All we do know is that our fast-paced, complex, technology driven, uncertain world prior to January 2020 will be eclipsed by one in which these factors will be multiplied 10-fold. If you thought planning for the future was difficult before, just wait.
We’re experiencing an event analogous to what biologists call a Punctuated Equilibrium (PE). Biologists identify five PE’s in the last 500 million years — the event that caused the demise of the dinosaurs was one. It didn’t matter if one was the fittest dinosaur in the pre-meteor strike ecosystem (think Tyrannosaurus Rex), when the ecosystem changed drastically, they died. There were a few cold-blooded reptile survivors (think crocodiles), but the new ecosystem favored those who could adapt to the severe weather changes — the warm-blooded mammals.
So, what should be your response to this equilibrium that has been punctuated in our economic ecosystem? Is your organization analogous to a dinosaur, or a mammal? What was the key to mammalian thriving, besides luck? Adaptability, adaptability, and adaptability. What is the key to your organization’s thriving? Adaptability, adaptability, and adaptability.
McKinsey insights article.
What You Will Learn
Recover and Reimagine
The first task for every organization — business, government, or non-profit — is to recover, to pursue the short-term adaptations needed to survive. Unfortunately, some organizations will run out of cash before the adaptations succeed. No one knows how long this recovery phase will last — much will depend on your industry, and the course of the virus. Recovering actions should stress operational excellence because if operations falter, especially regarding rigorous financial management, companies won’t survive long enough to reimagine the future.
As recovery efforts are underway, reimagining needs to begin by imagining different scenarios. Since the future is fuzzy at best, thinking through different economic, social, and governmental scenarios provides a baseline for developing ideas. These may include how your customers might view your products and services differently or how your employees want to work in a different fashion. Because of the scale of change, new opportunities will abound, but so will perils. Navigating these will require deft, bold leadership.
Reimagining requires both setting strategic directions and coming up with new business models based on revised customer and product alternatives. Whether you are recovering or reimagining the critical capability is adapting.
Speculate-Evolve rather than Plan-Do
In 2000, Adaptive Software Development introduced a lifecycle of Speculate-Collaborate-Learn to replace the waterfall lifecycles of the day. The word speculate was off-putting to many at the time, as were “extreme programming”and even agile. Twenty years later, maybe Speculate is appropriate for our times. The word “plan” connotes a deterministic view of the world, one in which we expect the plan to be adhered to — a view in which only small deviations are tolerated. If you think you can plan the next few years, or even the next several months, with any degree of accuracy your business will probably be in trouble. Speculate doesn’t mean we give up on planning — it means that we approach thinking about the future in a different, speculative way.
In 2019, EDGE used the phrase “Envision-Evolve” to represent the mindset needed in turbulent times. In more stable environments the mindset was more “Plan-Do.” However, in today’s environment Speculate seems to better reflect where we are. Once you reimagine your future your will need to Speculate on goals to get there and then Evolve towards those goals. Maybe it should be Speculate-Envision-Evolve. Speculate about your short to medium-term opportunities based on a set of scenarios and assumptions. Envision how to turn those opportunities into goals, bets, and initiatives. Evolve experimentally towards your goal.
Although agile and lean methods have emphasized the problems with a Plan-Do mindset in times of uncertainty, many people still lean towards the false security of prescriptive plans. No more. This mindset did not work well before COVID-19, and it will not work at all post-COVID-19.
Evolving requires defining customer value measures, broad based collaboration, innovative ideas, quick feedback, learning from that feedback, and responding to that feedback — including abandoning your hypothesis, or pivoting appropriately. And, you need a structure in which to operationalize this adaptive culture.
Lean Value Tree — A framework for an adaptive future
To thrive you need a framework that provides mechanisms for thinking about the future in a different way — explicitly focusing on customer value, measuring outcomes, providing iterative learning, and encouraging innovation. EDGE’s Agile Operating Model proposes a Lean Value Tree (LVT) that is composed of Vision, Goals, Bets, and Initiatives (Figure 1). To survive our PE, you need to employ a Speculate-Envision-Evolve mindset at all levels of the LVT.
