Transcription
Hello and welcome to another episode of the Product Thinking podcast. Today, we have a great episode in store for you, all about strategy and deploying strategy with somebody that I admire so much, Steph Bungay.
Stephen is the author of the book *The Art of Action*, which you may have read about in my book *Escaping the Build Trap*. In that book, he really lays out how organizations can create great strategies and help turn their plans and their strategies into action. Stephen teaches managers about strategy and leadership, and he consults in a wide range of organizations, which include world-leading companies. He's been doing this for a very long time. I love this conversation, and I think you are going to love it too.
But before we talk to Stephen, let's go to our dear Melissa segment. In this segment, you can ask me all your burning product management questions, and I will answer them on a future episode. Just go to dearmelissa.com and drop me a line on what you would like me to answer. Also, if you leave me a voicemail, we do prioritize those ahead of the written-in questions, so I love to hear your pretty voices.
Let's see what this week's question is.
Dear Melissa, I want to help my organization make product trade-off decisions on financial analysis rather than what the founder feels is the right thing to invest in. What are typical ROI analysis frameworks that are appropriate for a SaaS product?
All right, this is a great question. When we think about this, I don't have a very specific ROI framework in hand, but one thing that you have to understand before you can get into financial analysis is how the company is being judged for success.
In a lot of organizations that are venture-backed or private equity-backed, they are looking for something like the rule of 40, which is saying that the percentage of your EBITDA plus your percentage of growth needs to add up to 40. That makes a company that's well-suited for those types of backing. That's usually those types of companies that that's what they're trying to get to.
So you need to go figure out, are we doing the rule of 40, or are we doing something else? What are we actually trying to get to, and what do we need to show today to make that work, to show that we are invested in the long term?
Right? Because it's not just about this year's trade-off decisions; it's about how we organize that for the long term. Once you have a good understanding of what the company needs to achieve financially to make their investors happy, to make the CEO happy—because he's going to be happy if your investors are happy—you can then work backwards and start to think about ROI frameworks and how do we calculate those things out.
So what I'm typically doing with organizations when I come in is looking at what kind of choices we're making from a strategic direction and then coming back and figuring out if that’s going to help us get to those growth goals or those profitability goals that we have on deck.
You're going to want to do something like that at the highest level, but then that's going to translate down into the product level. So you got to make sure that those trade-off decisions are actually happening first at the company level. Those decisions are things like, should we enter a new market? Should we stay in this market? Should we expand geographically?
All of those things that I talk about frequently, which I call strategic intents. Once you make those trade-off decisions, the executives, I should say, there too should be doing ROI analysis on it. They should be calculating out what kind of profitability or what kind of increased revenue we can get from those markets.
Once it's prioritized at the top level, then we start to translate that into what it means for product. Now, there's usually a little bit of back and forth here because if we are in a SaaS company, what we want to do is make sure that we are primed and ready to enter those markets.
So for example, if you say, I want to go upmarket, but from a product perspective, it's going to take like six months to a year to build something to be able to sell upmarket, you might not be realizing monetarily what you want to get from that upmarket move until much later, and it might not hit in the window of this year or next year.
Now, usually, investors will understand if you can paint them a picture of how this is all going to work over the long term, but you still have to make sure that you're showing some momentum and some progress in the short term. So that's where we get into these trade-offs.
What you want to look at and work with the founder on here is thinking through if we build this for product A, right, or we do this for product B, we got these different trade-off decisions here. What's that going to amount to from a revenue perspective, and how long is it going to take?
This is where things like cost of delay become really important. I love cost of delay, and I talk about it a lot because this actually does get to ROI, and it does get into financials here. So if you want to put a financial framework in place, look at something like cost of delay, which is saying something along the lines of if we do feature A first and it takes X amount of money to build it and X amount of time to actually do it right to be able to release it and realize value, what is the cost of delay compared to feature B?
Now, they're going to have different timing for when you go to market and when you start realizing value. There's going to be different value metrics associated with each one. From a product perspective, what you're doing here too is trying to understand and connect the dots between product-led metrics and revenue.
So for example, if you can increase usage of product A, does that translate into more money for you? To understand how to do this, you really need to understand how your things are priced. So trace back price into your value metrics, connect them back into user metrics and product metrics that tell you what levers you can pull to help increase revenue or reduce cost.
So you're going to want to do something like that to help institute it. Is this super simple to do? Absolutely not. But is it valuable to do? Yes, because we're actually looking at the trade-off decisions that we can make, and we're doing that with a good eye towards what that's going to bring in for revenue. That gets everybody on the same page, and it helps speak the language of business.
So I would look into a couple of those frameworks I was talking about. Definitely look into cost of delay. Start thinking through what value levers you have to pull from a product perspective to increase revenue or reduce cost. Think through how you might affect those with your customers, and then also make sure that you are solid on what you're going to do from a business perspective and how you're going to prioritize different markets or different personas.
So that's how I would think through all those things. I hope that helps. And again, if you guys have questions for me on Dear Melissa, please write into dearmelissa.com, and I will be happy to answer them on an upcoming podcast.
All right, now it's time to talk to Stephen. Welcome, Stephen! I'm so excited to have you on the podcast.
Thank you, Melissa. It's very kind of you to invite me.
So you wrote one of my favorite books, a book that I recommended a million times to everybody out there, *The Art of Action*, which goes all into strategy deployment and how leaders can really close the gaps between plans and actions and strategy and getting people all set moving in the right direction.
Can you tell us a little bit about why organizations kind of fall into this trap of not creating and deploying strategy correctly? How do they get into this situation where they would need to reconfigure their strategy or figure out where to go next?
