Episode 20
Your business is a machine: how to design, build, and run it successfully
Let's assume your business is a machine. There are different activities and processes your machine goes through in order for it to be fully functional and successful. Those activities include designing, building, and running the machine. But what does that truly mean for your business?
We spoke to Richard Russell, an OKR and Leadership Coach, about his analogy: your business is a machine. In this episode, we'll:
- Walk you through the analogy
- Discuss what each activity — design, build, and run — entails
- How people fit into these processes
- What role OKRs and KPIs play in these activities
- Share how and when you should move from one activity to another
- Explain how to balance efforts between each activity
- Provide best practices for successfully designing, building, and running your business
Tune in to learn more!
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Transcript
Hi everyone and welcome to another episode of Goal Diggers.
Speaker:I'm Henrik, one of the founders and CEO of Perdoo — a Strategy Execution Software.
Speaker:I'll be your host today, and with me today is Richard Russell.
Speaker:Richard, could you tell us a bit about yourself and what you do professionally?
Speaker:Yeah, for sure.
Speaker:So, um, mostly these days I work with scale ups and companies between about 50, sometimes lower, sometimes to 30 people up to 500 or a thousand people.
Speaker:Usually they've just raised some venture capital.
Speaker:They've gone through a seed, series A, B, C, or D round.
Speaker:Raised some money and they've gone through what I call a Mikitani cycle and the Mikitani cycle named after, Miki Mikitani, the founder of Rakuten in Japan.
Speaker:And he said that every time a company triples in size, everything breaks.
Speaker:And, what I do is I help fix those things that are breaking.
Speaker:And particularly what I focus on is the management system.
Speaker:And so how are we managing, how are we delegating, how are we organizing work?
Speaker:How are we setting goals?
Speaker:Usually people engage me because they've heard about, or they've used OKRs, and they're struggling somehow.
Speaker:Like they either look, look at the, read the book and they've decided, I didn't quite know how to do that on my own.
Speaker:I would like some help or else they've tried to do it themselves.
Speaker:And this is more than half my customers.
Speaker:They've tried to do it themselves and they're struggling and it doesn't work the way they want it to do.
Speaker:And they're not getting the results.
Speaker:Feel like they should be getting, so they call me and I come in and help them with that.
Speaker:And that's usually the starting point, but, sort of a goal setting on its own is not enough.
Speaker:You need to work through the whole operating system of how you're managing, how you're delegating and how you're tracking all of these things as well.
Speaker:I think that's also how I discovered you.
Speaker:So I started following you on LinkedIn not too long ago.
Speaker:And I really liked the stuff that you put out there.
Speaker:I really liked some of the posts, and one stood out in particular, which is actually the reason why I decided to reach out and
Speaker:we agreed to do this podcast together, but you referred to a business, as a machine.
Speaker:Could you tell us a bit more about that?
Speaker:Yeah.
Speaker:So business, basically any business, it doesn't really matter what kind of business this is, as long as it's got customers, um, A business basically is a machine that takes on one side.
Speaker:It takes in customers who have a need or an unmet need or some, they're unsatisfied, they're unhappy in some way, shape or form, and that's the marketing and sales funnel.
Speaker:It takes those customers in on one side, does something to them.
Speaker:And that something might be, it's a, they're giving them a service.
Speaker:It might be giving a product.
Speaker:It might be a long term thing.
Speaker:It might be a short term thing, whatever it is.
Speaker:You're delivering some value to this customer and changing something for the customer.
Speaker:And then out the other end of the machine pops a happy customer or a satisfied customer and profit.
Speaker:And when you think of a machine of business like that, a lot of my clients, you know, they're very intelligent people and they understand that their business in a huge amount of detail.
Speaker:But actually crystallizing what the business is, if you can use that framework or a simple framework like that, just, you know, sometimes you'll have two funnels because you have customers
Speaker:and we have sellers and buyers or something like that, whatever it is, but it's a pretty simple idea and trying to get your head around
Speaker:that is the business and that is what we are doing, helps to clarify your everything about your business model and what you're doing.
Speaker:And then within this business, as you're, when you're working on this business, all the work that you're doing in this business is usually about: there are three things that you mostly do.
Speaker:One is you run the machine, right?
Speaker:You have this machine that's going on, you are spending time running that machine, and that's everything from the sales, the marketing,
Speaker:the customer support, the customer success, the delivery, the running, the product.
Speaker:All that sort of stuff that isn't changing, keeping that machine going that generates P and L, that generates revenue and costs and so on.
