7
An Intuitive Reckoning

In chapter 1 we briefly explored a crude explanation of how learning occurs, and how our default thinking is formed — through the observation and codification of patterns (repeated phenomena).

A similar and yet altogether more mysterious thing happens with our hunches.

Hunches are the precursor to any potential idea or realisation. They are our intuitive reckonings that an alternative possibility, explanation or way may be available to us. They are the threads of patterns yet to be codified into learning.

We experience at least two forms of hunches.

The first could be described as spontaneous. An intuitive notion comes to you, seemingly out of the blue. It feels as though it's true, even though you have not applied any conscious reasoning to it.

A spontaneous hunch may strike you at any moment — like in a conversation with a friend. Something's not right … you find yourself knowing, before you've figured out why. Maybe it was the waver in their voice as they spoke with you. Maybe it was a micro facial expression you noticed, or some sort of incongruence between what they were saying and how they were acting. It's the subtlest thing. And so you ask, ‘Is everything okay?' … and your hunch may or may not be validated.

^[1]

We're in dangerous territory here. Hunches are immensely powerful ways to connect with intuitive insights. And yet, we need to ensure we are not merely seeking to confirm our default assumptions (preferences, stereotypes and biases — see chapter 14). Fostering your acuity for spontaneous yet accurate hunches — and developing the courage to act upon them — is a delicate art, and something I am still to striving to develop to a higher degree.

But it's the second form of hunch that I can comment on with an element of authority.

The second form of hunch could be described as nagging. It's that persistent hint that things aren't right, or that things could be better.^[2]

Now, what we frequently do with such hunches is ignore them. And this is perfectly valid. Sometimes our mind simply seeks distraction from the task at hand — a new idea to liberate us from the crappy work in front of us. Resisting the temptation to become distracted, and instead remaining focused on the work that matters, is an important discipline — and something that makes up the bulk of operational work.

But if a hunch is persistent — if you repeatedly intuit the same nagging feeling — you'll want to dedicate time to exploring it.^[3]

One of my more inspiring clients is Suncorp Group — a large finance, insurance and banking corporation based in Australia. Mark Milliner, the CEO of Suncorp Personal Insurance, championed the integration of a dynamic strategic innovation system into the personal insurance portion of the business. This system was incredibly effective. As Milliner explains in Understanding Strategic Risk in Suncorp Personal Insurance, ‘this process came about not because of a crisis or a reaction to the latest management fad but because of my growing, nagging sense that the number one risk to our business could be the status quo. The risk that we could wake up one day after a long winning streak and realise we were irrelevant.' In a book documenting their approach to strategic innovation, Milliner further describes that the things keeping him up at night are no longer operational issues, but rather the ‘invisible forces' of change that threaten the status quo — changes that can reshape industries, and our world as we know it.

Milliner was able to take a nagging hunch and — with the input of diverse and talented folk — work it into something significant. This is the thinking of pioneering leadership.

But where do you start? What's the first step to pursuing a hunch?

We can answer this in at least three ways.

Given that a hunch may be the fragments of a yet-to-be-codified pattern, you could seek to observe more patterns (thereby learning and understanding this nagging phenomenon in greater depth). In part IV we'll explore the role experiments play in helping to progress our learning.

In any event, this processing requires time — time for slower and much more thorough thinking than we are typically used to. The time invested in good thinking^[4] enhances the quality of the experiments we conduct. But even then, we can become lost in the infinite possibilities of the future. You can only open so many tabs before your browser crashes.

And so, perhaps the best place to start is with self-awareness — understanding your current enterprise identity, business model and the context in which you operate. This then enables you to contrast your current state with potential future states, to see where potential incoherencies may lie.

WAIT, WHO ARE WE?

And what do we stand for? And for whom?

Every enterprise forms and exists to serve a need in the market. But it's surprising how frequently we can forget what that need is. Or, as an enterprise grows, to find that we can no longer articulate it succinctly — it is instead wrapped up in bloated, meaningless corporate-speak.^[5]

If you're in this situation — if your enterprise has forgotten whom it serves, and why — then you need to have a deep leadership conversation with your colleagues.

This conversation is both urgent and important, but it's not something that can be rushed. Together with your colleagues, you need to be able to develop an effective representation that captures the complexities of your business model and the nature of the need it serves within its current context. And this needs to be sufficiently succinct and relatable that it can serve to influence strategy and pioneering work.

One of the first stumbling points in realising an enterprise identity is the distinction between what we do, and why we do it. It's very easy to simply list the key activities your enterprise engages in^[6], but this does nothing to capture the value generated, or the market need it meets.^[7]

Attempting to refresh, rediscover or reconnect with the purpose of your organisation — the guiding why — should reveal some challenging assumptions among your team. If time is allowed for such a conversation — and if it is facilitated in a way that encourages thorough thinking and open debate — hidden needs may also be identified. Additionally, differences in perspective among leadership about current or emerging needs may also manifest. This may be angsty conversation. But, if we stay within the tension and work through it (exploring assumptions and negotiating through differences in perspective), we may generate a valuable and refreshed sense of identity for the business.