I spent the first 20 years of my career at the Boston Consulting Group, and I've been hired to develop strategies. Towards the end of those 20 years, I realized the big problem those people had was not developing strategies but actually executing them.
I wondered why this is and what makes it so difficult. The kind of behavior patterns that I would see is that the senior people will come up with some strategy documents where they put it into some PowerPoints and then do some videos and all the rest of it and think that they've done their job.
The effect was generally that the people in the middle, the much maligned middle managers who are actually the key to getting this whole thing done, would end up with great long lists of KPIs and initiatives and work plans and whatever, and none of them actually answered the simple question that they all had, which is, so what do you want me to do?
That question is far from obvious. In fact, all the targets and things that the senior management were setting were actually just confusing people. They were making matters worse. I realized that, in fact, the whole business of execution meant aligning people around a common intent.
That is to say, where the company needs to get to, what it had to achieve, and why, and, vitally for them, what their part in all that was. That required a particular discipline, and nobody had that discipline in place. In fact, it's not really been taught anywhere at any business school.
Right? I mean, the business schools, bless them, have a role to play in being a guilty party in all of this because, you know, the operators do their best. They kind of do what they're taught, and they're not taught how to do this.
I discovered that there was, in fact, a discipline for doing this, but it didn't exist in the business world, just the military world. I thought, why can't you deploy this in business? I've discovered since then that indeed you can, and that's what I spent most of my time doing, is helping people actually do it.
If we boil it down to the specific problems that everybody actually has to overcome, it can be expressed in terms of three gaps that everybody has when you execute. You do some thinking, do some plans to decide what actions to take in order to achieve a particular set of outcomes.
Unfortunately, there are gaps. The first gap is the gap between the outcomes and the plans, and I call that the knowledge gap. It's the difference between what we like to know and what we really know.
Then the second gap, the gap between the plans and the actions, is what I call the alignment gap, which is the difference between what we like people to do and what they really do.
Finally, there's a third one between the actions and the outcomes, which I call the effects gap. This means that even if we did do everything we planned to do, there's no guarantee that you'll actually get the outcomes that you want because we're taking action in a fast-changing environment that's full of other actors who can intervene, and chance events can take place.
So we can be laid off track before the month is out. As my favorite guru, Helmuth von Moltke the Elder, said, "No plan survives first contact with the enemy's main body."
So the challenge is to overcome these gaps, and unfortunately, we usually react to them by going into more detail. From a few stuff you want to know that you don't, you tend to do a bit more research and add a bit more detail to the plans.
So if people are doing what you want, you tell them again, usually more detail, and quite often in a slightly louder voice as well. If the actions of your unit as a manager aren't getting you where you want, what do you do? Well, you're responsible, so you tighten up the controls, don't you?
Unfortunately, these reactions are very, very natural, and you see them around you all the time. They not only fail to solve the problem, but they actually make it worse. They turn everybody's attention inside instead of to the external world, focusing on trying to get the outcomes instead of which everybody waits for more information.
So decision-making slows down. They're conducting too many reviews. They spend all their time making sure they know the answer to every question that can possibly come up. They make a fetish of the numbers, and of course, by issuing more detailed instructions, we effectively tell people to switch off their brains and do what they are told.
You end up with a slow, expensive robot that gets you nowhere. The military had come up with a way of doing things which, in some ways, is the opposite. The answer to the knowledge gap is to be very clear about the essentials of what you need and to express your strategy as the intent: what to achieve and why.
Or, as I put it sometimes, you have to answer the Spice Girls' question, which was, "Tell me what you want, what you really, really want." Forget about all the other crap you're inundating me with. Now shut up when you tell me what really matters.
Then give me a briefing where you explain all that context to me and let me go away and have a think, and I will come back and tell you how I'm going to set about it. So a briefing is followed by me briefing you back. We call it a back brief.
We have to put some work into getting alignment. That's the only way you're going to get alignment. It doesn't just happen. After we've been through a few iterations, usually we finally do know what we all want, and I've now got an area of freedom which I can use to adapt how I approach the problem as long as I'm still continuing to realize the intent.
So when stuff goes wrong and when unexpected events take place and our competitors intervene with something we didn't expect, I can change what I'm doing but still find a different path as the situation changes to getting towards the intent. The military call it mission command; I call it leading through intent.
The book came out in 2011, I think it was. In the last 10 years or so, I've been doing that with a wide range of companies, all sorts of different businesses, and all sorts of countries. I'd have to say it seems to work, and people find it rather liberating.
It does involve putting in some effort to begin with, but that can usually be done in a two-day workshop or frequently usually going to hold anyway, and it pays dividends later on by shedding light where otherwise there's only going to be heat further down the road.
It actually saves you time in the long run as well as creating a measure of what everybody's looking for these days, which is organizational agility.
So that's it in a nutshell.
To me, understanding those gaps was really mind-blowing and great for my situation. When I came across your book and started using it for the first time, I was in an organization trying to help them stand up product management.
At the time, I'd been working mostly with product managers, teaching them good product management—how to go out, do discovery, talk to customers, put that into features, and iterate with it. I kept running into this problem over and over again where all the product managers would say, "I love this! I want to operate this way; I just can't."
I said, "Why? What's causing you to do that?" I kept seeing these symptoms of leadership either handing down super directive orders of like, "Go build this specific feature," without any context over what it was, or we were all swimming in so many different directions there was no alignment.
So the leaders are going, "Oh, you know, there's no push like my go figure out what's wrong with my product management team. Nobody's releasing anything right; nothing's getting done." When I would go look, everybody was going in 15,000 different directions. There was no momentum behind anything that anybody wanted to accomplish, and I couldn't put my finger on what it was.