Speaker:And that's your running the machine.
Speaker:Building the machine is when you want to say, okay, we want to change something about this machine.
Speaker:We want to modify how our sales funnel works.
Speaker:We want to modify the product itself.
Speaker:We want to add more value to the customer.
Speaker:We want to change the way we're relating to our customer and that's building the machine.
Speaker:And then of course, if you're going to build a machine, you need to design the machine needs to come up with a strategy or an
Speaker:idea of like, what it is that I'm trying to achieve as I'm building this machine.
Speaker:So everything you do is fits into either design, build or run the machine.
Speaker:And a lot of this maps back to how businesses generally run or organized, but thinking about this like this and thinking about this with
Speaker:this structured way helps you particularly when you're managing teams doing things.
Speaker:So, yeah.
Speaker:And by the way, I tend to use OKRs — it's one of the topics that I've am involved in a lot.
Speaker:Obviously, I tend to use OKRs mostly for the build phase because it's mostly about what I'm trying to make a change.
Speaker:Whereas running things is mostly about consistency and I wanna have metrics and I wanna have customer anecdotes and feedback there.
Speaker:So it's more about KPIs, running, running the machine.
Speaker:Yeah.
Speaker:I really like the analogy.
Speaker:But like, sometimes you may have faced this a couple of times already, right?
Speaker:Where people say like businesses, machines, or like businesses are about people.
Speaker:Right?
Speaker:So, it's, of course, it's ultimately the people, that are responsible for designing, building and running the machine.
Speaker:But how does your analogy relate to that?
Speaker:Yeah.
Speaker:So I think, it's easy if you really want to, it's easy to interpret this in a, what we call a Tayloristic sense.
Speaker:As in people are sort of parts of this machine and they're automatons.
Speaker:And that sort of management model doesn't really work very well for good reason.
Speaker:And so what's happening here is the people are running the machine.
Speaker:The people are not the machine.
Speaker:People are running the machine.
Speaker:The people are building the machine.
Speaker:The people are designing the machine.
Speaker:And in fact, you actually have two other things you're doing as well.
Speaker:You're, you're staffing the machine, which is like finding the people and growing the people and developing teams to do all those things.
Speaker:And you're funding the machine.
Speaker:You're trying to raise money for it.
Speaker:But those are the two areas that I don't tend to work with this huge amount.
Speaker:But when you're thinking about designing, building and running this machine, the people doing this are human beings and they run in a very organic, human social relationship type situation.
Speaker:And people, by the way, whatever role people are in, they're very rarely just doing one thing.
Speaker:Like most people, if you're running the machine, you also have some responsibility for building part of the thing that you're running.
Speaker:If you're building something, mostly you're also involved in the running of it, right?
Speaker:If you're building it, you're involved in the design of it.
Speaker:So it's not like you can separate people out into particular pockets, but you can think about these activities in this manner.
Speaker:Gotcha.
Speaker:Yeah.
Speaker:So do you transition through these sort of phases sequentially, or do you go back and forth all the time?
Speaker:How does that work in reality?
Speaker:It's a great question.
Speaker:I think the best way to think about this is if you think of an early stage startup, like when you very first got that very
Speaker:first idea, the only thing that's happening there is you're designing something, you're designing a strategy, you're designing an idea.
Speaker:And you go and do some tests and you test this idea, you have to build some stuff to test it, but it's not really building the machine, it's building a test.
Speaker:So you're doing this exploration and search to find the business model.
Speaker:And that's really the design phase.
Speaker:Then once you sort of found something that works, you start to build out a machine to run that business.
Speaker:And that's, you know, if you think about like various early stage startups that we know, a lot of them were run by people doing the thing.
Speaker:Like, if you, I think even Airbnb, for example, they basically had people making, you know, doing all this stuff manually.
Speaker:And as they build this business, they start to build processes and tools and software to be able to do the matching and do the
Speaker:searching and do the uploading and manage customers and all that sort of stuff.
Speaker:So that's the building part.
Speaker:And then once you built this and it starts to work and you've got something happening, that's the running part.
Speaker:Now this tends to happen.
Speaker:So it grows sequentially over time, but as a business, you're almost always doing all three of them.
Speaker:So you have to run the machine, you have to run that.
Speaker:And then that's the most important thing because that's where the money comes from.
Speaker:Yeah.
Speaker:So you have to keep running it.
Speaker:But then if you're not in stasis, if you're not in this milking the cow mode, like if you're in that sort of like, mature Company approaching decline, and you don't need to change anything.
