Thriving in Uncertainty
Last year Brian Briskey and I led a webinar on doing strategy when there is a lot of uncertainty facing customers and companies. We had no idea how prescient the topic would be. Here’s a write up that comes from our presentation.
Experience strategists spend far too much time designing for the ideal and the permanent—when neither is real. In this webinar, my friend Brian Briskey and I will share two skills that all strategists should have: situational market analysis and scenario planning. You need these skills so you can help your company respond to the ever changing world, market forces, and customer needs. Stop designing for the ideal and the permanent! Start thinking about future scenarios and markets!
Thriving in Uncertainty
Experienced strategists tend to focus on uncertainty - that the customer will behave in a certain way. If there's anything that we know about the last, what, five, seven years is that you can't predict major changes that are going to happen in world economics in the way that you deliver your product, and that can cause a lot of risk and a lot of fear. So today we're going to talk about two concepts that we think will help you as a company to be more prepared for risk, for uncertainty, and still get incredible design out of what you’re trying to accomplish.
Why do companies design for the ideal and the permanent?
There's nothing permanent in our world, but companies designed for the ideal and the permanent. Why is that?
Companies buy the ideal because it's simple and convenient to focus on it when you have limited resources. The ideal is a lot easier to sell inside the company to get buy-in, especially when you have Finance that wants everything very carefully accounted for. So there are many different pressures and forces inside a company to work on this.
Brian points out that good strategists know that there are a range of answers just like there are a range of responses that fit within the bell curve in one standard deviation. And the best strategists understand how to work just outside that standard deviation. What would it be like if you broke from the norm, if you were willing to be a bit of an iconoclast from your organization and say, okay, if I had to work outside of what is ideal, which we could also call the mediocre average, what is that going to look like?
Dave arrived at this question from a different path. We should be troubled by the ‘ideal persona,’ the ‘ideal journey map,’ and the ‘ideal metric’ because it doesn’t really represent the reality of what people are actually doing in their lives. Add on top of that that most any business models today are really complex where you have different channels doing different things, and competitors are doing all kinds of different things. It’s crazy to think that you can design for the ideal.
Walgreens has been struggling for a long time, and it's been 20 years that Amazon has been in their rear view mirror, right? They simply couldn't make change because their business model was kind of this ideal, this permanent. You've got the pharmacy and then you've got the conveniences, and that's been their business model all along. So, I think this is a really, really big issue and a big concern for companies. And one of the reasons why companies focus on the ideal and the permanent is because they're scalable. If you're going to grow, you've got to be scalable and they don't know any other way to scale.
Companies Think They Can Only Scale Permanency
Companies create strategies and business models that are designed to last and attract as many people as possible. Meanwhile, technology changes, people’s needs change, world forces adapt and change. And no one can predict the future. What companies need are experience strategists who know how to scale experiences when things change or become unclear.
Today we’re going to talk about two strategic skills that all strategists need to have:
Situational Markets
Scenario Planning
What is a Situational Market?
Dave Norton
The term “market” went through a transformation back in the fifties. Before the 1950s, you went to the market to buy stuff. But with the advent of advertising and marketing and so forth, that term changed and a “market” became a type of person. So today we always say, who is your market? And that has helped us progress in many ways. There's been something useful about thinking about who your market is and marketing associated with that.
Companies that consider their markets to be just a certain number or type of person today are putting artificial constraints on their solutions. Can you imagine, for example, Google saying our target market is people who have to do research? Scholars? That's it, that's our target audience. That would be terribly limiting for Google or for Apple to do the same type of thing - we only want people who are this demographic.
Instead of thinking about markets as a target audience, we need to start thinking about markets in kind of that original definition, which is, when there is a buyer and a seller and those two things come together. We don't have to go somewhere anymore for the market to appear because we have technology that can support us, but we need to have that kind of mindset. If there's a need, there's probably somebody that's going to sell to that need. And the marketplace is ever present, always there for us, always able to accomplish things very different than thinking about who is our target market.
When we start to think about a marketplace as being always there, it actually helps us become more nimble, more able to address the situation at hand. Thus, when uncertainty arises, as it always does, the business model can adjust.
Companies that consider their market to be a certain number or type of person are putting artificial constraints on their solutions, with the most glaring being that these certain solutions are only for certain people. These constraints hinder innovation and limit growth.
