Monday, 26 September 2016

The annual home insurance dance - Or - how to rebuild consumer trust

I renewed my home insurance over the weekend. I do it every year, of course, and every year it is pretty much the same.

Here is how the conversation typically goes:

Ins Co: (automated voice) Your call is important to us. We're experiencing unusually high call volumes at the moment, so it may take us longer than usual to answer your call.

Me: (under my breath) You're always experiencing 'unusually high' call volumes. Maybe you should start to call this level of call 'usually high' and staff your call centre processes appropriately. On the other hand, if you're process worked properly, I wouldn't need to call you and  we wouldn't be here in the first place.

Ins Co: (answering the call quite quickly, leaving me wondering why they'd wound me up about having to wait a long time first place!) Hello, this is ..., how can I help?

Me: I've received your renewal quotation, and I'd like to not accept it.

Ins Co: (after completing ID&V) Of course. Do you mind if I ask why?

Me: Because it is much cheaper (16% this year) to take out a new policy with you than it is to accept your renewal.

Ins Co: Oh. Would you like me to see if there is anything I can do to reduce your renewal?

Me: No, don't bother thanks. You try every year and even though you do reduce it, it is always still higher than the new policy cost. I don't know why you don't give me your best price in the first place? Anyway, I've taken out the new one already over the internet, so can we please just not renew the old one?

Ins Co: OK, that's done now, is there anything else I can do for you?

Alright, that's not the exact conversation. I am less blunt than that with the operator. I know it is not her fault.

But a simple renewal has been turned into a much more complex cancellation and new policy, with a phone call and twice as much paperwork and postage. Why I can't do the cancellation over the internet (perhaps you can, but I couldn't figure it out) and why there is any paper and postage involved in this day and age is a completely different question. The whole process is quite simply annoying.

So why do I stay with this insurer? Quite simply because, hassle factor included, it is still the best deal I can find (every year, I cross check the deal with a few other insurers).

Now I am pretty sure I know what is going on here. By taking out a new policy, I benefit from a much more attractive rate designed to attract new business. The renewal, by contrast, is much more expensive as the insurance company is relying on customer apathy to claw back the profits they sacrificed in the first year, despite the fact that a renewal must surely be cheaper to process than a new policy.

And I am guessing that enough people simply accept the higher priced renewal to make it worth the insurance company's while. I also suspect that, because I take out a new policy with the same insurer every year instead of renewing, that they make much less profit from me as a customer than they otherwise would.

It is a process which is broken on many levels. As a customer I face two choices: (1) pay more than I need to at renewal, or (2) go through a convoluted and annoying cancellation and new policy process. Neither options seems like a win from my perspective.

I've been with the same insurer for many years now. I should be a loyal customer - even an advocate. Instead, I tolerate them grudgingly.

As an industry, we spend a lot of time talking about rebuilding consumer confidence and trust. It is in fixing broken processes like these that we need to start.
photo credit: BAM BAM via photopin (license)

Tuesday, 13 September 2016

Transparency versus democracy in decision making

One of the key lessons of the Brexit vote was that important decisions should not be made by direct democracy. On the one hand, the referendum showed that voters had lost confidence in 'the experts'; on the other hand, it showed that they were ill-equipped to make the decision themselves.

That is the very reason why most democracies are representative democracies and not direct democracies. (In a representative democracy, the people vote for 'experts' to represent them in making the important decisions. In a direct democracy, the people vote directly on the important decisions themselves. The challenge, in a representative democracy, of course, is for the representatives to retain the confidence of the electorate - which they clearly failed to do during the Brexit referendum!)

It is the same in organisations. Whilst much has been written about increasing employee participation in order to increase engagement, it remains management's responsibility and prerogative to make the important decisions.

Where does that leave employee engagement? A better way to increase employee engagement is through transparency. That is, by explaining to employees how and why important decisions are made, both before, during and after the fact.

Of course, this assumes that management is making high-quality decisions in an informed and reasoned basis in the first place. If this is not the case, then increasing transparency will just expose these flaws to employees, which will decrease engagement and confidence.

The models we typically use in strategy development and execution play two roles in this regard.

