographies)
Once the data whispers are classified as causal (qualitative whispers) and correlation maps (quantitative whispers), they are then fed into the next step, for the seedal chain principle to take its course!
STEP 2: Discern and Diagnose the Seasonal Strategic Choices
The Seasonal Choices (identified as imaginative possibilities) are nothing but the strategic paths that are discerned and diagnosed by the seedal whispers from the previous step, to help us to trickle them down to the final path.
For a moment, if I may, let us a take detour - and look at it first with a spirituality lens – as these seasonal strategic choices, in a way, are equivalent to discerning God’s will for our life - as God reveals His WILL in most religious faiths), just in whispers only. The question, however is - how does predestination fits within these set of whispers? How about the perfect will vs. permissive will?
Now, rephrasing the same spiritual questions, with a strategy lens – does that mean the outcome of our strategic choices, within a company setup, are also caused (or predestined) by the PURPOSE SEED (and its invisible test conditions/instructions)? If so, how do we make sure that the right choices are always made, to achieve the best possible outcome(s)?
Let us answer this question using the board game of chutes and ladders (or popularly called as snakes and ladders in UK/India as outlined in the picture on the top of the page)– which, as we all know, is filled with multiple paths, but usually one path is the perfect path, to reach the final destination. When we take the perfect path, we usually reach the destination without being bitten by the chutes (or barriers). On the other hand, when we take an alternate permissive path, we still might reach the destination, but after being bitten few times by the chutes!
Yet another insight here is, when we are bitten by the chutes (or for that matter even after being lifted by the ladder), the outcomes of those choices are always predestined (as per the purpose seed), however, the choice is totally up to us to take i.e. which path we want to pursue to reach the destination. In the same way, the invisible instructions (test conditions) within the PURPOSE SEED, not only try to validate the outcomes of the choices, but also, try to find a path where there are less number of barriers.
Does that mean the outcomes of the same choice made by two identical companies (background, capabilities, years of operation, culture, etc) will always be the same? Here is where, our Purpose Capsule that is custom designed (with test conditions as per the invisible instructions of the PURPOSE SEED possibilities), comes handy. In other words, the outcome of a same choice, made by two identical companies, not necessarily will be the same, as those outcomes are always personalized, per the “invisible instructions” within the Purpose seed Capsule!
This Purpose seed Capsule, is not only filled with the predestined outcomes for our choices, but also, it is packed with many invisible possibilities, time bound instructions, that gets activated, only when we start navigating through those choices. For all practical purposes, let us imagine that purpose seed capsule, as a set of decision trees, with multiple sub nodes. In my mind, every sub node within the purpose seed capsule has five part invisible instructions.
- Intended Outcomes
- SWOTC (Strengths/weaknesses/Opportunities/Threats/Constraints) with a choice/time bound instruction manifesting from Company’s motivations w/r to competitor’s motivations (chutes) and collaborator’s motivations (ladders). For those of us who chart these things, we usually do it with five charts
- Company’s Motivation growth vs. Market Motivation Growth
- Company’s Motivation growth vs. Relative Market Motivation Share (RMMS)
- ROMCA vs. RMMS
- Motivation Margin vs. RMMS
- Motivation Velocity vs. RMMS
SWOTC (Strengths/weaknesses/Opportunities/Threats/Constraints) with a choice/time bound instruction manifesting from Company’s market w/r to competitor’s markets (chutes) and collaborator’s markets (ladders) with a “traditional industry structure is irrelevant” mindset. Those of us who chart these things, we usually do it with five charts as listed below and also in the picture below
- Company’s growth vs. Market Growth
- Company’s growth vs. Relative Experience or Market Share(RMS)
- Operating Margin vs. RMS
- Capital Intensity (or Operating Velocity) vs. RMS
- ROIC vs. RMS
- SWOTC (Strengths/weaknesses/Opportunities/Threats/Constraints) with a choice/time bound instruction manifesting from Company’s capability w/r to competitor’s capabilities (chutes) and collaborator’s capabilities (ladders) with the “traditional industry structure is irrelevant” mindset. Those of us who chart these things, we usually do it with five charts.
- Company’s growth vs. Industry’s Total capability (Primarily Capital only for now)
- Company’s growth vs. Relative Capability Share (RCS)
- Operating Margin vs. RCS
- Operating Velocity vs. RCS
- ROIC vs. RCS
- Missteps (real vs. perceived i.e. and how it will be blown/exploited out of proportion by competitors or take advantage of us)
Now that the PURPOSE SEED capsule is formulated, the obvious next question is - how do all the possibilities, come to life within the context of "Discern and Prescribe" step, as outlined in the schematic on the top of the page?