So when somebody recommended your book, I read the strategic gaps, and I was like, "This is it!" This is the actions also of the leaders where you were talking about too much detail. I had a CEO of a 5,000-person company digging through JIRA just trying to get information about what was going on and where people were going because he wasn't getting the right level of information to make choices.
I was like, "You're never going to find it in JIRA!" That started me on this path of, "Okay, how do we start to define what the intent is for the whole company?" But then also, how do we break it down into levels of strategy that people can actually go after, make it tangible to the next level?
To me, that intent piece is so important for organizations. I want to ask you a little bit about crafting good intents, right? Because I feel like there's the—when I say, "Go craft an intent," sometimes organizations come back, and they're like, "Okay, my intent is to make an additional $2 million this year."
You're like, "Okay, that's not quite what we're looking for here." So as you work with organizations, can you tell us a little bit about what makes a good intent and how do you get to it? What should you be considering as the leader of a company, and how do you know if you hit a good intent, like if you crafted it well?
Right, it's a next question because people find this very difficult. The main reason they find it difficult is intent has to be very high level. It's actually very difficult to do; it's a very demanding exercise. It looks simple, but it's not. It's very high level.
So what you get is something that's abstract and could be from any company, really. The key is to make choices, and the best choices are ones that are based on insight—real insight into the basis of competition, how the business works.
My favorite example of this is a very simple one. It's real; it's a little domestic boiler company based here in the UK that I advised some considerable time ago. I went around and asked every member of the executive why they'd been so successful. They were number three in the market, gaining market share on number two, and making a lot of money at the same time.
One of them said, "Oh, it's because of our financial strength," but she couldn't tell me whether they were out-investing their competitors. One of them said it was the product that's more efficient than any other, but he couldn't say whether the customers cared about price. The marketing director thought it was brand, and so on and so forth.
I got every answer under the sun, and that made sense. Then I had a final interview with the managing director, and he said, "Let me tell you how our business works." He said, "Here we are in our factory, and there you are in your house. How do we get a sale?"
Right? Critical question—any business: how does money change hands? He said, "One February morning, you wake up, switch the boiler on, and then boom, there's a horrible noise that goes off. So what do you do? Well, you call the little man called the installer, and he comes along, has a look at the boiler, comes out a few minutes later, and in his hands with an oily rag, he says, 'I'm sorry, madam, we can't get spare parts for this anymore. You're going to have to buy a new one.'"
So what do you do? Well, you don't go down to the boiler shop and see if you want a pink one, a green one, or a blue one. You ask the installer. 90% of all purchasing decisions, he said, are made actually by the installer.
"My people ignore this because the installers don't work for us. They're entirely independent; they work for all companies." That is the point where the installer says, "Look, I've got these here. They're a bit on the expensive side, but they're great boilers, and if you want one, I'll put one in this afternoon or tomorrow morning. Or you could have these, which are a bit cheaper, but you might have to wait for 10 days. What do you want to do?"
Well, it's a February morning, so you know you follow what the installer says.
Our business, he said, the area is up on the whiteboard is service to the installer. I'm the only guy around here who gets this, and your job, he says, is to get them—he meant his executive—to get it.
So we have workshops and so on. Now, you think about this: every decision he made was based on its impact on service to the installer, which is a counterintuitive idea, right? Most people think, "Oh, it's the end user, and it's about products."
So he's having an argument with his marketing director, who wants to have a national TV advertising campaign aimed at consumers, telling him it's a waste of money. I want you to improve the quality of the product literature because that's what matters to our installers.
They were just producing a new range of boilers at the time, and he was having a long argument with the R&D guy about where the inspection panel was going to be because he wanted the installers to be able to change all the parts they have to change regularly without dismantling the boiler to make it easy for them.
If you save them 10 minutes per customer visit, that's gold dust to them. He was obsessed with this, but it applied right the way across the function.
So it's high level, but the reason he could do that is that it's not abstract; it's concrete. It's concrete because he makes two choices. Most people thought it was a product business. It used to be a product business years ago; now they're all pretty much the same.
It's a service business. Most people thought it was about the end user. No, said they're not critical at all. The critical people are the installers.
So what we did then, I mean, this made perfect sense to me, is to sit down and all agree that our collective job was not just to run the business but to run it in such a way that we optimized service to the installer in order to achieve market leadership within five years. That was his ambition.
If you like, one of the examples you quoted is some ambition, and it doesn't say anything at all about what really matters, about what the strategy is. He had both.
So, you know, the R&D guys said, "You know, we produce a new range of condensed boilers that optimize service to the installer." You could go down then within the department about how they were actually designing it. That was based no longer simply on technical questions.
Obviously, it had to be efficient; it had to be the right cost, and so on and so forth. Those were constraints, but within that, to try and make it more attractive as possible for the people who were actually going to install and service it.
So that went all the way down, but he didn't tell everybody how to do that. They just had to understand, "Okay, so what does that mean for me to optimize service to the installer?" It happened across all the departments.
Well, they became market leader in three years, not five. They're still market leader today. Whether other people have caught up on that, I don't know.
So my bottom line from that—and I see this happening all the time in other contexts—is that people at the top have to do something that they tend to shy away from, which is to make choices. To say, you know, a strategy involves saying we're going to go over here, not over there. I want to do this and not that.
Sometimes you have to make that explicit, but quite often, as in his case, it's implicit. It's service, not product; it's the installer, not the end user that matters. If you do that, you've created a situation in which it's possible for the people within the organization at all levels of the hierarchy to make choices of their own.
So the bottom line test is, does my articulation of the strategy enable my people to make choices? Because then I can leave them alone to make good choices, and they don't have to come back and ask me, "Say, what do you really want?"