Firstly, by using the appropriate models well, decision makers are able to increase the quality of their decision making. The models help decision makers to develop richer pictures of the organisation and its competitive environment, to ensure that a wider range of alternatives is considered before making a decision, and to ensure that the alternatives are evaluated against all of the appropriate criteria before a final decision is reached.

Many leaders continue to make important decisions based on intuition. This is appropriate for less critical decisions: intuition is, after all, the sum of all of our experiences. However, research has shown the importance of visual cognitive artefacts (such as mind maps, SWOT analyses, and decision matrices) that extend the capacity of the brain to process information (see Stop jumping to solutions!). That is, clearly articulating your thinking on paper (or a screen) using models improves everyone's abilities.

Secondly, the models facilitate communicating those decisions to employees, and therefore promote transparency. Because the analysis has been both thorough and explicit, it is more easily revealed to employees. Employees in turn will see that management really has understood the issues and evaluated all of the alternatives and will be less likely to assume that decision makers are living in ivory towers, out of touch with what is really going on in the business, and pursuing their own hidden agendas for personal gain at the expense of the organisation as a whole.

For example, almost all options have both pros and cons. An important part of transparency is revealing both the cons of the alternative selected, and the pros of the alternatives not selected (rather than simply presenting the selected alternative as being unambiguously positive). By understanding the cons of the alternative selected, employees will be better able to recognise and minimise any downsides as they arise.

Of course, there will be some decisions where management cannot be transparent. This might occur, for example, where there is market sensitive information in a complex negotiation. However, if decision makers are transparent wherever they can be, employees will be more likely to accept where the decision makers explain that they cannot be.

The judicious use of models can significantly improve the quality of decision-making whilst also improving transparency and employee engagement., the purpose-built online environment for collaborative strategy development and execution was developed with just that in mind. Why not give it a try now?

Post-script: I have used the terms 'management', 'employees', and 'decision-makers' rather loosely as if they are discreet groups of people. In truth, most organisations exhibit some form of hierarchy and specialisation with  at least some devolution of decision-making. That is, the same individual may be 'management' and a 'decision-maker' with regard to some decisions, whilst simultaneously being an 'employee' with regards to others. Whilst this may make the flows of communication and transparency more complex, the principles outlined above will still apply.

Monday, 8 August 2016

Understanding 4 different types of growth with Ansoff's Matrix

Most businesses are obsessed with growth. Growth is by no means the only strategic objective worth pursuing, but it is certainly one of the more common ones. Growth creates economies of scale, creates employment, generates shareholder returns, bolsters executives' egos, and of course means more customers getting more of the products and services they want. In a very real sense, a business which is growing, especially one which is growing relative to its competitors, is seen to be winning.

Ansoff's Matrix
However, as H. Igor Ansoff showed with his now famous matrix in 1957, there are at least 4 different types of growth.
  • Market Penetration is achieved by selling higher volumes of the same products and services into existing markets.
  • Product Development involves developing new products or services to sell into existing markets.
  • Market Development involves finding new markets to sell existing products or services to.
  • Diversification involves selling new products or services to new markets, and is considered the most risky strategy on account of it having to deal with two unknowns at the same time.
There is more to these four growth strategies than meets the eye, so we will look at each of them in turn.

1. Market Penetration

For most businesses, market penetration is the default strategy. Of course, if the market itself is growing, then, all other things being equal, the business will grow along with it - they say that "all ships rise with the tide".

Normally, however, market penetration would seek growth relative to the market. There are a number of ways that this can be achieved:
  1. Volume-selling: selling larger quantities of the same product to existing customers - perhaps by increasing distribution and/or offering volume discounts.
  2. Up-selling: selling higher value products to existing customers - perhaps a more expensive model.
  3. Cross-selling: selling additional products to existing customers - such as add-on or complementary products.
  4. Competition: convincing customers who would otherwise have bought from your competitors to buy from you instead.
  5. New customer development: finding customers within the market who are not already using the product or service at all, and convincing them to start.
Market penetration can be achieved by tweaking the marketing mix (reducing price, increasing promotion and/or distribution, tweaking product features or packaging, etc.), or by acquiring a competitor.