As we move deeper into the this step of “Discern and Diagnose”, it becomes all the more interesting -as we, now get to play the game of chutes and ladders, as guided by the seedal chain principle. Imagine for a moment – when you are inside the boundaries of this board game, as strategists we will see multiple choices, however, when we are tuned to listen to the whispers of the external events/situations (or the quantitative/correlation insights and qualitative/causal insights), the whispers (further guided by invisible instructions/test conditions), will lead us into one path more than the others, based on the expected results of the test conditions, that are established. In pragmatic terms, it is like planting a seed (time, energy, ideas, resources, insights etc) on certain sets of activities (or people) more than others, which in its due course (season), will help us to navigate into the subsequent steps, to reap the harvest or outcomes within the PURPOSE SEED Capsule.
In other words, the type of purpose seed we sow, ultimately, decides what type of invisible instructions( or test conditions), within the PURPOSE SEED capsule gets executed, which then, ultimately decides the perfect choice (and the corresponding outcomes). Simply put, once we align the PURPOSE SEED with the whispers (correlation and causal chains), the seedal chain principle will take its course of action, to navigate us into the perfect path, in alignment with the principle - as long as the earth remains, the seedal chain principle will remain in action.
Now, what happens if one chooses to take the alternate non-optimal path instead of perfect path? Granted, we will, still be able to reach the final destination, but definitely, not in an optimal fashion- as there might exist one or more chutes, along the way, within those non optimal paths, to slow us down, before we reach the final destination – again the outcomes of even those permissive paths, are also predestined as part of the PURPOSE SEED capsule.
STEP 3: Prescribe and Execute the Sequel Actions, producing Triune Shared Value
Now, coming into the next step - Sequel Actions are, nothing but, set of actions behind the final strategic choice, to accomplish the outcomes from the previous step– which then causes the motivation energies to be continuously reaped/recycled, as part of this closed cultural value loop. Now the question is how all these three steps (Motivational Seedal Whispers, Seasonal Choices and Sequel Values) fit together to produce the Triune Shared Value (TSV) in a close looped fashion?
As proven both spiritually and scientifically, when we intend a particular outcome with a motivational energy, the intentions themselves have an impact on choices, so that the outcome is more likely to occur in the direction of the intentions. An intention is a conscious desire or motivation for a particular outcome as further validated by Solomon “As a man think in his heart, so is he”. This is the reason, we have used the word Whisper (alluding to the way God reveals his intentions for our life) – as whispers can also be equated to Internal gut type motivations, that are guided in the direction of the whisper to help us make the right strategic choices, resulting in better outcomes.
Sure enough, our firm’s PURPOSE SEED capsule, in its rudimentary format, map 1:1 to McKinsey’s Zen of Corporate finance formula ->Financial Value =Profit x (1-g/ROIC)/ (WACC-g)
- Return on Motivation Whisper Choice (ROMWC) is similar to ROIC variable. Simply put, ROMWC is the ratio of - no of whisper driven choices producing positive outcomes divided by all choices made in a period.
- Size of Outcome is similar to the ‘g’ variable
- Amount of threshold purpose seed energy needed to propel (or data whispers in causal and correlation dimensions) is similar to the hurdle rate(WACC) variable
- Motivational Intent gain is similar to profit variable
- Motivational value is similar to Financial value
Now, by synthesizing all these variables, we see the following formula evolving
- Motivation driven cultural value= Spirituality driven Motivation gain x (1- Spirituality driven Motivation growth/ROWCA)/ (Motivation threshold- Spirituality driven Motivation growth).
Similarly, we had also proposed another correlation formula, in the form of a hypothesis called societal value formula, with a new metric called WACP - which is nothing but a Weighted average of WACC (weighted average cost of capital) and WACP(weighted average cost of purpose in one of our earlier articles -http://strategywithapurpose.blogspot.com/2010/11/purpose-profit-balanced-sustainable.html.
- NOPAT x (1-g/ROIC)/ (WACP-g)
Now, synthesizing all the three formulas - TSV can be summarized as
- TSV= Spirituality or Emotional energy driven Motivational value (Higher Power based + Shareholder value+ Societal value (With direct linkage to SCCA in the picture above)
Granted, two of the three formulas (motivational value and societal value) are just hypothesized, correlation formulas, at this point in time - and so, lot more research, with empirical data needs to be done, before publishing them as causality driven working formulas. However, by carefully studying few sample companies over a period of 10 years (similar to how Jim Collins’s team has studied the 10Xers in his recent book or may be just one company, as suggested by Prof. Clay Christensen), I am positive, that we can clearly establish a causality relationship (perhaps with a 80-100% certainty).
Conclusion:
Framing up the opportunity space, with this MBA lens, not only, helps us to imagine multiple strategic possibilities (with our behavior economics driven cultural/rational filters on), but also, helps us to motivate the strategic planners, with the right set of foundational tenets, from nature’s energy management principle. While this type of motivation driven discovery process, might generate multiple unguarded possibilities in the beginning, our experience suggests that, those shifted mindsets (caused by the motivations, in the form of renewed beliefs, as guided by seedal chain principle enabled data insights, with its test conditions) has the magical power, to lead us into the final choice. Granted, that we might run into few opposing dilemmas, along the way, however, applying nature’s balancing opposites principle, in conjunction with seedal chain principle, will definitely guide us into the final choice, with 100% certainty, accuracy and speed!
