Virtual Ocean Strategy (VOS) comes to life, in three steps, with three questions!

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-

1. 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”.
2. 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”.
3. 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.
4. 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).
5. 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:

1. 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
2. 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
3. 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:

1. Seedal Motivation Driven Whispers
2. Seasonal Beliefs Guided Choices
3. 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! 

 

Virtual Ocean Strategy – the way to reset strategies with a purpose driven “industry structure is irrelevant” mindset?

With our Virtual Ocean Strategy (VOS) receiving some great press within the blogosphere, some of our fellow strategy practitioners, have challenged us with a set of follow-up questions - the most notable one being - "how is it different from the popular approaches like Red Ocean and Blue Ocean Strategies?". Instead of answering them all individually, we decided to synthesize them in the form of three questions, to make it relevant for our larger audience -

1. Why another approach now?


2. How does it stack up against the other popular frameworks like Red Ocean (ROS) and Blue Ocean strategy (BOS) frameworks?


3. In spite of having these great strategy frameworks, quite a few strategy efforts, still do not produce its intended outcome - Why?
   

1.Why another approach now?

While the popular Red Ocean Strategy (ROS) and the Blue Ocean Strategies (BOS) have widely been successful in the last decade+ years, we believe that they may not be well equipped, to handle the ever-changing business needs of the 21st century! This does not mean that these two approaches have not lost their former glory; rather, the best way to comprehend our hypothesis is that some of the foundational principles of ROS and BOS, may not be well equipped to handle the seismic shift happening within the social media/digital technology driven, global business environments of the 21st century.

In other words, the right way to frame this “Why another approach question” within the context of this seismic shift being – “what elements of ROS and BOS can be blended together, to form a hybrid approach (with some value-adds), that can, not only help companies to reset their strategies, but also, help them to stay relevant in the 21st century?”

First things first - let us start with some basics. Porter’s ROS is built with the mantra of beating the competition with a unique winning path, whereas, BOS is built with a mantra of entering the deep blue ocean markets, with a “competition is irrelevant” mindset. While there is time and place for each of these worldviews, we believe that none of these approaches, in its current form, are designed to handle the emerging "boundaryless industry structure" mindset of the 21st century. In other words, in the last 5-10 years, the traditional boundaries existing among industrial structures, have started to blur, as evident from some of the recent industry convergence moves by Fortune 500 companies (e.g. Starbucks entering CPG type Juice industry, Google entering travel/media/mobile handset industry, Apple/Intel entering media/paid TV industry etc). What do these strategic moves tell us? Companies have started to look beyond their traditional industry structures for growth opportunities with an “industry structure is irrelevant” mindset, and so, the need of the hour is an approach that helps companies to accomplish that mindset, in a comprehensive way, as outlined in the picture on the top of the page!

While VOS is designed with an "industry structure is irrelevant” mindset, in its essence and spirit, VOS is all about executing those strategies with a collaborative heartbeat. In other words, while competition within a boundaryless industry structure, might be irrelevant during the beginning days (i.e. especially when companies enter the virtual oceans with a first mover advantage), it will catch up sooner than later, as digital and social media technologies have started to shrink the world much smaller, by tearing down the artificial walls, existing among the industry structures, and so, “collaborative execution” is the name of the game in the 21st century!

The implication is that the trade boundaries across industry structures are all being redrawn, thus validating the need for a “strategy reset journey” with an “industry structure is irrelevant” mindset! VOS starts that reset journey, not only, by resetting the purpose statement (with its five parts of vision, mission, values, codes and BHAG with priorities), but also, by balancing them with a multi dimensional balancing process, in value, cost, velocity, growth and purpose dimensions, as opposed to the two dimensional value-cost trade-off in ROS and value-cost balancing in BOS. VOS is the only approach in the market place that is sourced from an “inside-out” energy source called PURPOSE SEED that is manifested in three forms simultaneously -

• Purpose Driven Leadership framework using the “inside-out” emotional energies of faith, hope and love.


• Purpose Driven Strategy framework using the “inside-out” scientific energies of seedal energy, seasonal force and sequel power.


• Purpose Driven Innovation framework using the three value energies (shareholder, societal and emotional/cultural) that are manifested as purpose bundles, purpose models and purpose platforms.
  

Simply put, VOS and its three frameworks are being sourced from the common PURPOSE seed, very much like, how GOD-HEAD in most faiths happen to manifest himself in three forms depending upon the dispensational context, and yet operate as one person. In other words, VOS, although manifests itself in three forms (leadership, strategy and innovation) within the various cultural contexts, it still operate as one integrated approach, when it comes to decision making- which is what makes VOS, a sustainable approach for the long haul.

2. How does it stack up against the popular ROS and BOS?

3. In spite of having great strategy frameworks, still some strategy efforts do not produce its intended outcome - Why?

The essence of strategy, according to Michael Porter, is choosing what not to do, and so, we have developed 5 “WHAT NOT TO DO’s” to answer this question. One might ask - why the “negative” approach? Well, most research suggests that unlearning is the foundational prerequisite of learning, and so, we have identified these 5 “what not’s”- to unlearn some of these decade old mindsets, before learning to use VOS, with an integrated/systemic mindset and to stay relevant in the 21st century!

• What Not #1 -> Do not reset with a single dimensional strategy mindset, as opposed to an integrated systemic approach, in the three dimensions of leadership, strategy and innovation, as addressed by our TPF framework within VOS.



• What Not #2-> Do not reset strategy without resetting the purpose seed, as addressed by our Purpose driven seedal chain/scientific energy management principle driven Portfolio Thread view based strategic planning framework within VOS.



• What Not #3-> Do not go after an existing market, as opposed to going after the virtual ocean market and/or experience pools, which do not exist today with a motivational momentum themes creating experience moments or movements-> as addressed by our Experience Pool Portfolio (EPP) framework and our Purpose Innovation framework within VOS.