Speaker:You just keep doing the same thing.
Speaker:Fine.
Speaker:You're just running the machine.
Speaker:You don't have to do anything else.
Speaker:But most of us exist in environments where we have ambitions to grow and we have a dynamic market.
Speaker:And so we have to keep on building and we have to keep on designing.
Speaker:So we're also building and designing at the same time.
Speaker:We spend our time on all of these things at the same time.
Speaker:I'd love to zoom in on these different phases a little bit more to really understand, like, what are the specific challenges that you have when you, when you're in that stage?
Speaker:So when we think about, which one should we start with?
Speaker:Does it make more sense to start with designing?
Speaker:I think it actually makes sense to start with running because in most organizations that's the most important part.
Speaker:And I'd call this an activity rather than a phase because the phase implies that sequentiality.
Speaker:Activity is probably a better word.
Speaker:I've never really tried to use that word, but I think it works in this context.
Speaker:But if we start with running, should I just run into this?
Speaker:Or did you want to ask something specific?
Speaker:Yeah, go ahead.
Speaker:If we start with running.
Speaker:So what are the specifics of what's happening during this activity.
Speaker:And what are the challenges that companies face?
Speaker:Does it change for like the people that you need in your business for example?
Speaker:Do you need different people for running the machine versus people for building the machine?
Speaker:Yeah.
Speaker:Generally people tend to fit more into one stage than another.
Speaker:And what happens with running, let's just talk a bit about what running is.
Speaker:So I mentioned before it has the marketing funnel, the sales process, the onboarding process, the customer success, whatever
Speaker:your business is set up to do, it has all of those things that happen over and over again.
Speaker:Most of this domain of running, most of these activities are processes and we run them with KPIs, with metrics and with regularity.
Speaker:And we're basically trying to do the same thing over and over again, slightly better each time.
Speaker:We're trying to scale it up a bit.
Speaker:We're trying to figure out how to do it better.
Speaker:But we're trying to mostly do the same thing over and over again.
Speaker:And if you're in a business that has been established for a while, you've got a lot of these processes.
Speaker:So the people who are doing this need to be people who are mostly oriented around efficiency and quality.
Speaker:Right.
Speaker:And sort of like that, that sort of work, you're doing the same stuff, right?
Speaker:You're..
Speaker:I do want people to, I often, in those situations, I do want people to be thinking about how do I improve this, but I want 90
Speaker:percent of their time to go into doing the work, 10 percent of their time to go into improving and building and changing something new.
Speaker:Because if everyone's just building no one's running.
Speaker:Right.
Speaker:And the running is the part that makes the money.
Speaker:So when we're operating this, we think about people who have got that orientation towards process, orientation towards detail, orientation towards efficiency and that kind of thing.
Speaker:Predictability is really important in this space, even for a startup.
Speaker:Predictability is important because you have to know how your business runs to be able to do anything with them.
Speaker:And then the way you manage this, you have to know how your business runs to be able to grow it right.
Speaker:And then to manage this aspect of the business, this is this core fundamental part of running the business to manage this mostly is about data and metrics.
Speaker:You can use KPIs.
Speaker:I like to use a weekly business review sort of a spreadsheet with like the weekly numbers that matter across the board here.
Speaker:We can segment them.
Speaker:We can do all sorts of interesting analysis on this, but basically it comes down to how do I understand what's happening here?
Speaker:And I'm looking at this on a regular basis and I'm taking into account actual customer feedback.
Speaker:Because we have this idea that data is God and data is true.
Speaker:And the plural of anecdotes is not data.
Speaker:Right.
Speaker:And so, however, in any business, our data is imperfect and our ability to, uh, the way we're segmenting, the way we're looking at this is not perfect.
Speaker:So if we take in some customer feedback, some customer stories from this, we can then look at how we're operating.
Speaker:What the data is telling us and is this consistent with what the customer's feedback is telling us?
Speaker:Or is there something we're missing here and how do we change the way we're looking at our data to really understand what the customer is saying?
Speaker:So we combine these things together and we have both of these going on at once.
Speaker:And that then informs our understanding of how our business operates, which then means that we can build and design the business.
Speaker:And who is the weekly business review for?
Speaker:Is that a way for an employee or a manager to report back to the leadership team?
Speaker:To me, I think fundamentally for the leadership team, like I think if you're a leadership team, you're a CEO, you're the C suite.
Speaker:Most of my customers, are the C suite, like CEO in that group, the executive team.