2. Market Development

Market penetration can involve developing new markets in a number of ways:
  1. Entering a new geographic region - such as a new region or country.
  2. Targeting a new customer segment - for example, the youth market, or small-to-medium enterprises. Success in this strategy depends on how insightful and nuanced your customer segmentation is in the first place.
  3. Developing new distribution channels - for example, expanding from wholesale into retail distribution, or targeting a different type of distributor.
  4. Expanding from the consumer to the corporate or public sectors, or vice versa.
The exact means of entering those markets will depend on numerous factors, such as different regulatory regimes, different socio-economic norms, and whether a competitor already exists in the market or not.

3. Product Development

Product development may take the form of:
  1. New product development, which typically involves research and innovation in order to create something which the world has never seen before.
  2. Product licensing, which involves acquiring the rights to manufacture a product developed by someone else.
  3. Product sourcing, which involves selecting products which already exist elsewhere (in other geographies, or through other distribution channels) and making them available to your customers. Amazon is a great example of this approach.
Which of these two are most suitable depends on many different factors, key of which are whether the business is fundamentally predicated on technical product or service development expertise and innovation (like Apple), on manufacturing expertise (like Capita), or on customer intimacy (like Amazon).

In practice, new products exist in a continuum from completely new and novel products, through products which are reconfigurations of existing products, to products which are merely incremental improvements to existing products. The resulting products may be own-labeled, co-branded or white-labeled.

4. Diversification

Diversification is the most risky of the four strategies as it involves all of the complexity and risk of Market Development and Product Development at the same time. For this reason, businesses often pursue diversification through acquisition. That is, by acquiring a business or team which already has a track record of selling those products or services in those markets. Even then, the acquirers ability to understand and oversee the acquired business may be a challenge.


Ansoff's Matrix can be used to understand strategies in hindsight. However, it is more powerfully used to help businesses generate a complete list of strategic options for subsequent evaluation. As we have shown, Ansoff's Matrix provides not just the four options shown in the diagram, but a range of variations within each of the four.

Monday, 1 August 2016

Book Review: The Black Swan, by Nassim Taleb

The central premise of the Black Swan, by Nassim Taleb, is that rare outlying events have a greater influence on the world than do statistically predictable ones, but whilst our planning and analysis systems deal with the latter reasonably well, they are completely inadequate for the former.

Examples of rare outlying events that have had a significant event on our world include 9/11, the 2008/9 stock market crash, and, more recently, the UK #Brexit referendum.

Taleb does a reasonably good job of pointing out the flaws in what he terms the Gaussian model (most notably the normal distribution). He also does a good job in demonstrating our tendency to want to try to describe everything in these terms, regardless of whether or not it is appropriate, and therefore to tend to ignore everything that falls outside of this model.

However, he does err towards throwing the baby out with the bath water. The normal distribution (and indeed the other distributions he criticises) are useful in many applications. And that should be the real measure of any theory. All theories have limitations and domains beyond which they should be used, and yet remain useful if appropriately applied, and statistical distributions are not different in this regard.

He also fails to present any useful alternatives, and so does not really take us forward in any meaningful way. Thinking about it from my own perspective, scenario planning does provide one useful alternative which can help us to escape the confines and flaws of the so-called Gaussian model.

The Black Swan is a fascinating and eclectic read which may challenge many of our assumptions about the world and the way we analyse it. However, if you're looking for practical alternative solutions, you may be disappointed.

Monday, 25 July 2016

Using online business strategy development and execution tools to increase collaboration

It is hard to avoid the fact that the digital revolution is transforming almost every aspect of almost every business. As strategists, it is important to remain abreast of these trends in order to able to advise our employers or clients appropriately.

But one often over-looked aspect of the digital revolution is how digital can change the way we do strategy itself. Most strategy processes still boil down to circulating large Powerpoint decks or Word documents by email, just like we did 20 years ago.

Fortunately, that is now starting to change. StrategicLearningApp is an online business strategy development and execution tool designed to increase collaboration.