• What Not To Do #4->Do not mix up SCA vs. competency vs. capability within organic and inorganic growth strategies, but follow a portfolio approach, in avoiding this “capabilities mix-up trap” – as addressed by our Capability Pool Portfolio (CPP) Framework within VOS.
  o To put things within its context - SCA vs. Competency vs. capability is equivalent to Grandma’s hand trick of sautéing for the right duration with right temperature vs. Recipe vs. Ingredient.



• What Not To Do #5-> Do not execute without a real time performance visibility -> partly addressed by our big data driven real time valuation/Corporate performance management framework within VOS.

Conclusion:

Implementing a strategic plan, in itself is a big challenge for most organizations, leave alone resetting them all the way from the Purpose Seed, as strategy resets, invariably end up introducing lot more structural changes to the organizations, than we think. To manage those changes and to mitigate those execution risks that come along with it, we suggest companies to take a phased approach, and apply our VOS principles and frameworks with an integrated systemic mindset – as guided by our big data driven analytics/synthesis balanced, Corporate Performance Management (CPM) frameworks!

Please feel free to check out our Slide share version of our article for a better visual display as well.

Big Data Driven Real Time Valuation – The next wave in Performance Management Systems?

A recent study suggests that the value gap between the “stock price based market cap” and the “internal cash flow based market cap” of Fortune 500 companies, are constantly on the rise, especially in the last 50 years. The implication is that some companies are either grossly undervalued (up to 25% points in case of old economy style companies) or overvalued (up to 50-100% points, in case of dotcom/entrepreneurial style companies) - and rightfully so, this value gap, seems to be emerging as one of the top 5 issues, keeping the CEO, senior leaders and investors, on the alert.

Let’s face it - the true stock value of a company, in its essence is the combination of its “future cash flow value” and its linkage to “future expectation building abilities” discounted by today’s cost of capital. While there are quite a few valuation models (e.g. McKinsey's Zen of corporate Finance formula, DCF, NPV, IRR) available, to accurately quantify the cash flow value, there are not many proven models available, to accurately establish the causal chain relationship between the cash flow value and the “expectation building abilities” - and so, stock markets, often follow the tread mill effect of trading on mismatched expectations.

Part of the reason for that behavior is that, the so called “expectation building abilities” are often hidden within the “intangible” competitive advantage (CA) enabling perspectives of the company (i.e. learning/growth, customer, value chain and financial perspectives in BSC terminology) and so, they are not well understood by the street, within its right context. “Expectation building abilities”, in this context include, but not limited to are - the earning guidance, product portfolio pipeline for the next 5 years, share repurchase program schedules/dividend payout, management changes and other big ticket capital expenditures - provided by company executives on an ongoing basis, to better manage street’s expectations, and to boost their overall stock prices.

Trading Value vs. Creating Value

The implication is that street, either over reacts to those “expectation building abilities” in the form of higher stock prices, or in some cases, under react (or some might suggest punish) with lower prices – purely based on the way, it interprets the causal relationship between cash flow value and the “expectation building abilities”. As it turns out, this causality interpretation gap seems to be the single most important factor, that drives many company executives and investors, to get into this game of trading value, as opposed to creating them fresh, says Roger Martin.

What do we mean? From investor’s standpoint – while quantifying cash flow is important in making the near term investment decisions, interpreting the causal relationship accurately, is key for them to bet on a stock for the long haul. Similarly, from company’s leadership standpoint – while quantifying cash flow value is critical for making effective near term operating decisions (i.e. achieving Q-To-Q results), framing the “expectation building abilities” accurately, in the form of earning guidance statements, is very important for them to manage the expectations of their investor community, and to stay focused on their long term strategic choices.

How about Valuation in M&A deal scenarios?

As it turns out, this causality gap between “expectation building abilities” and cash flow value seems to be the biggest hurdle faced by leaders within M&A negotiation scenarios as well – as suggested by a recent study. For example in a M&A scenario, if we had to dissect the value components of a product life cycle of a target firm -

• Invisible value of discovering the unmet “Jobs to be done” value + Invisible idea/vision seed value +invisible incubator value + commercialization value(when there is no alternative product available) + commoditization value (when alternate products are available with heavy competition)
  

If we look at this equation, interestingly enough, they map 1:1 to the five value stations of the PTV framework picture above. Yet another interesting insight here is that- it reiterates our earlier point that stock prices are often decided based on the commercialization and commoditization vale components (i.e. financial value station), partly because, street does not have visibility to the unrealized invisible values of the early product life cycles, the primary driver behind those expectation building abilities.

Transparency without compromising the Integrity of Insider information
The follow-up question is how can we provide that end-to-end visibility, without compromising the integrity of the CA enabling insider information? While there is never a silver bullet answer for this type of questions, one of the best answers in our opinion, is to mine those “expectation building abilities, proactively from the tons of data that are often hidden within and outside the four walls of the companies, and integrate them within the performance management systems. Yes, you guessed it correct - that the emerging buzz word for that approach is “Big data”.

As it turns out, even company insides, often do not have visibility to all of their own company data, leave alone the external social media data, and so, the better way to frame the question is – how can this emerging big data concept, help us to establish the causal relationship between cash flow and “expectation building abilities” and provide that end-to-end visibility, without compromising the integrity of the CA providing insider information?

Big data – the panacea for establishing the causality between cash flow and “expectation building abilities”?
Let us face it - the key benefit of any analytics platform (leave alone the Big-data driven analytics platform), is to help make effective decisions with timely and accurate insights. With that definition, if we had to dissect the service components of a Big data analytics platform, it is all about delivering value in the form of “insights” using a set of “analytics services” (as the delivery vehicle), with a faster service delivery time (i.e. latency) than the traditional analytics platform. In other words, the three key service components of big data are:

• Matter or cost in dollars that are needed to create and deliver those insights


• Acceptable Time or latency involved in delivering those insights


• Space or size of the data of the data needed- which is often why the word big is put in front of data.

Big data classified using CLS index
Now that we have defined Big data with the building blocks of matter, time and space – it makes sense to augment our firm’s Experience Pool Portfolio (EPP) framework with some of the value-add features of Big data, to accurately establish the causal relationship between the cash flow value and the “expectation building abilities” that are being hidden within the large amounts of Big data. Speaking of intangibles being buried within big data, the next question is – what is preventing us from quantifying those intangible values within the big data – is it a cost (matter), latency (time) or storage issue (size)?