Speaker:And if they're not on top of like every week, what's happening in our business?
Speaker:What's, what's changing?
Speaker:What do these numbers mean?
Speaker:If they're not asking that question, what's the driver?
Speaker:Has something changed here?
Speaker:Why did this change?
Speaker:And what's the driver?
Speaker:What's the input here?
Speaker:Is there a leading indicator?
Speaker:And they're not asking that question on a regular basis.
Speaker:Then they're not getting enough of an understanding of their own business.
Speaker:And then all of those decisions that they make at that strategy sort of level, are less informed.
Speaker:And so if you can do this and you have this happening at the same time with the same people, you can make informed decisions.
Speaker:And, do you have a template for that weekly business review?
Speaker:I do.
Speaker:I have a very simple, I like to use Google sheets.
Speaker:People use Excel or Google sheets.
Speaker:I am a fan of using that kind of tool as opposed to something like a BI tool or something complicated like a tablet.
Speaker:I mean, do you have like a format that you recommend companies to use with like templated questions?
Speaker:Is that available on your website?
Speaker:Otherwise we could put a link in the show notes.
Speaker:I have a template that basically doesn't have the questions.
Speaker:Because in most cases, the numbers or the particular metrics vary based on the business.
Speaker:So what kind of business you have, usually there's clearly, there's obviously things like marketing and sales numbers and onboarding numbers and retention and sharing.
Speaker:And, you know, if you're a SaaS business, probably pirate metrics as a good place to start.
Speaker:Right.
Speaker:Acquisition, Retention, all that.
Speaker:But is that the weekly business review?
Speaker:So is that like putting the KPIs that you should be looking at at a weekly basis into one sheet, into one overview, or do
Speaker:you also recommend people to go through like a certain thought exercise every week, answering certain questions, for example?
Speaker:I think when you have the data in the right way, you've got this listed on your spreadsheet and you usually have it by week.
Speaker:So you have the previous weeks and then you just have columns for weeks, right?
Speaker:So when you're looking at these things, you can see these numbers moving around, seeing these numbers change.
Speaker:And as you're looking at this, you start, some questions start to raise, like, why is it that we're having more customers coming in the marketing, but we're not selling more.
Speaker:Or why is it that we're selling more?
Speaker:But we're having higher churn.
Speaker:Why is it that, yeah, it's trends are going up.
Speaker:Can we segment the churn?
Speaker:Like, can we segment this and figure out who's churning and all that sort of stuff.
Speaker:And so a lot of this is very subjective and very related to the actual business.
Speaker:But yeah, you do want to be asking those kinds of questions to number one, take action based on the data you're seeing.
Speaker:And number two, find the root causes of whatever you're doing.
Speaker:And number three, increase your understanding of the drivers.
Speaker:And then finally improve the data so that you can see this more easily in the future.
Speaker:And you seem to be a big proponent of doing that on a weekly basis, right?
Speaker:Is that because, is that on a weekly basis for, for startups and scale ups or do you think as, as companies are bigger?
Speaker:Like if you think about a huge company like PepsiCo, like would they do it on a weekly basis as well?
Speaker:Or would they do have to do that on a monthly or quarterly basis?
Speaker:So I picked this habit up from Amazon and Amazon does it on a weekly basis for every business.
Speaker:And sub business sub sub business.
Speaker:Like I said, there are massive organization.
Speaker:Every single week.
Speaker:Every leader with some level of responsibility for a business, or a piece of business, does their WBR with their senior stakeholders and their team in the room.
Speaker:Now with a startup, clearly you have less, fewer things going on than Amazon, but at the same time, generally, I think weekly is a good idea from both startups.
Speaker:Unless you have like, for me, I have relatively little change week on week, so it doesn't make sense to do it weekly.
Speaker:I do it monthly.
Speaker:It's a small one person business.
Speaker:Right.
Speaker:But for most places you have something changing every week.
Speaker:And the interesting thing is that weekly almost always feels like it's too often.
Speaker:And that's a good thing because if it's a little bit too often, it means that you can skip on because something went on, someone's sick or whatever.
Speaker:We skip on and life goes on.
Speaker:It also means that.
Speaker:By having that familiarity, we get the familiarity with the numbers and the metrics so we can look at this much quicker and more efficiently.
Speaker:See this number.
Speaker:See how that something looks weird here.
Speaker:What's going on.
Speaker:And now I'm because if I'm doing this every month, then every month I've got to go, hang on a minute, what does this number mean again?
Speaker:You know, how do we drive that number?
