A typical example of an operational decision is when you have to establish production levels, take new human resources, or discontinue a certain production unit. Those managers coming from an operational area are not always used to make decisions for the future which take into account risks and innovation. Their culture is deeply attached to results and incentives. Operational biases coming from disjuncture, culture, pride, resistance to change can belittle Quality Decisions. In order to correctly develop strategic and tactical decisions we will now define similarities and differences between the Business Model Canvas and the Lean Decision Quality Canvas, and how these two methods can coexist and enhance each other, giving you a tool to build confidence, coherence and alignment on your goal.
The Lean Decision Quality Canvas is a tool which allows you to make quality decisions producing confidence and alignment, and to gain much more than what you wish for. Vision, Mission and Company Culture build the wheel tread, which follow every step of the process. The aim of this step is to compare and decide, with strategic coaching sessions, if your business goal is coherent with: Vision what you want and what you want to become , then with your Mission your goals and how you want to achieve them , and your Culture your company structure and values and then with your company strategy.
Once your business goal is aligned, you have to define your clear values from a profit, environmental, staff growth, etc… point of view in the short, medium and long term and, eventually, the trade-offs. The aim of this step is to build your appropriate decision frame, starting what you are going to do, who to involve, who you can share your goal with and the decisions which are to be analyzed for your purposes.
The aim of this step is to use various creative tools to produce creative, doable and significantly different alternatives. The aim of this step is to research grounded information and define uncertainties. You also analyze the various alternatives by means of analytical tools to choose the one which can maximize your business value, knowing all the possible uncertainties linked to it.
Each step is linked to the following and the spokes in the Decision Wheel show the quality degree of each step. To establish the general quality of the decisions you have to examine the weakest spoke. The same applies to a Decision Quality process: a low-quality step influences the final decisions and it is the step showing the lowest degree of quality that defines the process quality. The Business Model Canvas is a tool made up of 9 blocks which helps clients creating new business models, without taking into account any competitors, and new value and profit mechanisms.
The Business Model Innovation process is made up of 5 steps. At each step, you highlight goals and focus. Focus: set the foundations.
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Create a group of different people of great experience, at a management level and coming from different areas, people of different age and, if necessary, who are not part of your business. Goals: research and analyze elements needed to design your business model clients, technologies, environment. If you lack a clear business model idea you dissipate energies by oversearching. Goals: generate and test viable business models and choose the best one. The best business model is reached by assessing the big picture and then using a SWOT analysis and a checklist for each block. These steps are rarely followed in an ordered manner.
The Understand and Design steps, especially, tend to work in parallel and prototyping starts at the Understand step. During the design and prototyping step a new idea usually comes out and you go back to the Understand step. During the Manage step you experience an ongoing process of evaluation, modifying and adaptation of business models. First of all, the Lean Decision Quality tool concerns strategic decisions while the Business Model Canvas tool concerns tactical and, partly, strategic decisions idea choice ; they intertwine and overlap at some point. Each business starts from a different need e.
Lean Decision Quality Canvas : it is an organized process which comprises a set of steps, one the consequence of the preceding, and each step has a quality rating. The Lean Decision Quality Canvas is used to generate decision confidence and coherence and achieve more than you wish for, for example:. The challenge here is creating an innovative business model which is not confused and unpredictable even if you try and use some kind of process.
You need to be able to manage ambiguities and uncertainties until you find a good solution. It takes time and the participants have to be willing to invest time and money to explore various possibilities, without hastily reaching a solution. Your group could end up stuck in an Analysis Paralysis , in other words being overwhelmed and paralyzed by too much information.
Your reward is a possible new business model generating value for your business. The challenge here is defining your real business goal, its values and trade-offs, in order to be coherent and in sync with you Vision, Mission, company Culture and strategy.
Lean Decision Quality Canvas Pro/Vs Business Model Canvas
The challenge here is the strategic innovation, in other words how to make great changes and create value. The decision making process comprises a set of steps, one the consequence of the preceding, and each step has a quality rating. The ultimate quality of the decision will come from the step with the lowest value. Once you have decided on your idea and you have defined your frame, Creativity kicks in to generate creative, doable and significantly different alternatives. Then, you start the analysis phase, to decide on the best alternative business model and why it is the best one.
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The process is set from the beginning and the result — that is the creation of business models the alternatives — is still unpredictable because Creativity is applied. The Creativity phase, which generated various business goal solutions, is followed by the analysis phase to define value and risks. This way of working requires times and those taking part in the process have to be willing to invest time and energy in exploring the various possibilities alternatives , without hastily finding a solution. You need to find the best balance between creativity and analysis in the various phases to create valuable insights.
The difference is that you now start from something you know and not from something you ignore, this gives you a direction.