Right? Is it marginal volume? Oh, well, we got to maximize. But you can't optimize two things. You can satisfice more than one thing, but you can only optimize one thing, and you have to make the call.
If in doubt, this comes first. Answer the Spice Girls' question.
So in that intent, the leader here is making the choice about where we are concentrating. So like marketing is not going, "Oh, we're going to concentrate on the consumer." Sales isn't pointing somewhere else, and everybody else is going after the installer. They're like, "We choose to go after the installer."
When you think about intents in an organization, one of the issues I see is that everybody wants to do everything, right? They want to do the end user and the installer and this, and then they want to expand into France from the UK or whatever.
How many intents should an organization really be looking at at the highest levels? Is it one? Is it a few? Like how many can people take on?
Yeah, I get this a lot. I come across people who say, "Well, this is our marketing strategy, and then we got a finance strategy and a nature strategy." I've even come across a legal department that wanted to be the most fired legal department in the world.
I said, "Why do you want to do that? Why don't you support the business?"
So, I mean, how many strategies do you need? One. Who needs a strategy? The business needs a strategy. A corporation with lots of businesses may have different business unit strategies, but each business needs one strategy.
Because, as you say, if you have more than one, you're going to get people running off in all sorts of different directions, and you lose cohesion. It is designed to bring the SC together.
Everybody else should not have a strategy of their own, but they do need their own intent, right? So you have the high-level intent; this is the business strategy intent.
Then each department, should we say, or region, or however it is you're organized, each person reporting in will need to have their intent, which will be more specific. But the purpose of that is not to come up with another strategy but to say, "This is how we are going to make our unique contribution to the business strategy."
So we're all heading in one direction, though we're coming from different places and we're covering different aspects. That's how you deal with all the mass of stuff any business has to do these days.
Some people will be concerned with, you know, the consumer; others with suppliers, and so on and so forth. That's perfectly natural, but they've all got to be heading in the same direction. Otherwise, what you end up with is a situation that you're kind of describing at the beginning, which is very cold, which is there's loads and loads of activity.
Organizations are good at generating activity, but there's no action. Action is activity plus direction; it moves you somewhere.
In many ways, what it's about is drawing together that activity to turn it into action so that things actually move. There's a discipline about all this, which involves starting really from the outside in.
So one of the rules, one of the techniques that we have when we're doing this alignment process is that you have to think two levels up and only task one level down. If you start tasking more than one level down, you're interfering with subordinates whose jobs you don't really understand anyway and just getting in their way, causing confusion.
But if you don't think high enough up, then you're going to miss the essential point. The two-level-up thing has been developed through trial and error. It's the RO of the military use, and this whole thing goes back about 150 years now.
By the way, if people are interested in that, read the book. Let's not deal with it now. They realize that understanding what your boss wants, which is one level up, is good, but not quite enough.
So you have to understand what your boss's boss wants as well. It's like aligning behind two points rather than just one point where you could easily veer off. You might think, "Well, if two up is good, why isn't three up better?"
The answer is that pragmatically, it doesn't make a lot of difference. It doesn't help, so let's not worry about it and stick to two up.
So that's the sort of the Goldilocks Mother Bear version of how high up you have to think—it's enough but not too much. But this also is a characteristic whole process.
You start from the outside in; you don't start from the inside out. So what do we have to do? You know, what are the problems I have? Think, "Okay, let's just stop. Let's step back. What is the situation that the company is facing?"
Let's understand that first, and then what is the senior management saying? Does that make sense against the context that I have here?
And yes, okay, so doing what the boss says is usually a good idea if you want to keep your job, but I need to make sense of what that is, and I need to interpret what that is.
Maybe I'll go back and say, "Well, I heard you say you want me to build a bridge because we need to cross the river, but actually, somebody's found some boats somewhere, and actually, we've been exploring a little bit upriver, and we found that the water is so shallow there that maybe we don't need the boats or a bridge, and we can just drive across. How about that?"
And the boss, of course, had no time to say, "Oh, you know, ifs in authoritarian." So, and so I told you to build a bloody bridge. Why don't you get on with it?
Or if he's leading through intent, say, "Well done! Very creative! Go for it!"
If you give direction, give people the problem, not the solution. The first solution that pops into your head is to build a bridge.
So now we got to get across the river. You know we got to do it. There's so many people to get across; it needs to be done by then, etc., etc. Work it out.
You'd be amazed at what they can come up with, and you give them far more degrees of freedom. You release creativity; you release their energy, and so on and so forth. They'll probably do a better job than you would have done if you just sat at your desk trying to work out what you think the answer might be.
I've heard that so many times. You know, I've heard engineers say, "I'm the most qualified person around here. I've got so much experience in all the rest of my team, but I did what you said, and I thought I knew what the answer was, and I was amazed the team came out with the better one."
Although each member of the team is less experienced than me, collectively, they outperformed me again and again.
I think this also kind of brings up the concept of cultural change to get to that point, right? If you've been working in an organization where, let's say, a leader has always been just dictating down solutions, there's this huge desire, especially this push in product management these days and agility, as you said, to get to this point where teams are coming up with the solutions.
I think everybody theoretically wants that. In theory, it's like everybody's like, "Yes, please make me agile! I want to move faster! I want to come up with good solutions!" But then in practice, it kind of falls apart.
What have you seen needed in order to kind of shift that culture to that perspective of, "I can hand problems down?" What needs to change in an organization to embrace that?
I don't actually use the word culture because culture, to me, is an outcome of a range of things. But it's essentially the range of behavior patterns that you meet in an organization, which are themselves usually based on beliefs and values.