Speaker:And why does it, and we are having the same question over and over again.
Speaker:So I find doing a weekly is a really good idea just because it creates that familiarity, that depth of understanding and that confidence around the numbers.
Speaker:Got it.
Speaker:So that was really helpful.
Speaker:So we've been talking about the running the machine activity.
Speaker:But, it feels to me as if, by doing that exercise, it sort of drives inspiration for, things you want to change in the design of things that you want to rebuild, for
Speaker:. Yeah.
Speaker:So basically when you're really familiar with the business, this is how you can know what changes I really want to make, right?
Speaker:If I'm disconnected from this, it's very hard to know what changes I want to make and what I want to build.
Speaker:I'm going off gut feeling.
Speaker:And so when I'm really connected.
Speaker:I understand this and I understand the impact of the changes I'm doing as I'm doing them.
Speaker:So whenever we're building the machine, usually what we're doing is most of my customers, we're using OKRs.
Speaker:We're saying, I want to meet this objective.
Speaker:I want to change something about my machine.
Speaker:I want to change the way our sales funnel works.
Speaker:I want to change the way this product is providing value on it, increase this particular type of value, whatever I'm doing, I'm trying to come up with a way of doing this and I'm measuring
Speaker:this based on some metric or some milestones or some other way that I've set a key result that tells me, yes, we're successful in this.
Speaker:Now, if I'm doing this on a regular basis at, you know, with the same group of people that I'm also looking at the numbers, these things are linked because actually what
Speaker:we're doing, if we're doing meaningful goals and changing things, we're changing the business, we're changing that machine.
Speaker:So now I've got to these two things reinforcing each other.
Speaker:I'm not only I'm looking at the business on a regular basis, seeing those seasonality changes, seeing the how the business works
Speaker:and digging deeper into inputs and drivers and leading indicators and that kind of thing.
Speaker:And I'm also doing changes and seeing how that change is affecting my business.
Speaker:And I've got a better idea as I'm doing this, what works well, what doesn't work well and what to do in the future and how to make a better change in the future.
Speaker:And these other two stages, like the designing and the building, are these more tightly connected?
Speaker:Like, do they have to go hand in hand?
Speaker:Like where do you draw the line for the design stages?
Speaker:I keep calling at a stage, but it's, it's an activity, of course, but, where do you draw the line between designing it and actually building it?
Speaker:Like, is there a constant feedback loop between the two or?
Speaker:So I think of design as mostly like strategy development.
Speaker:And it's kind of a strategy and innovation of basically two sides of the same coin.
Speaker:Right?
Speaker:So I'm coming up with a new idea.
Speaker:I'm coming up with a new product.
Speaker:I've got a strategy to enter this market or to expand that market or to expand my ideal customer profile.
Speaker:Whatever I'm doing to provide more value, to increase the touch points with customer, whatever it is that I'm doing.
Speaker:And that's my strategy, right?
Speaker:So that clearly informs what you're building.
Speaker:Cause if you have a strategy you've designed, you're then building according to what you've decided to do.
Speaker:In order to have that good strategy, you need to understand how the business is operating and what kind of building you've done in the past.
Speaker:So all these things linked together, you can't separate these out.
Speaker:I have one customer who tried to separate that kind of thing out between a strategy team and an operations team.
Speaker:In fact, I've seen that in quite a lot of companies.
Speaker:It doesn't work because these are all the same type of area and I need people with the same brains, understanding
Speaker:the operations and making the building priorities decisions and, understanding the strategy and designing the strategy.
Speaker:Yeah.
Speaker:Although they do often say that strategy is the, it's ultimately the responsibility of the CEO.
Speaker:That's what they often say.
Speaker:I see more and more companies also putting in place a chief strategy officer.
Speaker:Okay.
Speaker:You're the CEO, the CEO is the chief executive officer and executive is basically another word for operations and executing things.
Speaker:True.
Speaker:Yes.
Speaker:The CEO is the fundamental role is strategy.
Speaker:You got strategy, you got keeping money in the bank, you got building the team and you got making sure that your things are actually executing is a fundamental part of the job.
Speaker:And so your CEO needs to be involved in all three of these things.
Speaker:You can't have a CEO sitting in an ivory tower strategizing.
Speaker:Right.
Speaker:Right.
Speaker:Without, and at the same time, I don't want the CEO to spend all their time doing the operations and having their fingers deep in it.
Speaker:But I do want the CEO to be understanding deeply enough what is really happening at the ground, at the core of things.
