Author: TranscendStrategy

Karzai’s conundrum: leading in volatile, uncertain and dangerous times

Readers around the globe have recently been presented with a harsh rebuff of Afghanistan president Hamid Karzi’s choice of Mohammed Quassim Fahim as vice-presidential running mate in the upcoming election. Fahim served in this capacity once already (2001 – 2004), and was dropped as controversial. He has a checkered past as a top commander in the militant group Jamiat-e-Islami during the 1990’s civil war, and is believed by some to have illegal, criminal involvement to this day. The group Human Rights Watch has been documenting abuses in the country for years, and is aghast at the announced alliance, saying with this choice Karzai is “insulting the country”.

In the face of such vociferous, predictable condemnation from abroad as well as within his own country, what would lead Karzai to pick Fahim? The reporting in the AP article we read doesn’t ask this question, but arguably it should and so should we all in making sense of the decision.

We all know that ruling in a country like Afganistan at a time like the present is fraught with risks and that scant rewards are available. The question the leader needs to ask is what is the core dilemma I need to address to make a difference in the situation; where do I focus my and my country’s available resources?

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One dilemma that captures the moment and explains the “curious” political decision is the need to promote well-being, peace and improvements on the one hand, while on the other, growing and maintaining credibility and influence. As the matrix above depicts, inherent tensions make this a dangerous and challenging pursuit. Lean too far in one direction and you are seen as unsuitable for the mission at hand. Lean the other way and you will be mistrusted by your own people or the other countries who care about the direction of local events.

This tension between pursuing progressive change versus establishing trust and credibility is of course endemic to volatile transitional situations like we are witnessing in Afghanistan. Others that come to mind are Palestine (Abbas versus Hammas) and Sierra Leone (post- civil war “blood diamonds”).

Identifying the core dilemma does not “fix” anything, but it makes it possible to work on the right issues in the most helpful way. It brings honesty and integrity into the process. It creates a shared understanding and vocabulary for parties to dialogue and be understood.

Foundations: What Is 2 x 2 Thinking?

We use the term “2 x 2 Thinking” to describe a powerful approach to problem-solving that we have observed, documented and taught in our work as consultants and business advisors. It’s a method that recognizes that dilemmas are inherent in business and uses creative tension as fuel to drive innovative solutions and break the logjams that impede strategic decision-making.

The classic BCG (Boston Consulting Group) matrix offered a way of evaluating products and divisions along two axes: Market Share (which represents financial performance) and Market Growth (which represents the capital needs of the business unit)

In the book, Power of the 2 x 2 Matrix, we present fifty-five remarkable 2 x 2 frameworks. These were carefully chosen, (from more than 300) to help managers and institutions organize and focus problem-solving efforts. We find that nearly all 2 x 2 models share a common structure, one which is responsible for their strength. 2 x 2 models can range from the highly intuitive to the ingeniously complex. Classics such as the BCG Product Portfolio (familiar to any business school grad) or Stephen Covey’s Urgency vs. Importance (well-known to the millions of people who have read his books) help frame the common tradeoffs that organizations and individuals face. Others such as the perceptual maps frequently used in competitive marketing analysis, are more taxonomic, defining possible areas of focus and action, and creating a sound basis for decision-making.

It is the underlying dynamic structure of 2 x 2 modeling that brings richness, depth and a uniquely transformational power to this simple form. There is a right and wrong way to construct a 2 x 2 matrix, and the key lies in how the prime factors are selected and applied. Successful application is dependent on a particular cognitive and emotional bias in approach, which we call 2 x 2 Thinking. 2 x 2 Thinking is open as opposed to closed, proactive, and drawn towards inherent conflicts in search of resolution. The very best instances of problem-solving share a number of characteristics which comprise the core of 2 x 2 Thinking. The following seven points illustrate this more fully:

* 2 x 2 Thinking leads to an open exploration of issues to unearth inherent tensions; these tensions exist within an evolving context, where focus shifts as old points are resolved and new tensions emerge.

* 2 x 2 thinkers recognize the importance of learning as both a condition for change and a key enabler; learning involves embracing the new and letting go of unhelpful and invalid views.

