CategoryValue Creation

The TATA Values — driving brand and ethics for prosperity

From Rich Karlgaard:

 

Prosperity, of course, isn’t caused by government. It’s brought about by entrepreneurs and entrepreneurial companies. Few companies in the world are better at creating shared prosperity than the Tata Group, a 146-year-old Indian company with roughly $100 billion in revenue. If you hang around the technology world, and you know about Tata Consultancy Services . It did $11.6 billion in 2013 sales and is expected to show $14 billion in 2014.

But Tata is also in airlines, automobiles, steel, electricity, construction, hotels, and food and beverages. Tata has more than 100 lines of business and operates in more than 100 countries. I stayed at a Tata hotel–the luxurious Taj–and was driven around in a beautiful Tata-made car, a Jaguar XJ that looks more like a Bentley than the faux Jags from the Ford Motor F -0.19%-ownership era.
How does a global conglomerate of Tata’s size stay in top form across its various industries without reverting to the mean? Tata’s success comes from a blend of strategy, execution and strong cultural values. More than most, Tata puts real thought and muscle behind the oft-neglected cultural side of business.
In Tata’s historic and humble Bombay House headquarters, I spoke with Mukund Rajan, who holds the dual title of brand custodian and chief ethics officer. Rajan’s odd dual title hints at the way the company views the world.

“Tata plays a long game,” said Rajan. “In the long run trust, ethics and good corporate citizenship create happiness, which ultimately leads to success.” Rajan says the age of social media and hypertransparency is good for Tata’s historical values. “Those who take shortcuts for the bottom line will be found out sooner.”
If the rest of India follows Tata’s example, expect tangible results from the land of dreams.

Developmental Evaluation — compliments a adaptive innovation process

Social problems are in general complex in comparison to complicated and simple problems as formulated by David Snowden. We have to use an adaptive process for solving it and through that we will define the problem and the solution.

Innovation for social change requires tools and frameworks that support the process. Evaluation is a key component of this process. Evaluation helps us answer whether the program makes any difference.

Adaptive Loop

In a adaptive process while you are prototyping and experimenting various interactions, tools and scenarios — things change. The summary evaluation though useful is not available when you need it. What we need is a way to understand whether the current experiment is working.

Here is where developmental evaluation is a useful tool. In the kind of innovation process that I use this is clearly the best framework.

Patton is the pioneer in this space and thus is what he says.

“Developmental Evaluation supports innovation development to guide adaptation to emergent and dynamic realities in complex environments. Innovations can take the form of new projects, programs, products, organizational changes, policy reforms, and system interventions. A complex system is characterized by a large number of interacting and interdependent elements in which there is no central control. Patterns of change emerge from rapid, real time interactions that generate learning, evolution, and development – if one is paying attention and knows how to observe and capture the important and emergent patterns. Complex environments for social interventions and innovations are those in which what to do to solve problems is uncertain and key stakeholders are in conflict about how to proceed.”

How to stay on track with your strategy?

 

Now that your strategy is ready to be implemented how do you know that it is being implemented as planned and you are not being distracted by the noise and busyness of work.

Clayton Christensen suggests to focus on tracking your resources (people, time etc). Because where resources go that becomes your strategy whether you planned it that way or not.

Peter Winick provides some practical advise:

We do certain things (meetings, projects, conference calls, etc.) for the distinct purpose of moving our strategy forward. We’ve given them the thought they require, allocated the right level of resources and insure they get done on time (and hopefully on budget). Where the gap exists is the other “stuff” that consistently seems to consume our time and energy. What I suggest you start to do is two things:

1) Before you commit to anything (meaning scheduling a call, a meeting, accept an invitation to speak at any event, participate in a webinar, contribute to an article, launch a social media initiative, etc.) ask if it is positive, neutral or negative relative to your strategy. Will it get you closer to your goals or is it a distraction?

[…]

2) Do a quick strategic audit of your calendar, Take a look at the last month or two and mark each item is positive, neutral or negative. I realize that there are many things we need to do that aren’t relative to the implementation of our strategy, but I also know that there are way too many things we commit to doing that we have control of.

 

Jeff Bezos latest annual letter (2014): Focus on customers and innovation

Buffett said that reading annual letters of organisations around the world is a good learning exercise. This one from Jeff Bezos is a good one. One thing about Amazon, an obsessive focus on customers.

We have the good fortune of a large, inventive team and a patient, pioneering, customer-obsessed culture — great innovations, large and small, are happening everyday on behalf of customers, and at all levels throughout the company. This decentralized distribution of invention throughout the company — not limited to the company’s senior leaders — is the only way to get robust, high-throughput innovation. What we’re doing is challenging and fun — we get to work in the future.