Speaker:And so you need to have some understanding, some way to dig into this and some familiarity with the numbers to be able to make good strategy decisions.
Speaker:Yeah.
Speaker:But at the same time, you also don't want the entire company designing the strategy, right?
Speaker:Like you need to, ultimately someone has to call the shots.
Speaker:This is, this is true, but like, so in most cases that I've worked in, like what CEOs obviously have more of their brain associated with that part of the activity than the rest
Speaker:of the organization, because that's what the job is supposed to be or a bit more forward looking at the same time, if you want to have a successful strategy you need to engage your team.
Speaker:You don't have to engage everybody.
Speaker:There's no point in having a, let's have a big strategy party and everyone brings a puzzle piece, right?
Speaker:But I do want to have at least my top team engaged in that conversation.
Speaker:And I want them engaged with their teams in the conversation so that number one, everyone understands whatever we come up with.
Speaker:So that I can take into account the things that other people know and their brains and what, what they're thinking and their knowledge, that's been going on.
Speaker:And so that finally, at the end of the day, they buy into it and they do it, right?
Speaker:Because if I have a, if I have a wonderful strategy in my head, and now I've got to execute this through an organization
Speaker:of 200 people, getting everyone else to buy into that is a big hard job.
Speaker:If I can engage them so that they feel like they've been engaged in building this and developing it and they've been heard, and they're familiar with the why's or all
Speaker:the way through, it's much easier to get things moving because everyone understands where they're coming from and going to.
Speaker:If you look at a company like Amazon, one of the Amazon's massive strengths, despite having one and a half million people and probably a hundred
Speaker:or 200, 000 people in headquarters is that people are generally pretty engaged with the strategy.
Speaker:It's not like your average, you know, senior software engineer can change the fundamental strategy of Amazon, but they're
Speaker:engaged enough to know how their area is working and what the priorities are.
Speaker:And, you know, to provide some input to that and they have opportunities to provide input.
Speaker:And is that a matter of communication?
Speaker:Yeah.
Speaker:So, so like it's the term is communication.
Speaker:I think that, I mean, a lot of this is basically a lot of these tools, like having that weekly executive meeting where you're
Speaker:looking into the numbers and you're working with some people and sort of quizzing them and understanding them and coaching them on stuff.
Speaker:That's the kind of communication that happens on a regular basis.
Speaker:It's not the formalized, we are now going to communicate about strategy.
Speaker:It's like every week we're having this execution cadence where we talk about our operations.
Speaker:We talk about what we're building.
Speaker:We talk about our progress and we have in the conversation about strategy as we go through this.
Speaker:And so people start to understand that I'm coaching people on the strategy.
Speaker:I'm coaching people.
Speaker:The reason we're doing this is because of this reason and the other reason, and because this is our strategy.
Speaker:And I'm also hearing the critique and hearing their problems and then responding to that.
Speaker:And so we can have that ongoing basis as we go through.
Speaker:Let's talk a bit about the problems that they faced when working with this mental model.
Speaker:But before we do that, I was just reminded of an HBR article, that I read recently.
Speaker:And I think it's stated that 95%.
Speaker:According to a research that the authors did 95 percent of a company's employees do not know, or do not understand the company's strategy.
Speaker:This sounds, this sounds somewhat low, but I mean, yes, but this is something that you also see working with your clients.
Speaker:Then even in a small organization, a relatively young organization, like a large company strategy can feel very complex, but at the end of the day, strategies shouldn't be that complex.
Speaker:And if it is so complex, then of course, no one's going to get it.
Speaker:If it's something that you require in order to explain my strategy, I have to have 35 slides.
Speaker:No, you don't.
Speaker:That means you don't have a strategy.
Speaker:If your strategy is, we have six pillars and then the consequence of that is like, well, okay so what do we do?
Speaker:Which, which ones are we focusing on?
Speaker:When and how that means your strategy is not clear enough, right?
Speaker:So yes, I certainly come across this.
Speaker:And one of the things that I tend to do with all my customers is I interview even just the C team, the executive team, and I asked them all.
Speaker:So what is the strategy?
Speaker:And I write down what they say, and then I can replay this back to the whole team.
Speaker:Just like not without naming people.
Speaker:But here are the variety of things that your team.
Speaker:Your senior team thinks of a strategy and they're all different and they have different words and they're complicated.
Speaker:And that's why this is one of the reasons you're not getting where you want to go is because even your senior team can't articulate what the strategy is in a consistent way.