The answer in our opinion is not using the right set of data sources for the right type of analysis, and so, as a first step, we suggest to classify “Big data” with a new index called CLS index (Cost, Latency and Size), as shown in the chart below.

Depending upon which quadrant the data falls, we see five buckets of big data categories evolving.

• Transaction data producing the value for financial station (structured data with a low CLS mix index)


• P&S Purchase context data producing the value within the value chain station (structured data with a medium CLS mix index)


• P&S Purchase influencer data producing value within Learning/Growth station (structured data similar to IRI/Nielsen data with above average CLS mix index)


• Customer needs & want based data or” jobs to be done” data, producing value within Customer station. (combination of structured and unstructured data with high CLS mix index similar to social media/survey data in the form of opinions, likes etc)


• Purpose or Motivational driver’s data producing value within the central purpose station. (some combination of above four categories, helping us to answer the key purpose drivers question).
  

Big Data comes to life within PTV radial framework
Interestingly enough – this five types of big data map 1:1 to the five value stations of PTV - suggesting the need for four additional virtual exchanges on top of the wall street exchange ( i.e. primarily financial perspective driven)– and link them all together with causality - as outlined in the picture above and explained in detail in our firm’s Purpose driven strategic planning framework (http://www.managementexchange.com/story/strategic-planning-purpose-driven-way-using-nature%E2%80%99s-seedal-chain-principle)

• Job to be done or customer equity capital exchange, based on the formula -> Consumer/customer Value=Jobs-to-be done/Price



• Human capital equity exchange, based on human capital learning/growth, per one of my recent hack at MIX site (http://www.managementexchange.com/hack/reforming-performance-management-systems-%E2%80%93-virtual-purpose-equity-vizpity%C2%A9-exchange-way).
  


• Value chain equity exchange,based on the formula ->ROIC= Margin x Velocity



• Financial equity exchange, which is today’s’ street version based on the formula ->Share holder value= Profit x (1-g/ROIC)/ (WACC-g) - as outlined in our firm’s valuation driven PTV radial framework below.



• Purpose equity capital exchange ,based on our hypothesized formula -> Purpose value= Profit x (1-g/ROIC)/ (WACP*-g) where WACP=Weighted Average Cost of Purpose Capital
  

Providing this type of valuation visibility in these five dimensions, not only will help us to accurately establish the causal relationships, but also, help us to make the right call in M/A deal situations, as we had explained in one of our CPM articles (http://theacademyofbusinessstrategy-businessanalytics.com/2010/05/15/03/)

Conclusion with Implications

While the solution we have proposed is a 18 month solution, let me conclude with some immediate pragmatic next steps, that can help companies to lay the foundation for implementing this Big data driven performance management systems. First and foremost, companies must identify their causal/correlation chain relationships between “cash flow value" and the corresponding “expectation building abilities” impacting their overall stock prices. Some of the practical steps include, but not limited to are -

1. Identify the heavy hitters (top 50-100 investors) who have the “needle moving power” to influence value (and thus stock prices) within this causal/correlation chain relationship using a CPM framework like our PTV framework, as shown in the picture above.



2. Proactively manage the expectations of family owned and hedge/pension fund investors and document what makes them to tick.



3. Establish the causal chain of how they have reacted to the earning guidance and macroeconomic news/factors in the past, and then create a behavioral pattern map for their behaviors.



4. Depending upon those patterns, manage their expectations by releasing right type of insider information to media (and the analyst/investor community) in the right time, with a news staging mindset.



5. When company’s stock price changes, ask why the market moved and zero-in who bought, who sold, and why - with an empathetic mindset i.e. look at those investors with a lens of “alter-ego managers” or “indirect corporate owners”. In other words, learn to empathize with investors with various “what if scenario” options, within the context of the five perspectives of PTV framework.



6. Overhaul investor relations department and make them to actively manage the five big data types, by making them as joint data stewards, especially when it comes to regulatory data and annual reports.



7. Administer the big data registry with a causal map of shareholders and investor road shows, visits by analysts, and conferences; and major presentations to shareholders.



8. Integrate investor relationship management, part and parcel of strategic planning. Together make them responsible for managing the key-account processes to identify movers and understand their behavior. This way one can test all major plans, hypothesis and announcements, for their effect on the price of the company’s shares with various “what if scenario” options, and then suggest modifications to those earning guidance content, to better align with the views of key shareholders, thus becoming the key advisory arm of the CEO and senior leaders/board of directors.



9. Make investor relation leaders (in partnership with Corporate Strategy and Finance) as the people who co-own this big data driven valuation system and make them to proactively deliver the bad news when necessary. They will also have to be experts with “thinking on the feet” type communication skills, capable of handling tough interviews with investors who at times might be pressing them for information that cannot be divulged under SEC regulations or for maintaining CA integrity.




10. In closing, this type of big data driven integrated approach (i.e. structured and unstructured data driven approach) to strategic planning, Innovation, performance management, investor relations/valuation/stock price management and risk management, clearly require top notch talent, including the time and attention of senior management - and failing short on any of those commitments, would definitely leave the CEO, senior leaders and board of directors, in the constant game of never ending stock price guessing. It is a no brainer that no CEO and/or senior leaders/ board of directors, would ever want to be in that type of a guessing game, and so, the million dollar next step question is “What is in your docket ?” – and let that be our last word!

Purpose shifting lenses - a way to reset businesses and to launch the next big game changer type opportunities?

As we are getting ready to welcome the holiday season of Christmas, Hanukkah and New Year – it appears, as if, the “Festival of lights” season (we had observed in our earlier blog), seem to be reemerging all over again, with a SHIFT- and rightfully so, one of the pressing questions, facing most business leaders being – what would be the next big paradigm shifting idea, they can bet on in 2012? While there is no silver bullet, the short answer, in our opinion, is the experimentation mindset, - as we never know, which experimentation project, will bring forth the “aha’ moment! However, we often hear another follow-up question, from our clients – does that mean one need to experiment every idea under the sun? In other words - how do we go about identifying a handful of high potential ideas (or the strategic choices), for the so called experimentation adventure?