Failure comes part and parcel with invention. It’s not optional. We understand that and believe in failing early and iterating until we get it right. When this process works, it means our failures are relatively small in size (most experiments can start small), and when we hit on something that is really working for customers, we double-down on it with hopes to turn it into an even bigger success. However, it’s not always as clean as that. Inventing is messy, and over time, it’s certain that we’ll fail at some big bets too.

How caring brings out the best in you: Seth godin

From Seth:

Instead, the restaurant makes the menu longer instead of figuring out how to make even one dish worth traveling across town for. We add many slides to our presentation before figuring out how to utter a single sentence that will give the people in the room chills or make them think. We confuse variety and range with quality.

Practice is not the answer here. Practice, the 10,000 hours thing, practice alone doesn’t produce work that matters. No, that only comes from caring. From caring enough to leap, to bleed for the art, to go out on the ledge, where it’s dangerous. When we care enough, we raise the bar, not just for ourselves, but for our customer, our audience and our partners.

Tesla’s most disruptive product may not be its electric cars

Tesla and Musk have been fascinating for many years now. Joh McDuling writes in QZ about Tesla’s new batteries plant, the Gigafactory.

Tesla has much to gain by building the facility. Firstly, it will help speed up car production. And it should also help sales. It will lead to a “major reduction” in the cost of Tesla’s battery packs and enable the company to build an affordable, mass-market electric car within three years, Musk said. At the moment, the main thing restricting Tesla’s skyrocketing sales (see below) is the supply of battery cells

That alone might sound exciting enough. But the mass production of Tesla’s lithium-ion batteries could enable their use to power all sorts of activities beyond cars. It’s already happening; Telsa’s batteries have been used to store electricity from rooftop solar panels in California, for example.

[..]

Morgan Stanley, which also is bullish on the stock, is even more ebullient. “We are witnessing the most disruptive intersection of manufacturing, innovation and capital experienced by the auto industry in more than a century,” gushed analyst Adam Jonas in a note. “Tesla may be in position to disrupt industries well beyond the realm of traditional auto manufacturing. It’s not just cars.”

And possibly this is one reason Apple is in talks with Tesla. As John-Louise Gasse estimates, both of them may need the same amount of batteries in 2014 and possibly that’s the best connection. 

The meaning of design

Ben @ Stratechery  writes eloquently about what design thinking is. It’s key to innovation and creating value to customers. All our work, whether policy formulation, Strategy, innovation starts from this.

Approaching a problem with a design thinking mindset, however, certainly takes into account what a customer says, but simply as one input among many. In this approach, observing the way people really live, developing a deep understanding of the real problems they have, and gaining an appreciation of the “hacks” they devise to overcome them can deliver an understanding of prospective customers’ needs that is more accurate than what any of those prospective customers could ever articulate on their own.

And then, from that understanding, an entirely new, highly differentiated product can be delivered that surprises and delights.2 From a business perspective, the emotion and attachment said product inspires breaks down price sensitivity and builds brand attachment, and inspires the sort of viral marketing that can’t be bought.

The brands that resonate, that people love – most famously Apple, of course, but there are other examples3 – are those that suprise and delight. In fact, those words are a central tenet at Apple, and one of the primary standards by which all products are measured. What few appreciate, though, is that when Steve Jobs bragged about not doing market research or not holding focus groups, he was not saying Apple did less than the competition; rather, they did so much more.

It is this lack of understanding and appreciation for the very hard work and deep thinking required to surprise and delight that leads to countless companies and Steve-Jobs-wannabes crashing-and-burning, even as they declare their fealty to design. What they don’t understand is that design is not just about looking good, or working well, or even being easy-to-use. The most fundamental part of design is truly understanding your customers at a deeper level than they even understand themselves. Moreover, to truly be design-centric is harder than being market-centric. Things like surveys and focus groups persist because, while the products that result may not inspire love, they don’t inspire hate – or worse, apathy – either.

Understanding the Knowledge Funnel to reinvent your organisation

The mighty business models of giants like Home Depot failed when they entered China. One of the main reasons was the lack of empathy with customers and understand what is that they value.

Why did this happen? I cannot in all honest answer this question. However, Can you stop this from happening? I think there are ways to think about it.

Roger Martin introduced the idea of the Knowledge Funnel in his book, The Design of Business. My wife helped me recreate it. The idea is that everything in the world that is created goes through possibly three steps. Mystery, Heuristic and Algorithm.

Martin explains as follows:

To innovate and win, companies need design thinking. This form of thinking is rooted in how knowledge advances from one stage to another-from mystery (something we can’t explain) to heuristic (a rule of thumb that guides us toward solution) to algorithm (a predictable formula for producing an answer).