StrategicLearningApp is arranged around a unique Strategy Board which brings together the 4 core stages of the strategy development and execution cycle:
  1. Analysis
  2. Articulation
  3. Planning
  4. Control


The Analysis module is all about understanding the organisation's operating model, capabilities, strengths and weaknesses, as well as its operating environment, such competition, and industry forces and trends. StrategicLearningApp provides a number of tools for doing this, such as:
  • Porter's Value Chain analysis for understanding how the organisation uses it operating model to create value. (Learn more.)
  • McKinsey 7S analysis for understanding the internal factors which lead to success. (Learn more.)
  • PEST analysis for understanding the Political, Economic, Socio-economic and Technological trends. (Learn more.)
  • Porter's 5 Forces analysis for understanding the forces that shape competition in your industry. (Learn more.)
  • Strategy Canvas for comparing and contrasting how different competitors win customers. (Learn more.)
  • BCG Matrix for understanding how different products and services in your portfolio contribute value. (Learn more.)
  • SWOT analysis, a useful way of summarising your organisations Strengths, Weaknesses, Opportunities and Threats. (Learn more.)
The different models are all integrated behind the scenes where this makes sense, so that insights generated in the other tools will automatically show up in your SWOT analysis, and can also be attached to processes in the Value Chain analysis, etc.


The Articulation module is where you express what your strategy is. StrategicLearningApp allows you to articulate your Vision, Mission and Values. It also allows you to set your strategic Goals, Objectives, Key Performance Indicators (KPIs), Targets and Actual Results using a Balanced Scorecard framework.

The Performance Plan Map provides a useful summary of you Goals, Objectives KPIs and Targets and helps you identify any gaps in your strategy.


The Planning module allows you to map out exactly what you plan to do to deliver your strategy. You can organise your Initiatives in timeline or Gantt view, as well as lay them out in a Three Horizons view, helping to ensure you strike the right balance between short, medium and long-term activities. You can link Initiatives back to the Goals they support, and capture Cost and Benefit details.

The Goal/Initiative Matrix allows you to map your Initiatives to your Goals and highlights any Initiatives which don't explicitly support your Goals, or any Goals which don't have any initiatives supporting them.


The Control module runs across the other modules providing tools to assist in the development and execution of your strategy.

A RAID log allows you to record Risks, Actions, Issues and Decisions, and to link these to your to the appropriate items within the other three modules. (Learn more.)

You can also record Stakeholders, either Individuals, Organisations or Generic Groups and, using a RASCI framework, map them as being either Responsible, Supporting, Accountable, Consulted or Informed regarding Goals or Actions.

The Meeting Manager allows you to record which Stakeholders participated in which meetings, together with Agendas, Minutes, Actions and Decisions. The Actions and Decision are automatically included in the RAID log and can also then be linked back to the relevant Insights, Goals and Initiatives, etc.

Lastly the Scorecard provides a graphical summary of all of your KPI's Target and Action Results so that you can easily track if your strategy is delivering, and also feed this back into the ongoing Analysis and refinement of your strategy.


Collaboration is baked into StrategicLearningApp at every step along the way.

To invite someone into your strategy project, simply enter their email address. StrategicLearningApp will then email them with appropriate instructions which will then link them to your project. Only people you invite can see your strategy projects.

All changes are recorded (using a familiar legal red-lining approach where applicable) and timestamped together with the author who made them, so you'll always know who did what an when. There is also a handy notes feature allowing team mates to annotate and comment on any element of your strategy. This ensures that all collaboration around your strategy remains attached to the strategy content to which it relates - no more trawling through email archives and old versions of documents to remember who said what when!

Once a day, StrategicLearningApp will email you a summary of all the changes and notes your team mates have made, ensuring your always up to date and engaged in the conversation.

Reporting, Search & Multi-device

Using the Reporting module you can extract a snapshot strategic plan at any stage in your journey. Because it is a dynamic snap shot at a point in time, your strategic plan truly becomes a "living document", not an annual report which just sits on the shelf until next year.

You can also export your strategy plan into Strategy Markup Language (STRATML), which is the ISO Standard XML Schema for Strategy and Performance Plans and Reports.

Your projects are also fully searchable, and available from any device connected to the internet, be it a PC, laptop, tablet or smart-phone.

Give it a go, NOW

StrategicLearningApp is free to use for up to three projects. If you want to do more than three projects, there is a subscription version available for a small monthly fee.

Why not click here to give it a go, now?