Some gifted leaders might change culture by changing beliefs or changing values. A famous example, I suppose, is Welch with GE. You got to act in the right way as well as make your numbers, and if you don't, we'll fire you even though you make your numbers.
There are other examples, but I think in this specific case, it depends where you're coming from. What I'm talking about is a system that gives high alignment and high autonomy at the same time, which a lot of people think is a bit weird but actually works.
If you're coming from an area in which there's low alignment and there has been a lot of autonomy, then someone at the center is actually going to take control back from you first and then give it back when you reach the top.
If you've got high alignment and low autonomy, because the boss makes all the calls, then they've got to learn how to give it up.
Now, I found that if you start off with the low alignment, high autonomy thing, people start screaming when the center says, "No, you can't have your own IT system anymore. We've got 120 across the company, and we're going to give you a new one."
But if you explain where you're going to go and they say, "We are going to give you back control in two years' time, but then you're going to have lower costs," they tend to sort of start to go along with that.
There'll always be something they say, but by and large, you can calm things down when everyone's cursing the center during that period of change.
If you've got high alignment and low autonomy, there are certain circumstances that lead to that. Some of them are problematic because basically the boss is a control freak, and the boss thinks everyone else is an idiot.
"I know all the answers." They can be very difficult to deal with. Essentially, they do have to give away control.
Some of them you can work with. There aren't many people who will come out into the open and say, "Control is better." They just act that way.
In fact, I've come across cases where people preach all this stuff I've been talking about. There was one in particular, a very senior guy in a very big organization, and after I had done my stuff, he said, "Right, you P, Melissa, this is what we're going to do."
I found him downstairs at the coffee break rewriting a memo sent by one of his colleagues, who was an executive vice president responsible for half a billion dollars a year. He didn't like the way he phrased it, and he was just like that.
I told his HR business partners, "So that's that way you can change it." We just have to wait for him to go or bypass.
Sometimes you create a buffer, and you work with the people who can do it, but some people just can't give up control.
The common situation, which I find, though, is actually with entrepreneurs who reach—I'm sure you're familiar with this—who reach that critical point where they can't exercise control. They don't know what to do. They're flailing around because the organization has gotten too big, and most of them are used to calling all the shots.
All the people they employ are just basically APs, right? They're followers of the law from—they do the law they want. Then they realize that they're going to need some structural process because you've got Dell, and they are actually looking for a solution.
So this is the way of doing it. I say you want as much process as necessary but no more because most of them become entrepreneurs; they hate structure and they hate process.
I said, "Keep your nose out of that." But there is something really important here: setting direction.
That's setting direction. Yeah, it's a real skill. It's about formulating an intent; it's about understanding where the company needs to go, and it's a really big job.
And the only one person who can do it is you because nobody else is after minutia. So, you know, then a lot of them step up. Most of them step up because they're not doing it out of ego; they're doing it because they're basically in love with their company because they created it.
That's one change that needs to take place. The other change is that as they step back, the other people need to step forward and fill the gap.
The problem there is that the people who joined the founders are just A-players, and when the lord doesn't have tablets of stone anymore and there's no Moses, they're a bit lost.
So you need to get people in who are actually capable of running things and are willing to step up and take responsibility and make independent decisions for themselves.
At one, the same time, that is tricky to pull off, but by and large, you know when they're at that stage because they've been trying and trying, and it doesn't work anymore.
You know the Friday morning meetings where everybody called in now has 500 people on it, and half of them are in Singapore and others are in California, and it's not working.
That's when you need this more structured process, and actually, it's something that people do anyway because the only alternative to that is that they start generating lots of KPIs, and that's going to kill intent.
I hate a balanced scorecard. I see a lot of people mistake a whole list of KPIs as a strategy, right? It's like, "We're going to hit all these goals." You're like, "So we..."
We talked about crafting this intent in this direction that you need to give as a leader. I agree, like when I work with founders, a lot of people complain because they're like meddling in all of the code still, and they're like over here.
But it's funny because I talk to them, and they don't know what to do, right? I take the same exact approach with them, where I'm like, "You need to set the direction. Let's go over here and write this down, like write where we want to go for the long term. You're the only person who can do this."
It's like perfect because they just go, "Oh, okay! Now I have a job! Right? Now this is the thing I'm supposed to do," because they don't know what they're supposed to do in that strategy, though, that they need to craft for the business.
What are the components of it that make it sound right? We talked a little bit about direction and intent and level setting it. What kind of information do they need to pass down to let people know where to go?
And do they do that? How do they communicate it too? Is it like by a memo that you've seen work, or what makes sense?
I think the best people for developing strategies are not consultants or people like that. They are actually people with long-term operating experience.
I'm a boiler guy, simultaneously being on top of the detail and being able to step back and see how it all fits together. It's just like seeing the wood for the trees.
Sometimes they don't know. They know all the trees, and the pathways that connect the trees are there for the shape of the wood. Sometimes they can even go along; they can see a hole in the bark of one tree, and they realize that an insect's got in there spreading a disease that can actually kill the entire tree.
So they act far on something that most people wouldn't even notice. The sort of heuristic I use for strategy development is to think of it in drawing together three things.
The first is, what opportunities are there out there? The opportunity space—something going on in the external world.
The second is, what capabilities do we have? So what's going on in the internal world, which is, funnily enough, the hardest thing for them to recognize because an organization doesn't have a mirror to look into.
You know, you talk to banks, "Oh, we're great at customer service because we have lots of customers." Really? Think there's a bank on the planet that's good at high customer service? They maybe want to do today, to be fair, but you know, this is like they've been saying that for years, and we know they're all graphic.