Knowledge Funnel

 

In the book you will find examples of McDonalds and the science of perception and its use in the modern world. I find the idea that knowledge moves from one stage to another quite powerful and it fits when I map that to innovation projects that we have completed.

It works in a powerful way when you can use to evaluate your current project, program or organisation. In the Home Depot example, it was clear that there was a clear lack of understanding of the customers and their needs. Why did this happen with successful and smart people? Home Depot was in the algorithm stage of the knowledge funnel. It had a business model that works very well in many countries and the idea was to replicate that algorithm in China. However, the fundamental mystery of “do it yourself” that Home Depot solved in the US does not work in a “do it for me” need in China. And for that, no level of business model tweaking at the algorithm level works. You need to go back to the mystery.

In the social sector, it is the same. Lets take child protection. Over 30 years many developed countries like Australia have developed policies, legislation and programs to support children in scenarios where they are not well taken care of by their parents. However, in the last 30 years the world has changed, parents have changed, societal expectations have changed and our understanding of brain development and attachment theory which explains the need for love and relationship at a young age is better.

All of this means that we cannot tweak the child protection algorithm, we need to go back to the mystery and understand from fundamentals what’s happening and why. This is where the analogy of the knowledge funnel is powerful.

For that we need to be humble enough to accept that we do not know. Then, innovation starts.

Why Foreign Retailers Stumble in China: Lack of Empathy

Why did the might Home Depot and other retailers, very successful in the US and Canada, fail in China.

Anil Gupta and Haiyan Wang explain in the Business Week. They suggest four strategic idea. I want to focus in number 3.

Third, go heavy on local adaptation, including in such key areas as store size and format, product mix, and even store branding. The typical Chinese city has far greater population density than the typical American or European city. Also, the typical customer lives in a smaller apartment with a smaller refrigerator and is less likely to own a car. Thus, trying to clone the size and style of the company’s U.S. or European store is unnecessary baggage and would do little to build competitive advantage in China. Home Depot made this mistake in China. A key element of Home Depot’s success in the U.S. and Canada has been designing its stores around the do-it-yourself concept. It took this concept to China. Given the very low labor costs in China, however, Home Depot needed to think in terms of do-it-for-me rather than do-it-yourself.

 

Why co-design

When I have talked about empathy with customers, and understanding what is value to customers, this is great example. You cannot take even one of the most successful business models and transplant it into new contexts. You need to have the humbleness to build empathy and understand the “job to be done” for the customers in their context. A neuroscience researcher once told me that when we build empathy we “break our pattern of thinking”. This is the starting point of innovation. This kind of stuff, as the above graphic tries to suggest, cannot come from data driven analysis. It has to come from getting out of the office and understanding people.

If Home Depot has done that possibly there will be need to have a host of handymen, plumbers, electricians and others on call to support the buying process and adapt to the needs of the customers in China.

What is the learning: Whether you are starting off new or have one of the most successful business models in the world, when your context changes and customers change you need to go back to understanding the whole thing from the start. Get some insight into customers as a first step.

 

The “C” of strategy

Strategy is about choices. These choices are not easy to make and the question that comes through always is where do you start.

There are basically three Cs that matter – Capabilities, Customers and Competitors (more broadly the environment a.k.a Porters five forces). One view of strategy is that the environment and the structure of the industry matter, hence, look at competitors and other forces. The other view of strategy is your capabilities matter. What are you good at? Make your strategy based on that. The third and more radical view is the focus on customer. As Drucker suggests : The purpose of a business is to create a customer.

In this process, you have a Create role – the vision and values that guide what you and why you do it.The final outcome for social impact work is change. An individual whose life is better because of the work you do.

In summary, you use your create lens to make choices about – Customers, Competitors and Capabilities. Where do you start? Lets take a look at Apple.

Ben Bajarin on Apple’s Strategy:

The broad claims that are made about what Apple should do are almost always based a round competitive reasons. Folks claim that because Apple’s competition is doing something that Apple should also or they will lose. Yet what I love about Apple’s strategy is that it is never around what the competition is doing. Apple marches to beat of their own drum. This is fundamentally mis-understood by so many. In fact, Apple’s strategy is best understood within the view that internally they literally believe they have no competition ( I personally believe this also but that’s the subject of a much longer essay.) Apple has customers not competition. The decisions they make as a company are not based around what their competition is doing but around what is best for their customers. Like it or not, this is their strategy.

In the start up world, the work of Steve Blank, Eric Ries, Ash Maurya and others has pushed forward this idea of focus on customers, not competitors. This is most uncommon for large organisations. In some sense, that is why Apple is special.

For social impact, it is a no brainer. You have to start with customers. You have to think about what is value for them and how you can create change. For that, you have to go outside your office. How do we do that? Lean Startups and Design Thinking.

 

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