Monday, 18 July 2016

Data Analysis Lessons from "The implications of Brexit for monetary policy"

I recently attended Martin Weale's valedictory speech as a member of the Monetary Policy Committee (MPC), which was entitled: "The implications of Brexit for monetary policy", and was hosted by Resolution Foundation.

The session consisted of the speech itself, follow by panel comments from Sushil Wadhwani (economist and former MPC member), Chris Giles (Economics Editor at the Financial Times) and
Melanie Baker (UK economist at Morgan Stanley), followed by questions from the audience to the speaker and panel.

Martin Weale's speech was fascinating enough in its own right. However this is not a blog on economics or monetary policy, and so I will not even attempt to do it justice here. (If you're interested, you can read the speech itself here, and Resolution Foundation's write up of the event here.) Rather, I will pick up on two related points Sunil Wadhwani made in his remarks, and which I think have direct pertinence to business strategy.

1. Having the data is not enough

Martin showed two separate charts, one showing the weakening of the exchange rate, and the other showing the fall and recovery in the FTSE100 and the fall and not recovery in the FTSE250 immediately following the referendum. He suggested that the fall in the FTSE250 was more representative of sentiment regarding the UK because so much of the FTSE100 consisted of expected foreign earnings from multinationals with UK listings. He then suggested that the fall in the FTSE250 was not significant enough to allow one to draw conclusions (and did little more than confirm that "prices can go down as well as up").

Sunil countered that a better measure of confidence in the UK economy would be the FTSE250 in dollar terms. This had taken a pounding following the referendum, and painted a much more negative outlook than Martin had suggested. (This effectively combines the two charts.)

Whether you agree with Martin or Sunil, the exchange was a potent reminder that its not just what data you have, but also how you analyse it.

It reminded me of a project I worked on some years ago where the data we were seeing was showing a slight decline in the performance of a particular process. Because the decline appeared to be only slight it was not ringing any alarm bells (yet). However, I knew that the process (a) dealt with 6 discrete populations and (b) included a natural delay of some months. So I requested the underlying source data, and (1) split it into the populations, and (2) did a batch cohort analysis of each. This analysis revealed a much deeper - up to 50% for some populations - decline in process effectiveness. That definitely started the alarm bells ringing!

Yes, subtly improper analysis of data can render it very misleading!

2. You'll never have all of the data or analysis

Sunil further responded to Dr Weaver's conclusion that the data was still inconclusive by remarking that:
"You have to form judgments; because you are never as well informed as you would like to be; because the data is simply not there." (Tweet this!)
He went on to advise:
"Resist the temptation to wait for more data before acting. There will always be more data to wait for." (Tweet this!)
(That is my best recollection of the words that he used, but I cannot guarantee that it is verbatim.)

That is one of the key lessons I remember from the many case studies we did on my MBA programme. (I sometimes think that part of the objective of an MBA programme is to overload you with case studies and then put you on the spot in class in front of your peers to draw conclusions from what is inevitably inadequate data, as that is the closest they can get to what it feels like in real life within the classroom context!)

Its a lessons that has stood me in good stead ever since. In any strategic process, there is a time to collect more data, a time to conduct deeper analysis, and a time to accept that what you've got is good enough/as good as you're going to get and its time to make some decisions and move forward.

If you fail to learn that lesson, you invariable fall into 'paralysis by analysis': where data and analysis snowball and any chance of meaningful action falls by the wayside.


Data is a strategist's friend. It is the bedrock of analysis, reasoned decision making and feedback. But it is not without its pitfalls. Good use of data is as much an art as it is a science. And it is one every strategist does well to study carefully.

Saturday, 16 July 2016

How to deal with chronic uncertainty (like Brexit) in business strategy

I've just read (yet another!) blog post advising business owners on what to do about Brexit. The conclusion: there is so much uncertainty about the outcome that business owners should just ignore it and carry on as if nothing had happened.

I have seldom heard such poor advice!

In the first instance, uncertainty is no excuse for burying your head in the sand. We live in uncertain times, and if it were, no-one would ever do anything. As a discipline, strategy has tried and tested ways of dealing with uncertainty.

Secondly, we now have significantly more information about the future than we had 3 weeks ago. To ignore that information would be myopic and foolish.

