One of the challenges that I have had over the past years is to use the MBA and business thinking in the social sector. The language is different, the models cant be copied; they need to be “localized” and at the same time we need something to make sense of the complexity.

I started to see that some models are useful in some contexts. For example, Rumelt’s model of the strategy kernel as he described in Good Strategy/Bad Strategy is quite useful in a public sector or public policy setting whereas Roger Martin’s inter-related set of strategy questions are useful for the environment The Australian Center for Social Innovation (TACSI) finds itself.

It is the usefulness of the model to the context that is critical.

Learnings:

• Have many models in your arsenal
• Understand the context (situation, environment, people, language etc)
• Match models to context
• Make models useful
• Get things done

You should focus neither on failures nor on successes. What you should focus on are experiments that maximize learning.

Celebrate learning, not success or failure.

via Celebrate Learning, Not Success or Failure – Agile Management | NOOP.NL.

I am going to do two things. One, summarize and review the book in this blog and two, connect the learning to my life and to the other part of what this blog is dedicated to – the social sector. How can business tools be used in the social sector?

The book is an extension of his work with this Harvard MBA Class where he prompts them to use the theories they have learned about in business to their life. And this consists of three questions.

1. Finding happiness in your career?
2. Finding happiness in your relationships?
3. Staying out of Jail.

What can business theories do for our life? Does it even make sense to think like that? Christensen wrote a much sought after HBR article which is the basis of this book. If you have read that, you know that this makes sense.

He starts the book with a Prologue on the difference between “what to think?” and “how to think?”. This book is about “how to think?” and using that knowledge in your own life.

He goes on to explain the power of a theory. He explains the theory of flying and how we originally confused the idea of flying with having feathers and only after we understood the theories of “lift” and “gravity” etc we had human flight. The main takeaway – understanding the difference between causation and correlation.

Some takeaways.

For myself

The biggest takeaway for me is that we need a very well thought through and grounded theory for our life. I do not have a theory or set of theories for my life. Yes, I do believe in some things, I have principles, I like somethings and dislike others. But do I have theories that guide my life? No. If they are, they are very loosely set in my mind and they do not guide my thinking always.

If I can take one big learning out of this, it is that I need to start explicitly putting together the principles and theories that make sense for me. Theories that are put to test and work. Principles that I want to stand by. And these will have a effect on my family, my relationships and especially, my daughter.

Social Sector

Drucker talked about “Theory of the Business” and that article in HBR stands as one of the most critical pieces of thinking that any organisational leader need to understand. What is the theory that drives your business? I have seen many leaders in the government and not for profits who have two issues 1) they do not know the theory or 2) they have an outdated theory of the business and it does not work now.

Ofcourse, working with human beings mean that “theory of change” is not that easy however, we need to think through and understand what is our theory of the business.

The key question when trying to value Facebook’s stock is: can they find another business model that generates significantly more revenue per user without hurting the user experience? (And can they do that in an increasingly mobile world where display ads have been even less effective.) Perhaps that business model is sponsored feed entries, as Facebook seems to be hoping (along with Twitter and perhaps Tumblr). The jury is still out on that model. Personally, I have trouble seeing how insertions into the feeds aren’t just more prominent display ads. You still have to stoke demand and convert people from non-purchasing to purchasing intents. A more likely outcome is that Facebook uses their assets – a vast number of extremely engaged users, it’s social graph, Facebook Connect – to monetize through another business model. If they do that, the company is probably worth a lot more than the expected $100B IPO valuation. If they don’t, it’s probably worth a lot less.

via Facebook’s business model – Chris Dixon.

I don’t think facebook is worth $100B.

Amazon’s story is so much like a chess game in fact, that I suspect a fascinating book could be written about it by focusing on just the game. You wouldn’t need emotions, larger-than-life characters or redemptive arcs to make it interesting. You could get all the emotional content you wanted by focusing on the reactions of the others in the water with Amazon, like the human characters in Jaws. If you recall, the shark was pretty expressionless throughout.

From Brian Soloman writing for Forbes:

For Apple, what’s special about the iPad is tied up in its apps. In the space of 30 seconds, they showcase eight different apps used for a variety of purposes. Most of the depicted apps were built by third-party developers and may not appeal to more than a fraction of iPad owners. Not everyone wants to practice calligraphy, play the piano, or learn about the human skeleton. But that’s fine – there are over 100,000 different apps.

The Kindle Fire from Amazon is doing something very different. Amazon has thought through the entire value chain, its capabilities, long term plans and defined its Kindle Fire in the Tablet space very differently. The Job to be Done in this case is “all the content”.

More from Forbes:

“Enjoying your content should be simple and easy. One touch gives you instant access to Amazon’s massive content library, including over 18 million movies, TV shows, songs, apps, magazines, and books.”

Did you catch the difference? Amazon portrays apps as “content” equivalent to other downloadable entertainment. And if you look closely, the video shows off a tablet interface in which “Apps” is just another tab side-by-side with “Newsstand”, “Books”, “Music”, “Video”, “Docs”, and “Web”. Compared to Apple’s approach, in which all other content is bought, viewed, and manipulated within apps themselves, this is a somewhat radical departure.

There you go. For Apple the JTBD is “There’s an app for that” and for Amazon its “all the content”. And I think for this reason both will thrive.

A good summary of his idea is the McKinsey article “The Perils of Bad Strategy”.

He makes a very good point about maximising profit as a goal in his book.

An economist would tell her that she should take actions that maximise profit, a technically correct but useless piece of advice. In the economics textbook it is simple: choose the rate of output Q that provides the biggest gap between revenue and cost. In the real world, however, “maximise profit” is an ill-structured problem. (emphasis mine)

This is a really good way to think about it. Its a goal, not a strategy and its a bad one. It’s ill-structured. The same can be said about “maximizing shareholder value”. These goals do not help in anyway to understand the challenge or diagnosis as he says, provide a guiding policy nor help in creating a coherent set of actions.

In Sayonara Sony, Adam Hartung at Forbes explains this very well:

Why did Sony’s management go along with this?  As mentioned, Akio Morita was an innovator and new market creator.  But, Mr. Morita lived through WWII, and developed his business approach before Deming.  Under Mr. Morita, Sony used the industrial knowledge Deming and his American peers offered to make Sony’s products highly competitive against older technologies.  The products led, with industrial-era tactics used to lower cost.

But after Mr. Morita Sony’s other leaders were trained, like American-minted MBAs, to implement Industrial strategies.  Their minds put products, and new markets, second.  First was a commitment to volume and production – regardless of the products or the technology.  The fundamental belief was that if Sony had enough volume, and cut costs low enough, Sony would eventually succeed.  Without any innovation.

By 2005 Sony reached the pinnacle of this strategic approach by installing a non-Japanese to run the company.  Sir Howard Stringer made his fame running Sony’s American business, where he exemplified Industrial strategy by cutting 9,000 of 30,000 U.S. jobs (almost a full third.) To Mr. Stringer, strategy was not about innovation, technology, products or new markets

This is the interesting bit though:

Migicovsky said he’s more adept at pitching to consumers than to venture capitalists.

“With VCs, they worry about models and size of market and stuff like that,” he said. “With consumers, one of the things I love about the videos, we just showed how you’re going to use it.”

How you are going to use it? That is the Job to be Done. Nothing else really matters. Not market sizes and the traditional customer segmentation.

The way to understand the world is changing quickly and Job to Done does a great job of it. Horace Dediu from Asymco is a master at explaining this.

You can check out more on his podcast “The Futulity of Machinations” or on my blog post here.