"Connect the Dots" in three phases - Decide, Destine and Disrupt

Our experience suggests that most of those high potential paradigm shifting ideas, in most cases, happen to exist, just around us, and so, it is just a matter of identifying them with a right set of purpose shifting lenses. What do we mean by that? To explain it further, let us start with the concept of Gestalt, as illustrated by the famous optical illusion picture of “duck & rabbit” –as listed on the top of the page.

Depending upon, how you look at it, the picture could be a duck or a rabbit. In other words, when we start looking at the opportunity space, with a purpose shifting lenses, we, not only get the ability to spot the ducks and rabbits distinctly, but also, we get the ability to discern how ducks slowly shift into rabbits and vice-versa. As it turns out, these mind shifts, usually occur in both steps (like a duck) and in jumps (like a rabbit) and so, as leaders, we, not only need to master this “connecting the dots” game of discerning those shifts quickly, but also, we must learn to apply those shifts, within the right business context (CORE vs. EDGE) for us to be successful in the 21st century. To help master this “Connect the dot” game, we have put together a 3D framework (Decide, Destine and Disrupt), as part of this article.

1. Decide Phase is all about discerning those shifts (i.e. ideas/strategic choices in the form of ducks and rabbits) using the purpose shifting lenses. In other words, this phase is all about resetting the five part purpose seed (vision/mission/values/codes/BHAG) of the corporation, and start looking at the opportunity space with a fresh set of eyes, with a green field mindset.

2. Destine phase is all about properly slotting those shifts into “STEPS” and “JUMPS” into core and edge businesses, depending upon the velocity of those ideas(i.e. distance divided by time). As it turns out, ducks move in steps and rabbits in jumps, and so, this phase is all about answering “how far” and “how long” questions, from the standpoint of slotting those ideas (or strategic choices) into the appropriate step and jump type markets, by answering the following questions –

- How far would we want to go? – Establishing the geographical market boundaries to help answer “where to play and what to play” question- Force in Play
- How long would it take to get there? – Setting the timeline expectations to help answer “when do we need to win” question - Power in Play

3. Disrupt Phase is all about transforming core businesses with edge ideas/choices, with appropriate amount of capital (resources), to produce the extraordinary results by answering the following question –

- How much would it take? – Setting the resource or capability expectations to help answer “How do we win” question - Energy in Play

Core, Edge and Fringes Defined within the context of this 3D framework
Now that we have outlined the 3D framework, let us define few terminologies to get our message across with little more clarity -
• CORE are, the businesses that generate majority of the revenue for the firm, per their purpose seed (i.e. vision/mission/values/codes/BHAG) by meeting the unmet needs of the customers, and by exploiting their capabilities, within a well guarded environment, that is managed by an established set of rules.
• EDGES are, the businesses that generate a minority percentage of the revenue for the firm, not necessarily in alignment with the purpose seed (which means, it provides the opportunity for the leaders to reset their purpose seed), by meeting the unmet needs of the customers, with a help of their exploited (i.e. CORE’s capabilities) and unexploited capabilities, within a boundaryless environment, that is operated by a set of rules, that are constantly being redefined. Edges, over a period of time usually transform in to CORE or FRINGE.
• FRINGES, for all practical purposes, are edge businesses, with one difference – i.e. edge businesses that fail to transform into core within a reasonable period of time (say 1-3 years), end up as fringes, which usually go into extinction soon after.

Core and Edges come to life within a spinning wheel metaphor
What do these definitions tell us? Core and edges are not independent businesses, rather, they are children, born of the same parent, and so, they need each other for them to be successful in the long run. While edges have significant growth potential, to scale its growth, it is essential for edges to gain access to the resources and markets of the core. At the same time, core has another challenge to deal with i.e. to meet the margin pressures of the street; they are also constantly looking for new growth platforms, to meet the demands of the street.

To comprehend this interdependent relationship little better, let us use a spinning wheel metaphor -imagine for a moment that the corporation as a spinning wheel, with three types of dices (core, edge and fringe) that are being rolled into the spinning wheel, that is spindled on a common axis of purpose seed (vision/mission/values/codes/BHAG as the axis) - the core dices are the lucky ones (older established businesses) that get plugged tightly into the inner groove (i.e. wheel win region) quickly, whereas, edges & fringes are the chaotic roller dices, trying to find a spot inside that spinning wheel, that is being constantly spinned(disrupted) with varying speeds (i.e. changing the rules of the game). In other words, edges and fringes are the moving targets that are spinning with varying speeds within the wheel (i.e. corporation) with one difference - edges over a period of time, transform themselves and find a spot inside the core, whereas, fringes transform themselves into extinction.

Core and Edge Integration Options

What does this metaphor tell us? Winners in the 21st century are the companies, who not only find a way to make their core and edges to work collaboratively, but also, simultaneously disrupt the core with their edges, before they go into extinction. A corollary to that hypothesis is - Are today's corporations overly focused on “STEP” type core P&S’s and business models, and insufficiently aware of the “JUMP” type edge opportunities, and hence fail to disrupt their core, and thereby, let their competitors to eat their own lunches? If we had to further synthesize them - it all boils down to answering the key question – what are the possible organization models available for corporations, to make their core and edge businesses, to work together (but, still disrupt the core) and yet achieve the extraordinary business results, all simultaneously?

While bringing edge to the core is one of the best organizational models (as suggested by Professor Clayton Christensen), we also believe that there are situations, where, we may have to bring core to the edge, especially, when core resources need to adopt the emerging management practices of the edge – which means, we have three possible types of organization models evolving. Depending upon the culture, industry and size of the company, one needs to pick and chose one of the following three models, as one size does not fit all.