Here be Dragons. It's easy to get lost in this process, or to create bland, generic identities that say nothing, and are impossible to share with a straight face with a friend at a barbecue.^[8] If you feel like you are going around in circles, return to need. What is the need that exists in the market that your enterprise is currently serving? What are the factors within this, and what is most important?

The identity of your enterprise is a concept core to strategy work. It is the ‘why' banner under which the ‘how' of your business model operates.

AND WHAT IS IT THAT WE DO, EXACTLY?

It's difficult to ensure the enduring relevance and value of a business model if you don't know what your business model is.

Perhaps one of the best tools available to chart out a business model is the ‘Business Model Canvas' (as described in the brilliant book Business Model Generation). Developed by Swiss business theorist Alexander Osterwalder and strategic consultancy Strategyzer, this canvas explores nine essential elements of any functioning business.^[9]

The nine elements identified by Osterwalder and Strategyzer can be split across four main functions (the first of which is most important):

• The offering. This is the value proposition, which relates to an enterprise's identity. It is the collection of products and services that an enterprise offers to meet the needs of its customers. Ultimately, it is the value proposition that distinguishes one enterprise from another.
• The customers. A business's activities and value proposition must connect to customers. (Otherwise, what's the point?) This portion of a business model is divided into three key sections:
  1. Customer segments. Good businesses are able to clearly identify who they serve, what their distinct needs are, and who their ideal customers are. Some business models serve a mass-market approach (one size fits all); others serve diverse markets; and others focus on serving one niche market. Knowing who your business model delivers value for is critical.
  2. 2. Customer relationships. An enterprise must identify what relationship they have with their customer segments. Is it supported self-service (as is the case with some software companies), totally automated, or more personal and direct? Or does your enterprise create and foster a community platform to gather and nurture customers?
  3. Channels. This refers to how an enterprise delivers value to its customers. Does your enterprise have its own channels (a shopfront or website), or do you rely on major distributors or other partners to reach your customers? Or both? The best channels will distribute value to customers efficiently.^[10]
• The infrastructure. This covers the moving parts of an enterprise — the stuff that enables a business to acquire and transform resources into value. This portion of a business model is divided into three key sections:
  1. Key activities. This refers to an enterprise's most important activities — the essential things your enterprise must do to create and deliver value.
  2. Key resources. Every enterprise requires resources in order to generate and deliver value (and to support and sustain this process). These resources can be physical, intellectual, human and financial.
  3. Key partnerships. This describes the network of suppliers and partnerships that serve to optimise the business model, reduce risk or acquire resources. Partners may undertake key activities within a business model.
• Finances. This covers both the costs (the monetary consequences of the business model generating and delivering value to customer segments) and revenue streams (the way an enterprise obtains value from each customer segment, in exchange for value delivered).

By investing time to discuss each element of the Business Model Canvas (and how they interact), a clearer picture of your enterprise business model will emerge.^[11]

The picture that emerges can be confronting. The discussion might reveal that your enterprise is lacking in essential competencies.^[12] It might reveal that the business model is currently overly focused on a less valuable customer segment (ignoring a more valuable customer segment). Leaders might also realise that their distribution channels are creating unnecessary friction between customers and value — and so they may wish to review alternative approaches. Or, the discussion might also reveal that the business model is heavily reliant upon one key partnership (either for a key resource or activity). If that partner decides to withdraw from the arrangement, the integrity of the business model would be at threat.

Such revelations bring about immediate tactical consequences, which operational excellence would (rightly) demand we address without delay.

But, in the rush to fix the existing business model, it can be easy to forget to address the bigger question — will our current business model and identity remain viable in the future?

A CONTEXTUAL HUNCH

Here be Dragons: things are about to get meta.

‘Context' refers to the multitude of circumstances that form the setting within which an enterprise operates. The identity of an enterprise — and the business model that serves it — is formed to meet the needs of customers within a given context.

To engage in dissociated metacognition is to think contextually. And so, when a leadership team are reviewing a business model, they are doing so from a contextual perspective.

Some may view a business model with reference to past contexts. But nostalgia is of zero benefit to enterprise strategy.^[13] And so, strategy is usually tackled from within our current context. Such an approach is severely limited, however, and reactive at best.

The only contexts that matter for strategy are the myriad complex and as-yet-unknown future contexts.

There is no present tense. The benefits and consequences your enterprise is experiencing right now are the result of strategic decisions made previously. And these strategic decisions did not benefit from the knowledge or insight we have today.^[14]

Which brings us back to the focus of part III and the top-right quadrant of Quest-Augmented Strategy — how can we leverage pioneering thinking to create the most strategic value to an enterprise? How can we venture beyond our default thinking and preference for precedent? And how do we even begin to make sense of the possible future contexts ahead of us?

Particularly given that we have this nagging hunch that our current business model may not be viable in certain future contexts …