Then finally, what's your own? Which is just all the possibilities opened up by the opportunities out there and the capabilities we have. Where do we want to place our bets?
What goes wrong is usually that one of those things floats off and becomes independent of the others. So if you give strategy about marketing, there'll be full of the opportunities, and then someone will remember that, "Oh, actually, we need some new products for this, so let's get the R&D guys working on that."
And the R&D guys say, "What? When do you want this? Let's get real." Or you get a technology-oriented company with this brilliant stuff, right? Amazing technical innovations. They all history doing this, and nobody wants to pay for it, so they're a bit stuck as well because they forgot to talk marketing or these things called customers, which live a long, long way away, way outside the organization.
We already have, or most commonly of all, the aim floats off, and you get some—it’s driven by a lot of this stuff about stretch goals and BHAGs, and some senior executive comes up with some fantasy about what they like the organization to get to.
The people, you know, on the capability side say, "What? How the hell are we going to do that? I said, why are customers going to want this?"
I mean, maybe you know, and so they get separated. So the key thing is drawing together the real opportunities, the capabilities you have, and where you want to get to.
A good strategy has to be coherent, so it draws those things together; they're tightly knitted, and it has to be realistic, not a fantasy. It can be ambitious, but if it's ambitious, then you've got to have the financial strength at a time to be able to build whatever capabilities need to fulfill those ambitions.
It's going to make choices. Again, I keep on coming back to that one. If you're trying to be all things to all people, you're going to fail.
In the final analysis, so when you're in the middle level, right, I think this is where I see a lot of people struggle too, especially in these really large organizations, right? You have to digest that company strategy, and now you have to build an intent for your people.
How do you balance that craft of building the intent? How do you make sure that it's not so wide that everybody's going in a bunch of different directions still at the team level, but it's not so narrow that you're just passing things down?
I also think there's a huge problem with really large organizations where they have too many middle people, and so they just keep compressing that intent into like the most specific thing ever because they're trying to have a little—you know, they're taking a pie, they're narrowing it down, they're narrowing it down, they're narrowing it down.
It's like you can only do that so many times. How do you know the middle layer is wide enough that people can go make choices but narrow enough so that the teams are moving towards a goal, not just doing whatever they want?
There's an exercise that I use called strategy briefing, which is basically answering five questions that we go through with people collectively.
The first one's the context. The second one is, what's the higher intent? The third question is, what's my intent, my hour in our unit locally?
Then the fourth one is, what are the tasks we need people to accomplish to realize the intent? This one is boundary condition. One of the commonest things is that when people first come to question three, what's our intent, what they do is to put in a task—something that belongs in the next level down.
In other words, the problem at the top is that people think too abstractly. The problem in the middle is that they think too concretely, too specifically, because they're doing stuff, right?
They spend their time thinking, or junior people spend time doing things, and it feels okay if you're busy until you realize you're busy on the wrong thing.
All you need to do is to pull them back, and that happens usually through them working with the team or me coming along and making new to myself.
So is that really what you're trying to do? That sounds like something that, you know, Sue here, who works for you, ought to be doing. What are you doing? What are all of you here? There's five of you here in this room, so what are you all doing collectively?
How does it all add up? I use that little metaphor of the—so you're sure that you're here to build a bridge rather than get across the river. What's the difference?
"Oh, well, if it's get across the river, maybe there were alternatives to building a bridge. Why are you fixated on this?"
Because they sort of, at the top, people are sort of looking around at the universe, and they are narrowed in, right? They've all been given these blinkers.
It's the organization's fault; they stick blinkers on people, and usually, that works. But it's very common for people to do the job of the level below, often very transitive.
I've seen that quite a bit too because, especially in the realm of product management, what you're doing working with the developers is usually very different than what you're going to be doing as a director of product or VP of product or, you know, a chief product officer.
And there's not a lot of guidance, I think, for people when you're in the team role about what should you do once you get to that next level.
How do you set your intents? How do you craft it so they kind of revert back to build these features, just do these things, right? Specifying it because that's what they were doing with the developers instead.
How have you seen people start to break out of that habit? What's a good way, if you're, let's say, like a new manager, you're moving from an individual contributor, now you're a manager.
What types of things should you practice or should you try to get good at to make sure that you're thinking more strategically or giving more intent that's broad?
There really want to be some training for people who get a new role, I said, promote it because they get promoted usually because they're the best people at doing the role below them.
So when you get promoted, nobody tells you, "Oh, it's different now. You go do this." So they can choose to do the job, and they're very good at it, so they feel very comfortable, and it works, except that they're getting in the hair of the people who are now reporting to them.
So I start by saying, "Okay, now spending, you're on the receiving end of this. Is this telling all and only what you need to know that you can't work out for yourself?"
So I had a little group of people, very talented people working for a medical device company who were the R&D executive, and they were very proud of themselves that they had produced this thing called a project brief, which was all on one page.
These are the most important documents they produced the year because they told their project managers what they were going to be working on and allocation resources and so on and so forth.
The first thing I noticed about these things, they were indeed on one page, but they were in about nine or ten point, and you needed a magnifying glass to read it all.
So, you know, we talked it all through, and I said, "Well, here, this device, you say the needle has to be 4 mm long. Would you reject a product which had a 5 or 3 mm long needle?"
And they were, "Well, oh, it's got to be 4 mm because of the stiffness of the material and the ease of patient use on so and so forth."
I said, "Yeah, the two technology changing very fast. Why do you need to tell the project manager this?"
I thought that's said to come up with it. Well, I have another question. You've told me here that I need to add 20% more customer value, and you've got a very specific way of measuring what customer value is, and the product has to be ready in 18 months' time.