1. Edge comes to Core - the centrifugal model: This model is all about taking edge resources and slowly integrating them into core, within the four walls of the existing business division. One efficient Go-To-Market strategy for this type of model is product bundling– i.e. bundling core P&S with edge P&S - and then phasing out the core P&S’s, over a period of time.
2. Core comes to Edge – the centripetal model: Take core resources and move them into a newly formed, autonomous, edge business division with a different set of performance measurement/reward schemes. The edge business divisions come up with a revenue sharing and/or transfer pricing models, with different weight factors across both edge and core BU boundaries. After edge BU is commercially successful, edge can be merged back to the core BU.
3. Core and Edge meets in the middle of the road, with a hybrid spin-off model: Take a set of talented resources from both edges and core business organization, and augment them with an entrepreneurial talent from outside (preferably from different industry) and form a new “edcore Inc”, with a different set of leaders, performance measurement/reward schemes. After "edcore Inc", is commercially successful, it can optionally be bought over by the parent.

Conclusion:
With that said, let us conclude with a key take away – as leaders, we not only must learn to master this “connect the dots” game, with a purpose shifting lenses mindset, but also, we must learn to be both a stepper (duck) and jumper (rabbit) – to face the ambidextrous leadership challenges of the 21st century! Simply put, the billion dollar leadership question before us today is – as leaders, do we want to be a stepper, jumper or both? The choices are crystal clear before us, like the fork in the road, in the words of Yogi Berra- and so, it is up to us, to take it, with an integrated systemic mindset, and then solve it with our 3D process (Decide, Destine and Disrupt) within the context of our firm’s Triune Purpose Frameworks. Interestingly enough, these three phases happen to align perfectly with our firm’s Triune Purpose framework (TPF) dimensions of leadership, strategy and innovation, respectively, as outlined below.

• Leadership is all about discerning those decisions with a purpose shifting lenses mindset – Decide Phase
• Strategy is all about destining those decisions within the destiny puzzle (i.e. Core and Edge) with the purpose shifting lenses mindset – Destine Phase
• Innovation is all about disrupting CORE with EDGE, with the purpose shifting lenses mindset– Disrupt Phase

Having said that, we do agree that edges do have significant obstacles, before transforming themselves into core. However, given the tremendous promises we have outlined earlier- (i.e. scalability, differentiation, consumer relevance, preventing competitors eating one’s own lunch and last, but not the least, the aspiration), edges have a plenty of compelling reasons, to work together collaboratively with core, using one of the three organization models, suiting to the culture of the corporation. And so, let us finish with an optimistic note – while edges, at times, might have lost their battle, the war is not over yet, and so, cheer up edges –very much like how, we are enjoying the gifts of this holiday season, because of the shift that happened 2000 years ago(from law to grace), there is still hope – as tomorrow’s edge gift is always better than today’s core shift – and so, let us continue to collaborate with each other, and make the core-edge integration to work as part of our common sense of purpose– and let that be our last word!

Wish you all Happy Holidays!

Virtual Reality Experience (VRE) Portfolio driven Gamification Platforms – The next Billion dollar Game Changer Opportunity Platforms?

Happy Diwali (aka festival of lights) to our readers from both east and the west alike! As it turns out, there couldn’t have been a better moment than today, to publish this article - as light (energy), according to most “faiths”, indeed has originated from the Word – and rightfully so, it all started with that Word (the creator), saying- “Let there be a light”. Granted, that Word might sound different, in different faiths/philosophies - i.e. as “the Word”, “dvr”, “om”, “allah” or "cosmos"– however, the common consensus, among most of them is that, all of these different sounding words mean the same only.

In other words, the Word, not only created the light, but also, has put the “purpose driven seedal chain principle” in motion, which eventually separated the universe, into real and virtual worlds, within the time, space and matter dimensions, as depicted in the picture above! Rightfully so, the same purpose driven seedal chain principle (i.e. Purpose Driven Word->Light->Energy->Force->Power->Virtual Reality Experience), not only, happens to be the key principle behind our firm’s Triune Purpose Frameworks ( PDL©, PTV© and PIP© ), but also, is a key enabler for answering the following three key questions faced by businesses today, in an integrated manner, within the dimensions of leadership, strategy and innovation - as explained in detail, in one of our earlier articles.

• How far would we want to go? – Establishing the geographical market boundaries to help answer “where to play and what to play” question- Force in Play


• How long would it take to get there? – Setting the timeline expectations to help answer “when do we need to win” question - Power in Play


• How much would it take? – Setting the resource or capability expectations to help answer “How do we win” question - Energy in Play

The journey for the next Billion dollar game changer opportunity starts now…

With that said, I am sure, someone is asking – Where are we going with it? Let us face it – most breakthroughs within civilizations (or businesses for that matter) have happened, only when humans invented new experience pool moments (or market segments), within the context of these three dimensions of time, space and matter, spanning both physical and virtual worlds. While history, (all the way from stone ages), is being filled with many such examples, the one example, we all can relate and understand better is, what Apple/Google/Motorola and others have done, recently within the smart platforms space (Phone, Tablets etc). If you look at it deeply, they, not only have created a brand new experience pool (or market segment which never existed before), but also, have masterfully mixed, both the real and virtual world experience moments, and custom tailored, it to the needs and wants of the 21st century consumers – resulting in the creation of the billion+ dollar market segment, which never had existed before, in the first place.

Sure enough, one of the key questions, that is often asked in our C-suite advisory engagements is – “what is going to be the next billion dollar game changer opportunity within our industry?” The reason it has become such an important question is, because, history is filled with many examples, where most companies, not only, have failed to seize their billion dollar moments on a timely manner, but also, sadly in some instances, have let their competitors eat their own lunches too. So, the natural follow-up question is - is there a proven recipe (or formula) to proactively identify those billion dollar opportunities, on a timely manner, much ahead of the competitors? The answer, in Einstein’s words is- “opportunity identification is 1% inspiration and 99% perspiration” - meaning experimentation mindset, is the answer here- as we never know, which experimentation project, will bring forth the next billion dollar “aha’ moment.

Billion dollar game changer opportunities are all about creating Experience Pools that never had existed before!