* 2 x 2 Thinking is often but not necessarily interpersonal; where others are involved, dialogue is rich, informative and honest.

* 2 x 2 thinkers move towards not away from complexity; the act of focusing on a core set of variables does not reduce or simplify analysis – it enriches it.

* 2 x 2 Thinking requires openness leading to rapid modeling and reframing; problems are re-considered, and underlying assumptions are vigorously challenged.

* 2 x 2 thinkers are drawn to seeing both sides of an issue; this often leads to paradoxical situations which are explored rather than denied or ignored.

* 2 x 2 thinkers simplify to intensify focus; confusion is replaced by a core dilemma that holds the key to deeper meaning and more informed choices.

The simplest 2 x 2 problem-solving behavior involves looking at the other side of an issue before reaching a conclusion. A simple “what if” exercise will accomplish this. Dilemmas are a more interesting case. Dilemmas pull us simultaneously in competing directions, each one compelling in its own right. While dilemmas rarely feel good, they often contain the seeds of deeper understanding and a superior solution than we are otherwise capable of finding. The trouble with our experience of dilemmas is that they generally happen to us, and we feel out of control. 2 x 2 Thinking recognizes the power in exploring competing forces. By intentionally constructing dilemmas, we challenge ourselves to think at a higher logical level

Most small businesses ultimately face tough dilemmas about growth and exit strategies.

Often it is not really about choosing one or another option. Something is missing in the decision process. It could be perspective, excitement, confidence, agreement among parties, or additional alternatives. Here’s an example: Should we invest in growing our business or should we take profit now? This simple dilemma has caused thousands of business owners sleepless nights over the years. Viewed as a simple and straightforward choice, it is not very interesting or enlightening. However, a poorly thought through decision based in fear, greed or misplaced confidence can prove hazardous to the business over time. In contrast to this, we can construct a 2 x 2 decision-matrix to intensify and deepen the way we think through the issue. Looked at in this way, there are really two sets of choices to make rather than one. And, it may not have to be a forced choice between this and that. In the best of cases, it is possible to realize both ideals by reframing the question, seeking a solution that is both/and rather than either/or. This is what we call a transcendent solution.

Transcendent both/and solutions are all around us in the business world. Southwest Airlines is both a discount carrier and highly profitable, a combination that conventional wisdom said was impossible when Southwest was crafting their strategy two decades ago. When IBM had been battered by years of losses, Lou Gerstner turned a deaf ear to Wall Street’s demand that he sell off parts of the company in order to get back to basics. Instead, by focusing on services as the main offering to customers, he was able to leverage and recombine the company’s expertise in semiconductors, computers and software and return to record profitability. Toyota was long a low-cost leader in automobiles, but also became a quality leader when it introduced its Lexus brand, bringing the values of maintenance-free reliability into the luxury car market. Today, it is a leader in low-cost production and high-quality luxury cars, positions that were previously considered an either/or option for manufacturers. In all these cases, and many more, strategists were willing to challenge previous assumptions, and reframe competitive dilemmas in a way that enabled them to create innovative positioning and solutions that others could not match.

All materials copyright Transcend Strategy Group 2009

Foundations: The Problem Hierarchy

by Alex Lowy
Perhaps the single most important lesson in the book, No Problem, is that not all problems are problems. Sounds confusing at first, but stay with me.

Challenging issues differ depending on two factors – complexity and uncertainty. Complexity is about the level of interdependency between forces in a situation. Uncertainty describes the extent to which you can predict influences and outcomes.


Make Decisions
When complexity and uncertainty are relatively low, you have decisions. The essence of making decisions well is being clear about what is being decided, and knowing both the options and the criteria that will be applied.

Think about situations like choosing a restaurant for dinner or a supplier for your business.
Whether the issue is mundane or very important the basic method for making decisions is to list your options and apply your criteria. Your goal is to apply the right (relevant & accurate) information in an organized way, and to prevent irrational factors like fears, assumptions and biases from interfering with the process. The steps are straightforward, but applying them is often tough. And don’t confuse this with simply being “rational”. Decision making often requires checking in with your feelings and your heart to know how you feel about something. The key is doing it within the decision making process, so for example, one of your criteria for picking a supplier could very well be ‘feeling comfortable and trusting” them.