Yeah, okay, so I'm the project manager. I come to you in 15 months' time and say, "I can add 30% more value, but it's going to take me another six months, so I'll miss the 18-month deadline. I'll be 21. What do you want me to do?"
A, there’s someone had B it. "Oh, hell, somebody else." No, just a minute. The deadline.
And they started talking about this, and it was a Danish company. They started talking Danish there. They were lovely people, the Danes.
So she turned around and asked me for permission to use their mother tongue. No one else on the planet would ever do so. I said, "Absolutely! I'll go away and have a cup."
I came back, and they had a fierce debate, and their conclusion was that they had to hit the deadline and they take the extra value in the next release.
The reason for that was to do with the whole portfolio and their competitive position in this particular area of therapy stuff that a project manager would not possibly have known.
That was the R&D executive's role where I called that out. So I then said to them, "Okay, so what do we learn from this? While you have been busy doing the job of the level below, you failed to do your own because you didn't make a choice. You gave them two goals. You didn't answer the Spice Girls' question."
Actually, Spice Girls is time, right? That's a hard constraint. You must maximize value, but it must be ready in a year and a half, like all the others, because then there's a big thing that marketing are going to do.
And the interesting thing to be is what happened after that because we went off for dinner, but two of them disappeared somewhere and turned up for dessert looking very pleased with themselves and said, "We completely revised the project brief. We changed the format and everything else."
We looked at it all the following morning, had another hour talking about what they were putting in and what they were putting out, and improved it further.
So they self-corrected immediately. They weren't aware of what they were doing. Immediately they became aware. They didn't need me to tell them anything else. They saw what they were doing wrong and corrected it literally overnight because the answer was there.
The following morning, and all agreed that this was much better than what they'd been doing.
So when you've got highly competent, enlightened people who are open, one, the turnaround can be very quick. It's only when you've got people who dig their heels in and think they know all the answers that it's going to be a problem.
But that's true in life in general, isn't it?
Very much so.
I love that story too because it's something that really points out what I keep trying to tell product managers when they say, "You know, the company doesn't have a strategy," or "My boss hasn't given me a strategy," or anything like that.
I said, "Have you asked them any questions? Have you asked them what they want? Have you tried to clarify it?"
I love your story there because if they had gone back and asked, they would have said, "Time! Time's that constraint! That's what I want!"
I find that some leaders are pretty bad at communicating what they want sometimes, but a lot of people are too afraid to ask the question. But if they do, they're very willing to give the answer.
Well, that's the importance of the back brief. If you institutionalize back briefs, I can go along and say, "Look, you know, I just haven't understood this. You're saying this on the one hand, then you're saying that. So what do you want? Which one comes first? What if I have to choose?"
So my technique, as it were, in that story was to invent a situation which hadn't occurred in the future, which I played the role of the sport and said, "I have this dilemma. What do you want me to do?"
That set them off. So sometimes playing through those scenarios, as it were, making up a few dilemmas or in the future, I might face this decision. Please help me now can really clarify what's needed.
I keep on hearing, "Oh, the company doesn't have a strategy." They don't have a strategy that tells them what to do, which is very often true.
But sometimes they are actually asking the senior people to do their own jobs for them, and they think they're unclear because they haven't told them, "Oh, well, under these circumstances, do that."
They've done their job already. The gap is between the people at the executive committee and us here, and there are three levels between, and that's where the thing falls down on where we've got to connect things up.
The other thing is that you really do have a gap in information that you think someone's not made a decision that they need to make. The best thing to do is to go back and don't just say, "Well, what do you mean?"
What you want to say is, "What I think I heard you say is this. Tell me if I'm right," or you might mean that. In other words, make some suggestions.
And if they're still silent, tell them to tell you what you think they ought to tell. I had—there was one situation I had ago, actually, when effectively the whole company, which was in crisis, was led for about six months by the level that was two levels below the executive committee.
So there were about 70 people worldwide who were running operations, and there really wasn't as right there. There was, "We have to do this and that." There was a hopeless confusion.
So we had a lot of workshops around this stuff and without any higher up except that we're in a hole. We got to stop digging and then crawl out.
I think we all worked out what we thought we ought to be doing, and there was coherence right the way across it, and we got on with it.
Then at reviews after a few months, they go back to their bosses and say, "Well, I think you ought to be doing it."
"Oh, well, we completed that two months ago. We're doing this now."
"Oh, well done! So what are you going to do now? Are we going to do this and that?"
"Oh, fine! Yeah, right, Johnny, good! Get on with it!"
And so the senior people caught up with them because they had been discussing all sorts of stuff to do with finance and the markets and time talking to shareholders. They had their hands full with the external world, and they actually needed a group that were going to run the organization.
They can do both at the same time when things were so desperate, and this group simply filled the gap. They took back a—they thought by then interpreting what these 70 people were doing in a way that made it all seem like it was all very clever and a plan patched by the executive committee, but it wasn't.
And they came afterward.
That's pretty amazing there. So one of those things that was standing out to me while you were telling that story as well is this need, I think, for the teams and for the people out there doing the work, right, to communicate back to leadership about where we are, what we accomplished, so that they can make decisions in it.
How often should that be going, and how should you go about communicating back up what's happening so that they're aware of it?
One mistake people make about delegation and empowerment is that they think it's about, "Okay, done that, walk off, and let them get on with it. It's their problem now."
Unfortunately, you can delegate responsibility for doing stuff, but you can't delegate accountability to the outcome. So you need to keep your finger on the pulse, and everybody's going to need some help at some stage.