A company known for its high quality products decides to sell a cheap product. The issue is, now, to decide whether to do it by creating another brand or not. Decision makers involve their team and ask them to find the solution. We are now going to examine the two business models related to this new economic product, by assessing its impact on the corporate image and profit through 9 blocks.
When the rate of demand is greater than the rate of delivery, it is not surprising. Have you ever had the feeling that work just piles up, and gets more and more; while time to finish things just gets longer and longer? The reason why work actually piles up is not only due to the continuous arrival of new demand. It is also consequence of the fact that in most cases the decision to start the work happens almost as soon as the demand is received. If we combine the learnings from the earlier diagram where we illustrated the desire to increase the delivery rate to such extent that it could match the demand, with the last diagram above where work just accumulates and times get longer and longer , we can reason as follows.
If the delivery rate matches the demand rate i. Likewise, the amount of time to finish any given work would also become constant rather than being ever increasing. In other words, the system would become stable constant amount of work and predictable constant amount of time. Yet, no matter how much companies invest in increasing their performance, this ideal balanced and stable state seems never to be attained. Could there be another way to make those two lines parallel and thereby both avoiding to overburden the system, while making it both stable and predictable?
It is just so natural to want to make the delivery line parallel to the demand line, as that would resolve many issues. There are other possibilities, however, where focus is not on trying to affect the delivery line. For instance, one could decide to stop serving the less profitable customers or market segments, and focus only on those of high value. Of course, in most places, the idea of serving less customers or a smaller market place is not very popular. Moreover, in knowledge work, the demand line is often artificially steeper than what it really needs to be.
Whether we try to increase the rate of delivery or decrease the rate of demand, both approaches strive to achieve a condition where the two lines are parallel.
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When the lines are parallel, the system is not overburdened and, above all, it becomes stable and predictable. Being stable has huge business value. A stable and reliable system has greater odds of being around next year. On the one side, increasing the rate of delivery is hard, it almost certainly incurs costs, takes time and is mostly prone to failure. Note: the reason why it incurs costs and has high odds of failure will be further explored with the mental models of constraints management. On the other side, decreasing the rate of demand is mostly out of our control, and is rarely accepted as a wise and viable business decision.
To find that other way, we need to question some of the assumptions, and consequential beliefs, decisions and actions, that typically happen. Given that the rate of demand is greater than the rate of delivery, the organization is pressured. Decreasing demand is out of the question; and demand pressure invariably results in more and more work in the system.
We must start working on their requests ASAP, so we can tell them they are being served! In the next post in the two-part series, we will explore the ways we can approach rethinking these assumptions. Steve Tendon is a management consultant, business advisor and author. With a background in Software Engineering, he led the development of numerous applications in various fields, like: banking, health care, legal, human resources, and others.
As a management consultant focusing on organizational performance, he has had a number of significant assignments. For Wolters-Kluwer a global information services company based in Amsterdam , he designed a digital transformation resulting in 40 million Euro cost savings. Steve is the creator of the TameFlow management approach. TameFlow is used across many industries, like: aviation, automotive, financial services and others. Your email address will not be published. It might look like this: Of course, this is a simplification — it is a model, after all.
The Desire to Increase Performance Most organizations are under pressure to always deliver more. The Rate of Demand is Important Too If the rate of demand were taken in consideration, we would have to realize that demand arrives at a higher rate than the rate of delivery; and that it happens earlier in time because work needs to be done between receiving the demand and delivering it.
It might be represented like this: Now that we have plotted these two fundamental lines, the demand line and the delivery line, we can start reasoning about them. The Difference Between Demand and Delivery is Even More Important If we consider the difference between the demand line and the delivery line, then the vertical difference between the two lines represents how much work needs to be done, at any given moment in time.
We can illustrate the notion like this: Why Companies are Always Overburdened It is very common that most organizations feel stretched , as if they were constantly overwhelmed. If so, then this diagram can explain why: The Value of Matching Delivery to Demand The reason why work actually piles up is not only due to the continuous arrival of new demand.
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On our diagrams, it would look like this: Yet, no matter how much companies invest in increasing their performance, this ideal balanced and stable state seems never to be attained. On the diagram, it would look like this: Of course, in most places, the idea of serving less customers or a smaller market place is not very popular.
The Quest for Stability and Predictability Whether we try to increase the rate of delivery or decrease the rate of demand, both approaches strive to achieve a condition where the two lines are parallel. But it seems that achieving this is next to impossible. Yet, there is value in having those two parallel lines.
Could we achieve it in some other way? Unintended Consequences of Good Intentions To find that other way, we need to question some of the assumptions, and consequential beliefs, decisions and actions, that typically happen.