Although it looked revolutionary when it first came out in 2011, the Lean Startup ‘build-measure-learn’ feedback loop wasn’t all that new. For decades the lean manufacturing movement has evangelized similar loops. Most notable were:
- the Deming cycle: plan-do-study-act (from William E. Deming)
- the TPS cycle: observe-plan-do-check-adjust (from the Toyota Production System)
Probably the two major contributions of the lean startup movement were that, on one hand, it was moving the conversation of continuous improvement from the production line to business development. And on the other hand, that it was making the scientific method popular.
With product teams getting more confident using the scientific method for their decisions, a switch is needed at corporate strategy level too. The switch from ‘faith based’ to ‘evidence based’ strategy is crucial if the product teams and the board are to speak the same language.
Executives have no way of confidently predicting the future of their respective industries. Hence, when it comes to creating a strategy, one of two behaviours is triggered. Either ignore the ‘deadly’ mix of opacity and complexity, which results in a ‘faith based’ strategy being created. Or, throw up one’s hands, declare the situation too complicated for a decision to be made and go for an misinterpreted (and ad-hoc) “emergent strategy” instead.
Employing the help of a continuous feedback loops in strategy formulation is easier than it sounds. The simplest way to go about is to come up with answers for the questions from each stage of the loop. To exemplify this, I will use the OPDCA loop as, in my opinion, is the closest to the scientific method.
For the Observe stage a strategy team should find the answer to: Where is the company today?
Plan: What does the company want to achieve? Where does the company want to be? Why does the company wanna be there?
Do: How will the company get to where it wants to be? What capabilities, management system and/or structures does the company need to fulfil the vision?
Check: How will we measure our progress? What does success look like? Short term, medium term, long term.
Adjust: Will the company be able to continuously transform using the new capabilities, management system and/or structures?
As you’ve probably spotted the questions are interconnected. Hence the answers need to be consistent with one another and mutually reinforcing.
The key to using a feedback loop in strategy formulation is humbleness. Most of the answers, especially in the ‘Plan’ and ‘Do’ phases are assumptions to be tested not absolute truths. Thus the strategy formulation process is now becoming an experiment. Where with each iteration the degree of confidence in the strategy is increased.
Approaching strategy as an iterative process might sound daunting. But in the absence of a crystal globe, a continuous feedback loop might just do the trick. Saving time and frustration, this iterative way of going about strategy has the potential of becoming a new source of competitive advantage.