Speaker:And the reason for that usually is because there isn't a clear enough strategy in the first place.
Speaker:It's a lot of hand waving.
Speaker:But this also reminds me of another LinkedIn post that you put out recently, where you said, what do you say?
Speaker:You said something like.
Speaker:Ask 10 people for a definition of strategy and you get 10 different answers.
Speaker:Yeah, yeah.
Speaker:How do these two relate to each other?
Speaker:So you're saying on one hand, there's within a company, even within the C team, there is no common understanding of what the company strategy is.
Speaker:And then at the same time, people don't even really understand what strategy is at all.
Speaker:Yeah.
Speaker:Yeah.
Speaker:So the, the word has a problem and I think in some sense, I don't really mind too much, whether what people's definition is of strategy, as long as there is one.
Speaker:As long as they have within the C team, they have a common understanding of what it is.
Speaker:But it also has to answer two questions.
Speaker:And there's a fundamental two questions, which are, where are we playing?
Speaker:Like who are our customers and what problem do they have and which ones are we solving first?
Speaker:Right?
Speaker:So part of that is about segmentation, either customer profile, understanding the problem.
Speaker:So it's: where are we playing and what's our domain and who else is playing in this domain?
Speaker:So they're just understanding this space that we're playing in and where we're not playing.
Speaker:And then how are we going to win?
Speaker:And this, how are we going to win is the fundamental question of strategy, right?
Speaker:If you can only answer one question, that's the question to answer.
Speaker:How are we going to win?
Speaker:In this domain that we're playing in.
Speaker:And the thing is that when you have a series of pillars, usually it's more like, well, here are all of the things that we could do.
Speaker:These are the candidates things.
Speaker:If you break down revenue, it comes from, you know, cost of goods sold and number of goods and then number of customers and number of things in the cart or whatever it is, right.
Speaker:And so if we put those things as our pillars, well, clearly we haven't got a strategy.
Speaker:We're just saying, well, that's what the equation tells us.
Speaker:Right.
Speaker:If we have pillars of like that sort of cover everything, it's like, well, that's not really helping me.
Speaker:I mean, these are the options we have for winning.
Speaker:So my question is, what specifically you're going to do in order to win?
Speaker:And how is that going to help you win?
Speaker:At least in this, and if you can answer that question, then you've got a clear strategy and you have to be able to turn that into a bit of
Speaker:a narrative, a story, so it sticks in people's minds because we're not going to regurgitate..
Speaker:I think it's Michael Porter who says that strategy is more about choosing what not to do, than choosing what to do, which probably isn't true.
Speaker:But, it does communicate very well that you have to make these tough choices.
Speaker:Otherwise you end up with a lousy strategy.
Speaker:But it, but it so is true.
Speaker:And this is the thing, like, you know, you think about like for me, for example, my customer, I work with executive teams of scale ups and I don't work with large organizations like fortune 500.
Speaker:I will work with them if they come to me and they want to pay me to do some stuff, but I'm not talking to them.
Speaker:I'm not marketing to them.
Speaker:I'm not selling to them.
Speaker:They're not my target customer.
Speaker:And I'm not too worried about that.
Speaker:And that's how I can be much more successful at selling to my particular customers, because I understand them.
Speaker:And they know I understand them because I speak their language.
Speaker:And it's the same with you and it's the same with any other company that has a strong strategy.
Speaker:They know what they are doing and what they're not doing.
Speaker:And so, I mean, Apple wins on their strategy partially because they're not trying to make a laptop for every particular need.
Speaker:They don't have 35 varieties of laptop.
Speaker:They have what, you know, four or six or whatever they have now.
Speaker:Absolutely.
Speaker:Now, the people that listen to this podcast, Richard, they're all people that care a lot about, their organizations, the strategy, executing the strategy through KPIs and OKRs.
Speaker:So I can imagine people listening to this, wanting to get started with your mental model.
Speaker:What, what advice do you have for them?
Speaker:What are, are there like specific risks that they need to keep in mind when they start working with this?
Speaker:No, I think it's more a matter of like just being clear about what you're trying to do.
Speaker:I don't think it's necessary to formalize this in a really strict way.
Speaker:I had one customer who really wanted to formalize it, and it's just not really necessary.
Speaker:It's just helpful to have that in your head about most of the work that's really important here is running the machine.
Speaker:And I need to have some metrics to drive this right.
Speaker:And I here I'm trying to build the machine and I need some, I need some goals and I need teams to be doing that, running those goals and they plans to deliver those goals.
Speaker:Right.