As intelligent experiences begin to dominate business models and dramatically increase customer expectations, we need a ‘revamped’ definition of what constitutes a market to find the right customers. Ironically, the answer seems baked into the original definition of the word. People have long gathered in markets to buy and sell goods. Now, thanks to digital tools, people can gather in markets constantly to assess, buy, and sell goods whenever they’d like.
Which Business Model Would You Rather Have for Pictures?
People today take a phenomenal amount of pictures. And we have to ask ourselves, which business model would we rather have? Would we rather have Apple's business model or Canon’s? Canon is still considered the giant in the camera business.
And if you go to their website and you look at the way that they talk about their business and their business model, they have these different sectors that they're in. They have imaging, they have professional photography, they have consumer goods, all of these we would consider to be traditional verticals. And in most cases, they own those verticals.
But which business model would you rather have? Canon’s or Apple’s? There is so much more photography that is happening because Apple doesn't think in terms of just these different “who are our target audience” type mindsets. They think in terms of a situation that has arisen.
There's a need. I need to take a picture. How do I do that as simply as I possibly can? And so, even though Canon is technically the category leader, Apple is by far selling more product, more solutions, and has a much greater reach than Canon ever will. And Canon continues to get smaller and smaller, even as they remain the leader in their artificial category. So the stakes are very high for how we think about what a market is and how we support a particular market.
Seeing Markets as Situations
It is frequency, not a number of people that really makes the difference. And we're still dealing with this scalability issue - how do you scale? Well, you scale by looking at the number of times that this particular situation arises and then supporting those times.
The Size of the Market Opportunity
One way to look at it is to start with the total number of customers that you have. So track the number of people who don't experience the particular situation and then simply multiply by the estimated frequency of the situation. So if you have 250,000 total customers, 100,000 of which don't experience it, the rest of the 150,000 who do experience it do so 30 times per week. Then you have a frequency of like 45,000 opportunities per week. So you can begin to see how big that situation is, and you can begin to allocate resources, to allocate solution services against that situation. Because you know it's going to be profitable for you. You know that there's going to be enough activity associated with it.
Scenario Planning
Brian Briskey
One of the ways that will be very helpful to think about with regard to getting outside the box or the single stove pipe of a particular user is using scenario planning - as in there is an event or a frequency, a moment that takes place. And there are variations of that moment. What the designer behind developing new products, features, and innovation can do is say, okay, how far out do I want to stretch the types of services and offerings and things like that to accommodate all those different frequencies.
In the first section, we're going to do a four step process here. This is very boiled down, high level. But essentially what you're looking to do is figure out what all those contextual factors are. So think again to the typical attributes that you have for a user profile. But now we're having a situational profile, there's an event that occurs.
Here are all the factors that might contribute to changing the importance or the things that matter to the decision making process of a user. And then what we're looking to do is say, okay. Are these always set at a particular priority level? Is cost always the leading factor or is it access, or ease of use, or something like that? And if they're not, then that might be critical. In other words, there's a split into a different scenario where under certain context, the situation may call for a different prioritization. So we have all experienced this. When we go to the store, we have our favorite product that we're buying from the store. We recognize the brand, the pricing is reasonable. We've already made that choice and we just need to repeat it. Every time we go back for weekly shopping - but wait a minute - we have relatives coming into town and we know that we need to change, because we have a relative that's a brand snob or we want to go bulk because we have to accommodate more people.
Now I'm pushed out of my normal routine and I have to decide, okay, I'm going to do the bulk item. The brands are different. I have to redo all my heuristics and my decision making to make that choice. But what we're looking to do here is we're looking to generate a variety of these different Instances, and then author what that narrative would look like.
If we can articulate something similar to a value proposition statement, we're going to go ahead and articulate what those factors are, especially which ones are more fragile. In other words, they may be flipping one way or another in a given context and ultimately, at the end of the day, whether it's going to cause that person to go ahead and make that purchase.
So you can generate a menu of these. And choose how to prioritize from there, which ones you want to design for first, second, and third. One of the things I want to re-emphasize is that scenario planning's been around for a while. But instead of focusing on the who, we're focusing on the situation. You can use a lot of the same kinds of techniques you used historically for the situation.
Scenario planning's inception from the Rand Corporation to then being made famous by the Shell Oil Corporation was often used as a rigorous way to come up with ‘what if’ scenarios for macroeconomic forces, geopolitical forces. But the same methodology and techniques can be applied towards a theoretical person and the different situations they find themselves in, because as we're seeing here, especially with context, oftentimes we could be completely separate in terms of our demographic data, but we may find ourselves in the same situation when it comes to relatives visiting. Our purchase decision process may be very similar.