With that said, our experience also suggests that most billion dollar game changer opportunities, share a common characteristic of creating experience pools(i.e. market segments) which never had existed before - as evident in the Smart Phone/Tablet story. How do you do that? Part of the answer, is in the phrase experience pool itself – I.e. It is all about redefining the experience moments, within the three dimensional experience continuum of time, space and matter - and then, rendering company’s P&S’s and business models (new and old) within the context of those experience moments. In other words, the success recipe(or formula) is all about augmenting real world physical experiences, with simulated virtual experiences, in the form of hybrid experience models, that is custom tailored to the needs and wants of the 21st century consumers.The challenging part, though is, finding that optimal VRE mix between virtual and real word experiences, as it varies from industry to industry (and company to company as well)- as some industries, like media and entertainment, are very high on virtual experiences, whereas, old economy style brick-and-mortar industries like manufacturing, are high on real world experiences, but very less on virtual experiences.

Virtual Reality Experience (VRE) Portfolio Mix

With digital and telemetry technologies taking the virtual experiences, altogether to newer heights - the key question, that needs to be asked/answered within the context of this billion dollar opportunity phenomena is - what is the optimal virtual and real world experience mix for your industry and then for your company?

Before answering that question, let us first set the stage, with our own purpose innovation driven VizPlanet concept posted within the MIX site (http://www.managementexchange.com/hack/purpose-landing-vizplanet%C2%A9-our-generation%E2%80%99s-sputnik-moment) , as our VizPlanet platform, is one of the great examples, where we had augmented real world experiences, with virtual experiences, in the form of hybrid experience models, and custom tailored them to the needs and wants of the 21st century consumers. With that said, timing couldn’t have been better, that the need of the hour is a framework to arrive at that the optimal virtual reality experience (VRE) portfolio mix for each industry - as optimal VRE mix is going to be the next deal breaker, when it comes to succeeding in this digital experience driven 21st century economy.

Pure Play VRE Portfolio Realms

First things first – Let us define some terminologies. In rudimentary physics terms, Experience pool is nothing but objects (matter or P&S’s) that move in time and space dimensions, producing unique intervention moments! The corresponding real world experience pool equation is => matter+ time+ space => as depicted in the upper right hand side of the picture above.

Similarly, virtual experience pool is the reverse of the above definition - it is nothing but virtual objects (i.e. no-matter or virtual P&S’s) that move in both “no-time” and “no-space” dimensions, producing a similar, yet unique intervention moments! The corresponding virtual experience equation is => no-matter+ no-time+ no-space => as depicted in the lower left hand side of the picture above.

When we combine these two equations, in all possible combinations, we see the following 8 pure-play VRE realms emerging. For an easy readability, we have given a gamification platform example for each realm, so that readers can comprehend the characteristics of these 8 VRE realms within its context. For example, those of us who have played the “Wii” game can easily relate and comprehend the meaning of “augmented virtuality” realm, and so on and so forth. We call these 8 realms as pure-play VRE reams, because they follow a straight line progression within the three dimensional chart of time, space and matter- as opposed to the free-flow progression exhibited by the hybrid-play realms, as explained in the next section.


Hybrid-Play VRE Portfolio Realms

The next natural follow-on question is – what if, if every one of these 8 Pure-play VRE realms get mixed and matched, with rest of the pure-play realms, thus resulting in free-flow progression based, hybrid-play VRE portfolios realms? Rightfully so, some of the business model idea configurations, we had proposed within our larger VizPlanet platform, are classic examples for this free-flow progression based “hybrid-play VRE portfolio business models”, as explained below –

• VizPlant© - Combination of Reality, Duplicated Virtuality, Augmented Virtuality and Alter reality enabled – postponement strategy/telemetry/nano-technology driven manufacturing
  (in-home and/or distributed) business model for CPG, Pharma and Precisions equipment industries.


• VizMall©/VizStore© - Combination of Reality, Duplicated Virtuality, Augmented Virtuality enabled Virtual shopping mall/store platform business model for Retail, Media, CPG and Entertainment industries.


• VizTown©/VizThemePark©/VizClassroom© - Combination of Reality, Duplicated Virtuality, Augmented Virtuality enabled Virtual work place platform business model for all industries.

Please note that these examples are just tip of the iceberg when it comes to the “hybrid-play VRE portfolio realm based business models”– however, when we scratch the surface beyond them, by mixing and matching them in different combinations, we can come up with variety of interesting business model combinations (maximum of 63350 possibilities i.e. 8 possible repeatable combinations out of this 8 realms - using the formula 15! / (8! x7!)), within our VRE portfolio framework.

Conclusion

With that said, the billion dollar challenge before us today is - how can companies, render their products, services and business models, within the context of this VRE realms (each with varying weight factor), producing unique experience moments, that is custom tailored to their company’s purpose seed (or DNA)? The winners, in our opinion, are those companies, who, not only find the right answer for this question, but also, who customize their P&S’s and business models, within the context of this VRE Portfolio Mix, that is further custom tailored to the needs and wants of the 21st century consumers!

In closing, let us fast forward to 2020- in hindsight, let history decide - if we were right on with our intuition!

Integrated Triune Purpose, the missing link between spiritual value and business value?

Those of you, who have been following our blogs closely, would have definitely noticed a key message that an integrated “TRIUNE PURPOSE” driven approach(with its three frameworks - PDL© for leadership, PTV© for strategy and PIP© for innovation) is the best approach, when it comes to discovering untapped growth opportunities. While most practitioners would agree with our conclusion, one of the fellow practitioners, made a causal comment during one of the recent networking events - and I quote -“While it all sounds great to talk about solving these growth opportunities, in an integrated manner, what matters at the end of the day is, financial ratios based business value, and so, everything else is secondary”.