Speaker:But I mean, I just need to think about these things in a particular way to get the result.
Speaker:I wouldn't say that there's a series of steps you do to adopt this mental model.
Speaker:I just find it a really useful model for.
Speaker:I don't, you know, rapidly understanding a business and for making sure that the business is consistently understood by the people within the business.
Speaker:Because this is the biggest problem is that the problem I'm trying to resolve here in many cases is that some people have a clear understanding of the business, very complicated understanding.
Speaker:But in the rest of the business, not everyone does.
Speaker:And you have someone who's in customer service who doesn't quite understand how this all fits together and and so on.
Speaker:And so helping them understand how this fits together is really the key here.
Speaker:Got it.
Speaker:One last question for my end then.
Speaker:You mentioned earlier on that when you think about running the machine and you have all these processes and what are the types of people that you need, you want people that,
Speaker:that get are excited about running these processes and are very efficient at running these processes, but how do you balance the effort between these different activities, right?
Speaker:Is there a risk of losing yourself in running the machine?
Speaker:Like things go well, you keep on running it and you completely forget about like redesigning it and rebuilding it.
Speaker:Yeah.
Speaker:So this is something that this is something that people often talk about as like getting stuck in the whirlwind of daily execution.
Speaker:Right.
Speaker:And that's the stuff that tends to have its own urgency.
Speaker:And so it tends to multiply and it tends to, there's fire here, there's a problem there.
Speaker:There's another thing to do here.
Speaker:There's another ticket coming in.
Speaker:We've got all this work to do.
Speaker:So that tends to attract quite a lot of attention.
Speaker:Naturally, right?
Speaker:I haven't met many companies that don't pay enough, that don't pay.
Speaker:sufficient attention to it.
Speaker:Sometimes it does happen.
Speaker:Um, but basically fundamentally, that's the thing you're trying to do.
Speaker:One of the, your, because you're, if you're running a business that's reasonably successful, you'll have a lot of things going on in that area.
Speaker:Your trick is that usually, how do I keep that going, delegate it so that it's happening and happening well, and people understand what success and good looks like.
Speaker:And then how do I step back a little bit from this and go to that?
Speaker:In the Eisenhower quadrant, the important but not urgent things, which are usually the building of the machine.
Speaker:How do I step back from that?
Speaker:That's where I think OKRs and having that quote, that weekly, you know, execution cadence where we check on how our plan's
Speaker:going and how are we delivering OKRs, that is a mechanism to drive urgency into these things that are not otherwise urgent, right?
Speaker:You have to do the same kind of thing with some sort of cadence, not as frequent, but same, some sort of cadence with design.
Speaker:Like, I mean, and that basically is like, when you're setting your OKRs, you're often going through a process of, so what are we trying to do here?
Speaker:And that's sort of the trigger to cause you to make sure you're doing that regular thinking about design without strategy.
Speaker:I find by the way that the act of setting OKRs is one of the tools that people use that I use to help people realize when they have a slightly weak strategy.
Speaker:Cause if the strategy is weak.
Speaker:They can't decide what OKRs to do, what things to build because their strategy is not clear enough.
Speaker:And so that's one of the tools that I use to help trigger that conversation.
Speaker:Cool.
Speaker:I personally found this a very helpful conversation, Richard, and I hope our audience think the same.
Speaker:Is there anything else that you want to share before we, before we let them go?
Speaker:Well, the one thing that I think is really important is that following any particular model, whatever it is religiously, like
Speaker:by rote doesn't work because you have a particular business with particular needs.
Speaker:You need to sort of like solve the problems you have, not the ones you don't.
Speaker:So, and my classic example of this is don't copy Google's OKR system because that works for Google and they have different problems to you.
Speaker:Do something that works for you.
Speaker:And a lot of that means adopting and adapting and changing various things.
Speaker:So even with this model, if this is helpful, use it.
Speaker:If it's not helpful, if it doesn't solve a problem that you have, well, keep doing what you're doing, because what you're doing is working, right?
Speaker:So I find that it's just in terms of when you think about this model, I suspect it's going to be useful for a lot of people because I
Speaker:suspect that people have the same kinds of problems, but if it's not, don't worry about it.
Speaker:It's good to be pragmatic about it.
Speaker:Thank you so much, Richard, for joining us today.
Speaker:I keep following you on LinkedIn and, I hope to welcome you soon again on our podcast.
Speaker:Excellent.
Speaker:Thanks, Henrik.
Speaker:It's really a pleasure.