So a smart, strategic-minded company can come up with what the scenarios are, and say okay. Dave and Brian will find themselves in this particular scenario, and then they're going to decide very similarly. That's where it's homogenous, as opposed to the fact that we're both, whatever size, age, and income level, because when the circumstances are such most people are likely to behave the same way.
What we want to do is go ahead and walk through the process here. We're going to basically go through and identify the factors.
The second step is to determine whether there are some trends behind those.
Thirdly is, marking those. I like to use asterisks or something like an exclamation point to just simply notate which ones are going to be fragile.
So in the case of the scenario I described, the general scenario of going to the store, making a specific purchase, let's say of refried beans because I'm going to have taco night. Everybody loves taco night. The thing that's fragile about that is the size of the portion. That's one of the biggest ones, because the number of people that I'm cooking for is the factor that changes. Most people are planning on making a certain item for a certain number of people. And so to have the bigger bulk size or the pack of three, or different packaging options for better storage. That requires thinking of, what is the thing that's going to be changing in this other scenario?
I think one of the interesting takeaways is a case study I came across, and this is important for strategists to think about, people at PlayDoh thought that their competition was other toys. But in reality, their competition was television. Because that was the activity that PlayDoh replaced when parents were buying it and giving it to their kids. And so by doing this process of really better understanding the situations and scenarios that people are in, as opposed to just the people themselves, allows you to expand the definition of what really is competition.
Right now we could assume that there is a status quo, right? That's everybody doing their ideal segment, their ideal situation. Let's say they're writing that up. If you're looking for what's fragile, instead of trying to go find a bunch of signals in the noise, that's an expensive and challenging process. It takes a lot of skill to build that up. What you can do is postulate, what if this factor broke?
So buying the refried beans for taco night, we assume that it's going to be a taco night for two. For a small couple. If they have three, five kids, does that break that assumption? Does that turn it on its head? So start with the default status quo and then challenge each individual one. And that's how it's easiest to find which are the critical ones. Determining whether these critical uncertainties go one way or the other allows you to challenge the status quo or make sure that you haven't missed any particular opportunities that are going to go a certain way.
How is Scenario Planning Different from Traditional Journey Mapping?
If you think about it from the traditional point of view, where someone will create a profile, they may create a couple of ideal archetypes, and then they force feed them down this journey map, trying to explain all the different touch points. And they might think of a few splits.
So if you think of it like a user flow across a website, there might be a Sankey diagram as it's called. But it's still forcing a particular S and it forces people to create more and more stereotypical behaviors, and leave others on the table. Other kind of anomalies. So there's a lot that's missed. This approach here is more of a design thinking approach with a divergent convergent kind of attitude. So the ideal is you start with your default, let’s say eight different scenarios. All those are core seeds of scenarios at that point.
Then you take the top four that seem the most plausible, and you run those through the next step. In this case here, it's actually saying, okay, let's do some empathy and build that out further. So there's some tolerance between, in the same way an innovation pipeline, a hundred concepts are made and only 50 matriculate to the next level.
They get a little bit more worked on, then only 20 make it, but then they're worked on further. So with greater detail added, greater granularity, the number of survivors of those initial states are able to make it to the very end.
But because you've done that backlog of work, they're sitting there partially developed so that as assumptions are proven wrong you can revisit them, because the real decision is coming from the market. The market will tell you if you're successful with your hypotheses or not, you can then just only have to go one step back and advance other things that you've previously developed. So it's like an innovation pipeline. Think of this as a series of those double diamonds moving the scenarios through to the user narratives and using the narratives through to: these are what we're going to build for this project.
Here we're looking at an example of how you fill it in, kind of like a Madlib, similar to the value proposition statement. We want to write this as simply put, so that it's easy to communicate with others. This type of a product here or deliverable if you had, let's say a handful of these, enables a user designer or strategist to communicate with other members of the organization.
It puts guardrails around the strategic choices that need to be made further downstream, and it also creates a universal standardized language about a factor, let’s say affordability, if that is well defined then everybody can get on the same page about what that means. That's necessary for pricing choices later. Or when it's around convenience. Well, what does convenience mean? Is it this delivery channel? Is it a marketing channel? Is it onboarding? What is that specifically? So we want to be very precise in our language. And fitting it inside a Madlib kind of statement like that helps us have a universal way to describe it across the organization, especially for cross functional teams.
Universal is another word for scalable. So here we have a perfect example of how you can actually scale, and at the same time address uncertainty.