Spiritual Value and Business value – the conjoined twin concepts defined

Our friend perhaps has a point as most valuation models, including McKinsey’s Zen of Corporate Finance Formula, are all based on just three key financial ratios of growth, ROIC and cost of capital. However, as we take a closer look at the six dimensional purpose value chain equation and its elements (spiritual, purpose, leadership, strategy, innovation, scientific as listed in the picture below), we could clearly see a “cause and effect” causal chain relationship, emerging among them, more so, within the triune purpose dimensions of leadership, strategy and innovation. With that said, we contained our enthusiasm (of jumping too quickly into the micro level causal chain analysis), and decided to step back, to define the conjoined twin concepts of business value and spiritual value first- to see how they are interlinked at the macro level -

• Business Value (BV), in its essence, is discounting future cash flows, based on today’s cost of capital, popularly represented using the Zen of corporate Finance Formula, listed below. In other words, corporations not only need to grow continuously, but also, must learn to exercise their investment capital, in a prudent manner, and start producing profitable cash flows, above and beyond the hurdle/threshold rate of WACC, for them to increase their business value -> BV= NOPAT x [(1- g/ROIC)/ (WACC-g)].


• Similarly, Spiritual value (SV), in its essence, is discounting our future heavenly experiences (which happens to be faith & hope driven in most denominations/religions), based on today’s cost of emotional capital (which happens to be love in most denominations/religions), that is expressed using our own version of Zen of Spirituality Formula, listed below. In other words, we not only need to grow spiritually, but also, must learn to exercise our spiritual capital of faith & hope, in a prudent manner, and start living a fruitful life on this earth, above and beyond the minimum threshold of love (or cost of spiritual capital called love), for us to increase our spiritual value -> SV= spiritual gain x (1- Spiritual growth/Return on Spiritual capital)/ (minimum love threshold-spiritual growth).

What do these definitions tell us?

Interestingly enough - very much like how Business value is dependent upon three financial variables of growth, ROIC and cost of capital (or hurdle/threshold rate called WACC), Spiritual value is also dependent upon three spiritual variables of faith, hope and love, and rightfully so, they are interlinked as shown in the picture below -

Spiritual Value is determined by Sustainable Spiritual Advantage (SSA) very much like how Business Value is determined by Sustainable Competitive Advantage (SCA)!

Now that we have established the six way macro linkages across the six purpose value chain dimensions, the next logical step is to layout the micro linkages among them, with a help of few financial charts, for the benefit of those of us, who chart these things for living. As a first step , let us recall one of the key guiding principles that drives value within our Triune purpose framework (PDL©, PTV© and PIP©) - “For Organizations to increase their business value, they must learn to excel in one or more of following 3C dimensions , to achieve the so called Sustainable Competitive Advantage (SCA)”

• Market/Experience Advantage, as covered within our Experience Pool Portfolio (EPP©) framework, addressing the growth variable within BV formula.


• Capability Advantage, as covered within our Capability Pool Portfolio (CPP©) framework, addressing the ROIC and WACC variables within BV formula.


• Collaborative Advantage or Purpose Innovation advantage, as covered in our Purpose Innovation Portfolio( PIP©) framework, addressing both growth (g)and ROIC variables, as collaborative advantage, in our opinion, is the next wave to unleash growth opportunities, especially within the pull side of the value chain, as covered in one of our earlier articles( http://strategywithapurpose.blogspot.com/2011/01/purpose-innovation-answer-for.html).

Within the context of this 3C formula, SCA would be represented as follows -

• SCA = market or experience advantage + capability or competency advantage + collaborative advantage

Similarly, within the context of spiritual value, we see a similar set of 3C’s, resulting in a Sustainable Spiritual Advantage (SSA) formula as well -

• SSA=faith/hope advantage + love advantage +inter denominational/religion collaboration advantage.

As we further dissect each of the 3C’s within SCA and SSA formulas -we can clearly see a pattern evolving - that the top 5 macro charts, that are being used to develop the diagnostic insights within the SCA and SSA dimensions, not only, follow a symmetrical pattern, but also, they end up becoming the stepping stone for each other’s insight (i.e. SCA and SSA),as outlined in the 15 SCA producing symmetrical charts (5 for Market/Experience Portfolio, 5 for Capability Pool Portfolio and 5 for collaborative Pool Portfolio) and 5 SSA producing symmetrical charts, as outlined below.

SCA enabling Market/Experience Advantage Charts

With that said, let us leverage our EPP framework (that is part of PTV), and analyze the Market/Experience Advantage, with a help of it top 5 macro level bubble charts, with revenue in $ being represented as the bubble. To put our symmetrical progression reasoning in perspective, we have provided a sample set of charts, we recently put together, as part of one of our client engagements, to show how the symmetrical progression is manifested within those charts.

• Company’s growth vs. Market Growth


• Company’s growth vs. Relative Experience or Market Share(RMS)


• Operating Margin (ROS) vs. RMS


• Capital Intensity (or Operating Velocity) vs. RMS


• ROIC vs. RMS
  
  

SCA enabling Capability Advantage is analyzed by 5 macro charts within our CPP framework

Similarly, as part of the CPP framework, Capability Advantage is analyzed by 5 macro level bubble charts, with revenue in $ being represented as the bubble.

• Company’s growth vs. Market’s Total capability (primarily capital only for now)


• Company’s growth vs. Relative Capability Share (RCS)


• Operating Margin (ROS) vs. RCS


• Operating Velocity or Capital Intensity vs. RC


• ROIC vs. RCS

SCA enabling Collaborative Advantage is analyzed by 5 macro charts within our PIP and PTC frameworks
Along the similar lines, as part of the PIP and PTC frameworks, Collaborative Advantage is analyzed by 5 macro level bubble charts, with revenue in $ being represented as the bubble.

• Company’s collaborative growth vs. Market’s Total boundaryless collaborative capability (Purpose model, Purpose bundle and Purpose platform etc.