Solve Problems
When complexity and uncertainty are somewhere around middle intensity, you are dealing with a problem. Problems need to be solved. And the great thing about problems is that they can be solved. Problems are situations where there is a discernable gap between what is happening and what is expected or ideal. In problem solving, we find a way to fix that. There are two paths to solving problems, rational and creative. With the former, we work hard to identify root causes and then address them, while in creative efforts, we need to tap our unconscious and associative powers to “invent” a solution. For many problem solving situations, both rational and creative methods are needed, and not surprisingly, the best problem solvers tend to be good at both.

Want an example? You’re in the bottling business and the packaging materials are falling apart enroute to customers. This didn’t used to happen, but now it does. A root cause approach would search for what’s changed that might lead to the problem. And if this didn’t surface anything, a creative approach might look for ways to deliver the product without the need for packaging at all. Creative approaches are often the right way to go when you’ve reached a stuck point, but still believe there is a solution to the problem.

Manage And Exploit Dilemmas
When complexity and uncertainty are high, you are facing a dilemma. Dilemmas are situations where a great deal is at stake and you feel torn between opposing forces. Much as you might wish you could simply choose one or the other direction, with dilemmas it’s just not that simple. Each option has advantages but also consequences which need to be considered. Should I do what my head is telling me to do, or should I follow my heart? Is it better to play it safe in a particular situation or to be risky?

Examples of dilemmas are all around us. When you’re purchasing a new car, do you pick the one you find most exciting or the one that will meet the practical needs of your family? When expanding your business, do you need to borrow money or take on equity partners? With dilemmas, it’s important to address the core tension directly with courage and integrity. It always feels a little scary working with real, important dilemmas, but it is also exciting and it frees up energy. Not surprisingly, the best leaders and critical thinkers do it with courage and grace.

Know Your Approach
So, why do we care about making distinctions between these three levels of challenge? Because for each there is a different approach and attitude that works best, and if you use the wrong one, your chances of success are seriously diminished. In the next post, I’ll get into some of that.

Foundations: Dilemma Archetypes

Take apart any strategic dilemma and you will find a basic struggle occurring between opposing forces; Quality vs. Speed; Time vs. Money, Risk vs. Reward. These eight Archetypal Dilemmas offer thematic groupings of common struggles. Each archetype is a response to a particular question or challenge.

Download the Archetypal Dilemmas Self-Assessment, a short exercise that will help you identify the most important dilemmas currently facing your firm, and suggests first steps in approaching these issues.

Head & Heart

Key Question: How can I choose between these?

Description: The toughest choices are between doing what makes sense and what feels right. Achieving alignment between the 2 is a source of great power.

Scenario: Selecting the low-bid supplier will end a meaningful 10-year relationship with the existing one.

Inside & Outside

Key Question: How do we meet the demands being placed on us?

Description: Systems do best when they are well matched to the demands of their external contexts. Matches of greatest interest are structure, competencies, and culture.

Scenario: Acme co is losing customers. A satisfaction survey indicates the likely cause is poor after-sales service.

Cost / Benefit

Key Question: What is the price of getting what we want?

Description: Efforts to predict the future involve risk, and choosing the course of least pain and greatest gain.

Scenario: The ad campaign is necessary, but is it worth the investment in these tough economic times?

Product / Market

Key Question: Given this starting point, what are our options?

Description: You can change the essential offering or you can modify how, where or when it is presented.

Scenario: MacDonald’s started as a local burger joint in San Bernardino, California. The same product formula is now served in over 30,000 locations around the world.

Change vs. Stability

Key Question: What do we need to do to adapt? How much change is healthy? How do we get unstuck without falling apart?

Description: Systems of all size and nature are in perpetual dynamic tension between the forces for growth & adaptation on the one hand and integration and stability on the other. Too much of either is deadly, leading to chaos or rigidity.

Scenario: Recognizing that a new manufacturing process was essential, a company wisely invests in training staff ahead of the change.

Know / Don’t Know

Key Question: What is known, what is not, and what is known about what is or isn’t known?

Description:

Self-knowledge is mapped against Others’ knowledge.

