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May 21,2021 Strategic Planning

Strategy Design and Test

Strategy Design and Test

Strategy Design and Test

Strategy Design and Test

In the 1980’s, Howard Shultz, then a general manager of a coffee shop took a vacation to Italy. He quickly became obsessed with the Italian espresso. Not necessarily just the drink but the experience of resting your feet, grabbing a drink, and catching up with a friend. Shultz envisioned this back home in Seattle and later to his purchasing of the small Starbucks chain. He then set upon his vision of testing this experience out hundreds of times, action planning, iteration, scientific induction until he found the model that worked.

Like the Constitution, Starbucks knows that their business model is one of constant evolution and one that is never complete. This brought forward their Tryer Center. The goal of simply trying out new ideas and then being able to put them in action within 100 days. Ranging from drink and product testing to store modelling. Using 3D printing to make more efficient and space saving equipment, their work is endless but always improving through test and experimentation.

Walmart follows a similar testing model. Under a need to lower expanding costs, the leadership team used their test store to tryout new strategies. They theorized that by using fewer managers that they’d be able to push decisions down to empower customer facing positions that would lower costs, improve employee engagement, and improve customer satisfaction.

Test Before Invest

Design thinking and the Lean Startup both rejuvenated the idea of prototyping. Instead of releasing fully vetted products, lean startup applies a quick move to market for validation and iterations (Blank, 2013). As an entrepreneur you wanted to see how products worked in the market if at all. This could save you months if not years by not investing too much time in a product that has no consumer.

This same approach is true with strategies, these are large scale investments, and you want all the data you can get before fully committing your organization to it. This model calls for taking your top two or three strategies that made it through your ideation session and then implementing all three on a mini scale or in a simulation. The goal is to have all strategies compete against one another to see which is the most viable.

With strategies, you will want to experiment. Test to grasp what the impact would be and to determine what unknown variables show their head. To effectively do this though, the modelling and tests must be modeled in actual conditions and it must produce usable data.

To Test or Not To test

War is the art of extending forces without exploiting them. To embrace the enemy and take their flank without exposing their own. The business world applies the same logic, probe for understanding and commit to the right spot. Unfortunately, management teams have been trained over years to see strategy reviews as a defense plan to protect their resources instead of an offensive approach. Strategic testing changes the calculus to see strategy as getting a better view of the battlefield instead of digging into a death trap.

The principles of business are just one, concentration of efforts. Before you focus your efforts make sure it’s the right move and not a trap. There are numerous self-imposed traps: seeking dominance, lack of strategic discipline, over centralization, assuming competition have the same overreach, and overreacting to new products.

When approaching your strategy, remember that making the wrong choice happens all the time. Strive to get as much data as you can without delaying the decision process. The data will help you make better decisions, but it can paralyze you if you cannot act upon that information. More importantly, emphasize your ability to be agile enough to know how to alter or when to abandon your strategy sooner rather than later.

Testing in Action

Testing starts with getting the right talent to design and execute experiments that will paint a clear picture for the decision makers. The testers will not be master strategists but designers. Their goal is to inspire a clarity of thought.

Associated with the design of prototype is maintaining independence of each prototype. For example, if you ran a national chain and were trying out two different strategies, you may want to try out one strategy in the east coast and the other on the west coast so that they do not interfere with one another.

You also want this to mimic reality and apply an action research approach. This is adjusting as the experiment runs to tweak it as it is in process. It will keep the data clean and portray an accurate representation of its future implementation.

Much of this approach falls under the philosophy of Ayn Rand. While not a management theorist, she preached a need of philosophy to develop our values and defense from manipulation and control. Picking apart assumptions which are the foundation of our truths. Be willing to engage with what we hear and not take at face value (Parish, Ayn Rand on Why Philosophy Matters, 2019). Your testing shouldn’t confirm your estimations. It should drive questions, dialogue, and deeper understanding. This elevates your strategy when you bring it to implementation.

Testing in Today’s Environment

When setting up your strategic tests, there are six traps that can fool you and your findings.

  1. Trying to do it all
  2. Attacking competitors’ strengths
  3. Facing multiple fronts and threats
  4. Trying to do something for everyone
  5. Striving for a dream state
  6. Having your strategy be the program of the month

When designing your strategic tests, try to reverse engineer the strategic outcomes. Frame the choices and then generate possibilities. Next specify the conditions that will accurately reflect the market and identify the barriers to success. Lastly design valid tests, let them run, analyze the data, and then choose.

You will also not want to run too many tests and will want to consolidate the prototypes. You want to look to create economies of scale that can be quickly standardized. Attempt to gain greater focus by getting rid of fragments and acquire to critical mass.

Probing

Probing and testing is a common military practice. Small sniper and reconnaissance units will go out ahead of the main army looking for the enemy to observe. Their goal to see what the competitor is doing and provide information back to the main army on how to shape their future encounter.

The next level of this model is skirmishes. Here a deployed cavalry or infantry soldiers move away from the main body of the army with the intent to create conflict. This is used to protect the main body of the organization by contacting the enemy to shield their true size and prevent an advance. General Ulysses S. Grant would attempt to be in constant skirmishes with the Confederacy as to always know where his enemy was.

This does have a useful business translation. Competitive analysis and market understanding starts with reconnaissance. It then transitions to the test phase mimicking skirmishes to see how customers and competitors react. This provides the insights on where to strike with the main body of the organization using a focused strategy.

References

Strategies for Learning Through Failure

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