• Company’s growth vs. Relative Collaborative Share (RCS)


• Operating Margin (ROS) vs. RCS


• Operating Velocity or Capital Intensity vs. RCS


• ROIC vs. RCS

Similarly, Spiritual Value is determined by Sustainable Spiritual Advantage (SSA)

Now that we have shown the symmetrical progression existing among the 15 charts from business value producing SCA standpoint, the next steps is to show how they relate to the spiritual value focused SSA. With this article being Business Value focused, we have limited the scope of SSA with just five charts, which hopefully is good enough to show the symmetrical progression from the standpoint of it supporting SCA’s 15 charts and its insights. As time permits, we will go into more details with the remaining 10 SSA charts in one of our future articles. For now, listed below are the 5 macro level bubble charts, with number of souls in # being represented as the bubble, which by the way, happen to be in perfect alignment with the 5 macro level charts of EPP framework.

• Spiritual growth (faith) vs. denomination’s Growth


• Spiritual growth (faith) vs. Relative Denomination/Religion (RDRS)


• ROIC (hope)vs. RDRS


• ROS (faith driven) vs. RDRS


• Operating Velocity (hope driven)vs. RDRS

Does that mean Spiritual Value is the starting point for Business Value?

With that said, I am sure, someone is asking – “does that mean, business value must always start with the spiritual value?” The answer is “IT DEPENDS”, as the spiritual value culture invariably precedes Purpose driven leadership (PDL) culture in most organizations, and so, it is fair to say that PDL can be sourced either from a “higher power” based spiritual leadership culture or from an emotional energy based leadership culture, as long as it has the three key ingredients of faith, love and hope. Nevertheless, our integrated “triune approach” is well positioned to bridge the missing link between business value and spiritual value regardless of the source of the spiritual value (higher power based and/or emotional energy based), as outlined in the picture on the top of the article. It so happens, our PDL leadership framework, equally works well for both realms of cultures i.e. higher power driven spiritual value culture and Emotional energy driven spiritual value culture, as outlined in the picture below as well.

Triune Purpose in action with real world examples…..

With that said, our research also suggests that leaders with a deep sense of spiritual value (or faith), tend to dream bigger visions, regardless of their source of inspiration (i.e. higher power based or emotional energy based) and those big visions are the ones that help them to create those futuristic experience pools (or market segments) which never had existed in the first place, as seen in the following 5 examples from 5 different walks of life-

• Colgate founder William Colgate, a farmer by occupation, venturing into the multi billion dollar Colgate empire, inspired by his Christian Faith –> Spiritual energy based.


• Aravind eye hospital founder Dr.G.Venkataswamy, revolutionizing eye care with a shop floor type business model, inspired by his Hindu faith based Seva Foundation roots –> Spiritual energy based


• Professor Muhammad Yunus, the Nobel Prize winner, founder of the Grameen Bank, and one of the pioneers of micro finance, being inspired by his Islamic concept of charity and faith –> Spiritual energy based.


• Alexander the great, with his emotional energy based faith, conquering most of the known world in his era –> Emotional energy based.


• Steve jobs with his emotional energy based faith, revolutionizing the mobile space –> Emotional energy based.

In all of these five examples, if at all there is a common denominator, it is the fact that these leaders have always started their extraordinary journeys, with a deep sense of faith (higher power based or emotional energy based) and that faith is the one that had eventually helped them to revolutionize the market place or world in a larger context. In other words, in all of these five cases, these revolutionists, ended up creating an experience pool (or market segment), which had never existed in the first place at all. Without going too much into all of their life achievements, let us take the most recent example of Steve Jobs (as he has been in the news a lot lately), and see how his emotional energy driven, faith based vision, helped him to create an experience pool (or market segment) which had never existed before, further reinforcing our triune purpose linkage theme, as shown below.

• Emotional energy driven faith ->big vision->bigger experience pool/market segment which never existed->higher CAGR/ROIC->higher business value

As we further look at Steve Job’s legacy, it is apparent that his “hope and love” part of the emotional energy system was working in perfect harmony with his faith part, every step of the way, especially while he was developing Apple’s futuristic experience pools. In other words, it was his hope part of the emotional energy system that gave him the “never give up” attitude, even when things were impossible for him to climb. Let’s us face it – no matter how we slice it, odds of him reaching to the top of the most innovative company on the face of this planet, were near zero, if not, totally impossible– first growing up in an adopted home, then dropping out of the college, which when was followed by a period when he had to collect soda cans for a single meal, which then was followed by a period of success, and then came the unjust ouster from Apple during his first stint and then the cancer – wow, what a ride! But then, in spite of all of those odds standing against him so high- he neither lost his hope nor his spirits - and in my humble opinion, that is what made him one of the great business leaders of this generation! Not only that, during all those difficult days - he never lost his Mojo or his love for his profession (and to humanity as well) – and in nutshell, he truly lived up to his own slogan – “Stay hungry and Stay foolish”.

Conclusion

In closing, let us conclude with this thought – our combined experience, along with a decade worth of research is showing us that most companies, historically, have succeeded, only when they have taken an integrated approach in discovering untapped growth opportunities. Time and time again, we run into situations, where many “near picture perfect growth strategies” and game changer type innovation plans, have often been put on hold (or stopped?), partly because, appropriate leadership traits, were not exhibited during critical junctures - which makes us to propose another slogan "Lead with the Purpose Culture, Strategize from the Core and Innovate with the Edge". As we further dissect this slogan – we see the following sequence of events happening in any untapped growth discovery initiative, as reiterated further, by our triune purpose driven approach -

• Lead with the PDL leadership framework, to help develop the purpose culture that is needed to set the cultural context and order from the chaos.


• Strategize with the PTV framework, to help establish the boundaries as “Core and Edge”, so that the firm can start strategizing from Core.


• Innovate with the PIP framework, to help innovate without boundaries, yet, with an initial focus of innovating with the edge.

With that said, let us summarize the article with a final quote –

• “THE ME”, one wants to be (Spiritual value) must be aligned with the “THEME” (Business Value), the company wants to be, so that the stakeholders can reap their value, when it is completely THEMED to be!”

The prerequisite for such a magical transformation, is all about us removing the “ME” from the “THE ME” space first and then together transforming it into the “THEMED” place– and that is where, our integrated TRIUNE PURPOSE driven approach, stands tall and bridges that missing link perfectly - as outlined in the picture on the top of the page!