Different forms or levels of knowledge represent problems and opportunities

Scenario: Since no one would tell the emperor he wore no clothes, he became an object of ridicule.

Competing Priorities

Key Question: What should I do first? What’s really more important?

Description: We are driven to shortsighted trade-offs, relieving immediate pressure and pain, but postponing tackling truly important tasks.

Scenario: Clear-cutting the world’s forests is making forestry companies rich and the planet poor.

Content vs. Process

Key Question: Are Content & Process healthy and aligned?

Description: Content is the What, process the How. Success in most things requires a sufficient mastery of both of these qualities.

Scenario: Your words are saying yes, but your eyes say no. When a company like Dofasco says, “Our product is steel, our strength is our people”, they are recognizing the interdependency between the what and the how.

All materials copyright Transcend Strategy

Repost: Apple’s Trojan Horse Is Working Well

In 2005 we published a piece, “Apple’s Trojan Horse Is Working Well” which detailed how the tried-and-true Ansoff Matrix (products/markets) is useful in illuminating the phenomenal interaction of product and market development strategies Apple pulled off with its iTunes software, iTunes store, and iPod hardware. The piece was popular with readers then, so we’ve brought it back. We’ll update it, with a look at the iPhone phenomenon, in a future article. Here’s the original piece….

Apple stock continues to perform well, spurred on by sales of its iPod music, and now video, player. The music player market is hot and likely to remain so until 2007, which means Apple has plenty of good quarters ahead. Even better for the company, in the past year analysts such as Steve Milunovich of Merrill Lynch have stated that sales of the iPod are going to drive increases in computer sales, as new customers become accustomed to the Apple brand for the first time. As was predicted several years ago the iPod has become a , introducing Windows users who previously would not consider a Mac to the Apple user experience.

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The Product/ Market Matrix provides a useful tool for thinking about this evolution. Published by Igor Ansoff in 1965, it is still incredibly useful for focusing one’s thinking about growth. Ansoff worked at ITT in an era of large conglomerates. His work helped firms rationalize their investments, and logically consider the risks and rewards of growth options.

For most of the 1990s Apple was stuck in the personal computing world. Rather than adding customers and products, it shrank in market share and abandoned some markets (handhelds, printers). It was plainly stuck way down in the lower left quadrant, with little in the way of great growth prospects until the new iMacs, released in 1998, spurred interest among existing customers. The message of the market was clear. Making Macs better was not the problem. The market needed something more compelling than a computer that was slightly better than a Windows PC to convince new customers to give the company money.

The iPod was the perfect rabbit to pull out of the hat. Apple’s core audience is multimedia-oriented, so a Mac-ish musicplayer was a step in the right direction. It also helps that Apple is well-known for charismatic product design; the public is a little more willing to give an Apple innovation a try. When early models got rave reviews, even Windows users who were deep into downloading wanted one. Once the iTunes software was released on Windows the iPod zoomed. In Ansoff terms, a successful Product Development strategy that succeeded immediately had positioned Apple for a Market Development strategy. Suddenly Apple was not just developing new revenues (upper left), they were also growing a new customer base (lower left).

Then came the coup de grace. The iTunes online music service was a diversification strategy which took Apple out of its traditional business model—cool, elegant, user-friendly hardware—into a retail services entertainment business. Everything about the business, from frequency of customer contact to how profits are taken, is different.


This diversification benefits Apple in two ways. First, it provides an opening into media distribution that may be a future path for the firm. It’s clear to many observers that personal computers will not be the only centerpiece of tomorrow’s digital entertainment universe. Providing an assortment of electronics gear and content gateways may be preferable. Second, it sets up a virtuous cycle. The more people who use iTunes, the more these new customers are likely to try an IPod or even a Macintosh product.

As Apple puts iPods into millions of new hands each quarter, it is creating iTunes users and developing potential customers for Macintoshes, and new products yet to come such as future video iPods and newer iPod phones. Think of Apple’s groups of users as interpenetrating communities—Mac users, iPod users, iTunes users and so forth. Each improvement to hardware, to the iTunes software and the music store, is leading to enhancements in the user experience for all of those groups. Apple has unique strengths that have enabled it to succeed with this multi-level strategy which all started with a great product (the iPod) and an a