Vision: Sets a guiding direction towards which investments should contribute.
Goals: Created from business drivers to deliver on the vision.
Bets: Specific ways Goals might be realized. Multiple Bets show different ways of achieving a goal.
Initiative: Actions to deliver tangible value.
Figure 1: A Lean Value Tree
While this LVT may look like a traditional planning hierarchy, what makes it unique are its focus on customer outcomes, related Measures of Success (MOS), and experimentation. Outcomes, not outputs, should drive your process. At a strategic level this means that customer value should replace return on investment (ROI) as the driver. ROI is internal, customer value is external. ROI is extremely important; but it’s a constraint, not an objective.
A new framework will only get you so far: you also need to execute it rapidly, speeding up the entire process. Take your normal planning processes timing and cut it in half. Then do it again, and again, until you can keep up, and get ahead, of competitors.
Starting at the bottom of the LVT and working up: Initiatives deliver products and services. They deliver the results that ultimately deliver on your vision. These implementation cycles should be short, or even continuous, thereby providing an ability to adapt quickly.
The key in the LVT to encouraging adaptability are the Bets. If you’re going to Speculate about the future, then you need to place Bets on one or more hypotheses. While Initiatives give product teams the ability to adjust to detail level learnings, Bets give mid-level management teams that ability to respond to broader issues in product evolution. While Vision and Goals should change more slowly than Bets and Initiatives, they should not stagnate as the results of Bets and Initiatives inform progress on your Goals that may need to be adjusted.
Adaptability-Speed rather than Cost-Efficiency
Are technology cost and efficiency important? Of course they are. Will they determine your success? Of course NOT. As you move from strategic Goals and Bets to executing initiatives, adaptability and speed will determine success. Customer value drives your operating model. Adaptability and speed will determine your effectiveness in achieving those goals.
While most of us accept the need to be adaptable, what about speed? Speed has been known to get people in trouble. As it turns out, it’s how you pursue speed that makes the difference.
McKinsey insights article
As the McKinsey quote illustrates, time, and specifically cycle time, will be even more important in the future. It’s not how fast you perform a certain task, but how fast you perform a series of tasks that produce customer value. There are major cycles, such as concept to cash, and shorter contributing cycles, for instance weekly software development cycles; your goal should be to balance investments across them. For example, it makes little sense to spend big money on DevOps to reduce cycle time if your planning process takes months.
“Be quick, but don’t hurry,” is a famous quote from John Wooden, the legendary basketball coach of UCLA. In other words, do the right things, but learn how to do them quickly. Basketball players need to be fast — but never out of control. To adapt fast enough you need to find that razor’s edge between quickness and hurrying. You need to place more Bets, more alternative experiments, to learn quickly.
One of the tenants of agile software development is reducing cycle times for delivering digital products. In recent years, agility has become a goal for organizational leaders as they pursue digital transformation. As you pursue organizational agility, the more uncertain and chaotic the environment, the more reducing cycle time becomes critical at all levels. If your goal planning sessions before Covid-19 were semi-annually, maybe after Covid-19 they need to be quarterly or even monthly. Financial forecasting may need to be weekly, at least until the shape of your recovery becomes clearer.
The factor that keeps both speed and quality high is measuring the continuous flow of value from a product rather than having a project perspective. You want a software delivery system to produce value in small increments time after time, not just at the end of a long project as in the past. Project oriented processes tended to deliver a result that was then “maintained” over time. The focus was on delivery of the first release, not a system to release continuously — in short time frames. While technology quality may not resonate with executives, reducing the cycle time to deliver value does. Quality and speed go together.
Reimaging the future
Your Punctuated Equilibrium future is uncertain, ambiguous and hazy. So how do you survive and thrive? Break your planning into two phases (that will overlap): recovering and reimagining. Focus on creating a continuous stream of customer value. Adapt constantly. Increase the speed of your adaptations. Repeat over and over.