So you have to be able to judge when to step in and help. The default should be by using a coaching method, actually, rather than, "Okay, stop doing that. Do it this way. I told you that actually six months ago."
But in order to do that, you need what I call an operating rhythm.
I call it an operating rhythm because it should follow the rhythm of the business or the heartbeat of the organization. Some businesses have a heartbeat like an elephant that goes "P pom boom," and some businesses have a heartbeat of a mouse that goes "squeak."
You may need to review what's going on in the past week or the past quarter or even the last six months, but set up a rhythm that's asking, well, given the opportunity to ask the right questions at the right time.
I'd let people design these for themselves because they're all—I don't have a basic template for it because what they need to review in terms of progress is so different, KPIs.
This is where KPIs come in, but there are some basic rules. The most important one is that these sessions should not start with, "Okay, let's look at the numbers. How are we doing?" or using traffic lights or these common things.
The first question should be, "Has the situation changed?" which, by the way, is how the military do it. The first trip for is, "Has the situation changed?"
Because the answer is usually yes, and therefore we need to change what we are doing to adapt to the situation.
We can adapt by maybe changing what we're doing or how we're realizing the intent, but there's been a really severe change. Then we may have to say, "Well, we need to change our intent as well, at least at a certain level."
But we're still going to try to keep that overall thing that we agreed. If you think about it, just starting off, you know, how are we doing? Are we on track?
In the famous phrase, it sort of assumes that the track which we designed six months ago was the right one, and nothing has happened in the to make it more or less valid, right?
We have to get back on it regardless of what's happened. So the whole meeting goes backward looking, and it's about evaluating performance.
They very quickly turn into a "if we're not on track, there's a blame game" instead of assuming, rather more plausibly, that, "Well, now six months on, we've learned more about the situation, and actually, we can see that we did not write a perfect plan. Nobody ever does, and we need to modify the plan in these ways."
That's the best way to get there. Or a new opportunity has arisen. No, that something's gone wrong, but actually, "Oh, this has happened. We never expected this competitor to be acquired and to drop their participation in the segment of the market. Let's go for it!"
Right? Let's forget about what we were planning to do. This was very tough, and we'll see a new opportunity.
So that's the key to having good review meetings, and the agendas can change over time. You might want to devote one of them more to what are the effects on the customer, another one about employee morale, and so on.
So different topics as you go, and it's also important that anybody can call one if something happens and they need support from others.
I should say, by the way, something really important I've left out is that we've been talking about the hierarchy and up and down. Actually, what is as important or more is across because most organizations are, in fact, whatever's on the old chart, networks.
One of the things we do in the back brief, which we try to hold together, is to have an explicit session devoted to interdependencies where two people in the room or more have to work together, and it was F caps or overlaps.
These sessions last a few days, three hours easily, working out where they need to either coordinate or support each other or, you know, they're both actually planning to do exactly the same thing.
Some of the time, you know, that's going to lead to a bloody great mess down the road, so we sort it out right up front. Don't forget the horizontal as well as the vertical alignment.
That is a huge issue that I see in organizations is people not working with their peers, especially when there's interdependencies, and never everybody's got their own little silo going on.
Yeah, you could desilo.
Yeah, I guess that point. Executives too, right? When you're crafting the intent for the organization, what I often see as well is the executive team working in silos where it's like marketing, as you said before, right?
Like marketing going to do marketing strategy, and products going to go to do product strategy. They're not coming together on like a common goal that cuts across all of it, right? That brings it all together.
In some of these things, I mean, quite simple things that happen. I remember one of these sessions we had post-say everyone goes around and sees him. Marketing and technology work together.
Anybody said, "Oh, we work together?" It's like that. It's handing gloves, and we've got exact the same priorities.
So marketing done theirs, and they went around and looked at technology, and indeed they did have exactly the same priorities, except they were in a different order.
The product that marketing were going to launch in six months, R&D were going to start working on in 18 months' time.
So it took five minutes to sort it out, but if they hadn't done that, hadn't talked about it, then, "So, so where are we supposed to be doing?"
"Oh my God! How am I going to have to pull the..."
A good reminder to get out there and start talking to your peers and make sure that everything's aligned before you all start working.
Thank you so much for being on the podcast, Stephen. This has been amazing chatting with you about this. I could chat with you all day. I listen to your stories.
If people want to learn more about you or, you know, hopefully read your book, which I keep pushing, where can they go?
They can look at www.bang.com. There's a section there that's got a few blogs in which I tell some stories about this, that, and the other.
A more recent website is www.agilestrategy.co.uk, a name that, to my great surprise, no one else has bought, so I bought it. Doom's gone, but you not, and there's some more recent stuff there about how to handle uncertainty.
Basically, the idea of that website is to just raise the question, "What could an agile strategy be?" I didn't answer it; I provided some thoughts about it.
I mean, maybe strategy shouldn't be agile. Actually, it's a bit paradoxical. If you have to change your strategy every few weeks, then you've got a bit of a problem.
But maybe it's your operations that need to be agile within a fixed strategic framework. These words are just so agile. The latest buzzwords tossed around until it means nothing or anything to anyone.
So you can find some material on there. Again, you can download it; you don't have to sign in or anything.
Yeah, read the book *The Art of Action* if you want some help going to sleep.
I think it's a riveting read.
You're very kind.
So I will put all of those links on our show notes too at productthinkingpodcast.com. So if you want to go to productthinkingpodcast.com and find Stephen's episode, we'll have all those links there to all those great resources.
Thank you for listening to the Product Thinking podcast. We'll be back next Wednesday with another great guest.
And if you have any product management questions for me, go to dearmelissa.com, and I'll answer them on an upcoming episode.
We'll see you next time!