Steve Neiderhauser

Never outsource your eyes

I've been jumping from page to page in a new book (see below) I'm reading -- Blue Ocean Strategy. I happened to land on this remarkable paragraph.

A company should never outsource its eyes. There is simply no substitute for seeing for yourself. Great artists don't paint from other people's descriptions… they like to see the subject for themselves. The same is true for great strategists.

“Never outsource your eyes” evokes some vivid images. Just picturing the phrase (the actual separation of my eyes from my body) while I write makes me cringe. And it's important advice because vision is the only sense that allows us to see the future.

The authors are talking about the importance of visual thinking when it comes to strategy. So if you're an executive, don't send your subordinates into the field to watch how customers use or don't use your products. Instead, see for yourself and you'll receive creative ideas and be able to condense complex concepts into a concise canvas.

In a previous post, I explained that the concepts from screenwriting can be used to create a leap in value for your company. Now, consider how the authors magnify the importance of visual strategy with a quote:

The soul never thinks without an image.

-- Aristotle

Build Execution into Strategy

This week I purchased some Stonyfield Yogurt. As I was putting one of the cups of yogurt into my fridge, I read the label and noticed that they recycle the plastic and use wind energy to reduce reliance on oil.

When I reach for a Stonyfield Yogurt I get the benefits of yogurt and eliminate pollution from fossil fuel. So, in a way, I'm executing Stonyfield's strategy when I buy their product. But first, Stonyfield's employees had to buy into the corporate strategy.

The authors – W. Chan Kim and Renee Mauborgne -- of Blue Ocean Strategy recommend building execution into strategy from the start. Overcoming the organizational hurdles to strategy execution is an important first step. They describe a company that built an expert system; the system was supposed to make life easier for the salespeople. Instead, the salespeople felt threatened by the software and sabotaged the system.

So whether you're buying yogurt or involved in a complex sale, you must believe the process is fair.

Options Thinking in Project Management

The current issue of California Management Review includes "Options Thinking in IT Project Management." The article provides a number of real examples, including Starbucks' pre-paid card project, that show how the value of embedded real options can be realized through project management. The authors -- Robert G. Fichman, Mark Keil, and Amrit Tiwana -- list six kinds of real options and describe how value is created.

Consider the Switch Option -- A key foundation technology supporting a project can be swapped out for another.

How is value created? "Over time, the relative value of alternative uses becomes more apparent and only uses with positive payoffs are pursued."

Apple's announcement that they will replace IBM's PowerPC processor with an Intel Pentium is an example of a Switch Option. Ever since the first version of OS X was released, a development team has maintained a version of OS X that runs on Intel hardware. So, over time, Apple has held an option to run OS X on another platform. Now they want to exercise this option because they believe they're in the money -- the value of the option has become abundantly clear.

I'm sure Apple wanted to negotiate faster and cooler PowerPC chips for their PowerBooks, just like you'd enjoy negotiating a $20K pay increase at your next employee review. We all know, however, that an option is often a better alternative to a negotiated agreement. And in most cases we have to create our own options -- a shiny new college degree so the company down the street gives you a promotion and a pay raise.

Typically, the value of real options far exceeds the cost of the option due to the nature of software. Good design creates flexibility while lowering development costs. If you want to spot a developer who understands how to build options into software from the ground up, look for the person who isn't being tossed about by every sea change.

Benjamin Graham used an analogy to describe how smart investors take advantage of the stock market. He created a fellow named Mr. Market who is a personification of the stock market. One day, Mr. Market would be wildly optimistic and bid prices up. The next day, Mr. Market would be so despondent that he'd sell everything and drive prices down. The Intelligent Investor would stay calm and profit from these wild swings.

The stock market and technology market are fast-moving markets. And it's the swirl of volatility that creates value. Indeed, the more an environment changes, the more valuable embedded options become. What's more, if you can use options to generate ripples of change throughout your industry, some of your less agile competitors may have to exercise an abandon option, giving you greater market share.

Not your father's MBA

More business schools are developing programs that create
integrated thinkers.
 
This business week article explores the changes at several business schools.