So, how does one deal with chronic uncertainty in a structured and proactive manner? Here is a 6-step approach:

1. Get the facts

After a referendum characterised by misinformation, it is important to remain appropriately informed. Key questions include:
  1. What is the legal status of the referendum, and what, if anything could overturn it?
  2. What is the actual process, steps to be taken, and timelines for leaving the EU? 
  3. Who are the decision makers and power brokers, in both the UK in Europe, and what are they saying and doing?
  4. What models exist for subsequent engagement with the EU and what do they entail?
Ignorance breeds fear, so get informed.

2. Identify possible outcomes

Following the referendum, there are a number of possible outcomes. At the highest level, these might include:
  1. The UK does not leave the EU.
  2. The UK leaves the EU under favourable terms (so-called Brexit-light).
  3. The UK leaves the EU under unfavourable terms.
  4. The UK leaves the EU, followed by other countries exiting and ultimately, the collapse of the EU itself.
  5. The UK splits, with Scotland remaining a part of the EU and the rest of the UK exiting.
There are, of course many other combinations and permutations which might be worthy of consideration. Whilst it is probably impractical to consider them all, it is important to consider a wide range of possible outcomes.

3. Understand the circumstances and implications of each possible outcome

Within each possible outcome, it is important to develop an understanding of:
  1. What are the future developments and circumstances which might make that outcome more or less likely to emerge, and
  2. What are the implications of that outcome, in general, and for your business specifically.
It is important to develop as vivid a narrative for each possible outcome as is possible. That is, write a plausible story for each outcome a logical chain of actions, events and their consequences. The more vivid the narrative, the more instructive it will be in planning your response.

4. Implement an early warning system

Once you've identified the circumstances which might make it more likely for one outcome to emerge than another, you need to use that as a lens for monitoring developments on an ongoing basis. Make specific people responsible for monitoring specific issues and reporting them to the broader group on a regular basis. Review all of your plans every time there is a major development. Know in advance when you intend to act, and when you intend to sit tight and watch.

Include relevant factors into your competitor analysis (see 7 straight-forward steps to master competitor analysis) to keep one step ahead of the competition.

5. Prepare plans in advance for the most likely outcomes

Don't wait for your early warning system to tell you that something has happened. It's too late to start planning then. Prepare contingency plans for each of the possible outcomes. Add more detail to your plans as events develop and some outcomes become more likely, leaving the plans for the less likely outcomes. You don't need to execute your plans now, but you do want to know in advance who will do what when key outcomes do emerge.

The plans you develop for each of the likely outcomes may be different to the normal plans you'd implement for, say, the implementation of a large system. Plans should emphasise "if this then that" logic, review and decision points and accountabilities, and clear criteria for deciding when to push forward and when to hold back.

You may find that from your plans there emerge some actions which you'd take in the event of many or all outcomes, which expand the options available to you, and/or which are relatively inexpensive to complete. You may then decide to proceed with these "no regrets" actions immediately.

6. Deal with the uncertainty now

The preceding 5 steps deal with planning ahead for what might happen. But there are also things that you could be doing to better cope with the uncertainty right now.

In the case of Brexit, there are at a number of likely immediate considerations:
  1. How are you suppliers, distributors and customers responding? For example, if business partners (especially foreign ones) are less inclined to enter into long-term contracts because of the uncertainty, how could that impact your business and your existing plans for growth or expansion and how will you respond? What could you do to help your partners overcome any such reticence.
  2. A Brexit will inevitably place a huge demand on legal, regulatory, compliance and strategy resources. Do you need need to secure resource in advance, or risk losing out when there is a mad rush at the last minute (as some experienced as the Solvency II deadline approached)? What regulatory or competitive initiatives will be put on hold as regulators and competitors divert resources to deal with their own Brexit plans, and what will you do with the breathing space that might offer?
  3. What are you doing to re-assure your staff, customers and partners that

Chronic uncertainty certainly complicates strategy, but it also offers many opportunities. It is important not to get stunned into inaction, like a deer caught in the headlights. Proactivity remains key to success.

For a confidential conversation about what Brexit might mean for your business, or how to deal with uncertainty in general, please contact me.

See also: