“Your business model has a limited shelf life and you’d better start looking at alternatives if you still want to be in business in 10 years time!”
Have you ever heard those words and would you ever wish to hear them? Would you actively seek out conversations with people likely to utter words to that effect? My guess is that your answer would be a resounding “No!” on all counts.
Seeking out conversations with people who are likely to challenge your organisation, your ideas and your plans may seem like a strange and slightly masochistic way to spend your time. As a leader however, you have a responsibility to look ahead and to find approaches that ensure the continuing success of your business. This responsibility includes reaching out to, and gaining insight from, those who see the world from a different perspective to both yourself and your leadership team.
Rita McGrath, author of the paper Business Models: A Discovery Driven Approach, raises the importance of what she has coined “critical conversations”:
There is a human dimension to competing on new business models that we are…beginning to understand. Encouraging leaders to question the viability of a business model, and to have the right conversations with those who might challenge it, will become increasingly important.
While McGrath’s paper is focused solely on business modelling, I believe the idea of critical conversations can be more broadly applied.
What are critical conversations?
The word ‘critical’ has a number of quite different definitions. Whilst McGrath does not explore in detail the nature of such conversations and it is difficult to elicit the exact definition that she is using, I believe that, in this context, critical can be understood in almost all senses of the word. According to several dictionary sources, critical can variously mean:
Characterised by skillful judgment and careful evaluation
Involving an analysis of the merits and faults of a given work
Incorporating a detailed and scholarly analysis and commentary
Of or pertaining to critics or criticism
Expressing adverse or disapproving comments or judgements
Forming or having the nature of a turning-point, transition or important juncture
Being in or verging on a state of crisis or emergency
Having decisive or crucial importance in the success or failure of something
Absolutely necessary, indispensable or vital
Seeking out conversations that embody and embrace all of these ideas brings an interesting and challenging richness. In essence, critical conversations should give you insight into:
- Factors that could cause your business to succeed or fail
- The merits and faults of your organisation, business model and strategy
- Key threats to your business
- Opportunities for your organisation
- Emergent factors that have the potential to disrupt the status quo
- Situations that could become disastrous
Ignore them at your peril
Critical conversations have the potential to be deeply uncomfortable and challenging, so why on earth would you want to put yourself through them?! Like it or not, the fact that they are uncomfortable, difficult to hear, and challenging is precisely the point!
As humans, we naturally seek out those who have similar views, interests and beliefs to us and this is no different in business. Information, beliefs, attitudes and behaviours that are inconsistent or that do not fit together create an unpleasant state of psychological tension known by psychologists as ‘cognitive dissonance’. Because we dislike how dissonance feels, we naturally seek to minimise our experience of it by reducing inconsistency; Dieter Frey and Marita Rosch (creators of the selective exposure hypothesis) even found that we will deliberately and selectively avoid exposure to information that could cause dissonance.
As a result, we develop blind spots—factors that are obvious to others become seemingly invisible to us. Organisations are no different. Think the Global Financial Crisis for a perfect example.
Critical conversations are about minimising your blindspots. Although these conversations are likely to cause tension and discomfort (at least in the short term), they are all about enabling you to anticipate the black swans of this world, to discover the unknown and to better understand both the present and the future by viewing it through the eyes of others.
A lesson from the high seas
Allow me to illustrate with a story. My family are avid sailors. I grew up learning to sail and am a qualified sailing instructor. Whilst Debbie and I have been somewhat spoiled by the fair seas and blue skies of the Mediterranean, my brother is currently sailing across the Atlantic and my parents regularly skipper their own yacht.
When you’re out sailing, you can only see as far as the horizon. There are some sailors who believe this information is all they need to stay safe—let’s just say that I’d rather not be on a boat with them! Yes, these sailors can monitor the wellbeing of their crew; assess their clothing, waterproof and safety equipment requirements; decide how much to reef the sails given the current conditions; steer their boat; and monitor the horizon. But if that’s all they’re doing, they’re a danger to themselves and their crew! (I hasten to add at this point that none of my family would fall into this category.)
Weather can change quickly and things can appear over the horizon remarkably rapidly. Using only visual clues gives a sailor little in the way of warning time—a couple of hours at best.
In addition to visual monitoring, an experienced sailor will also use their charts and maps to guide them; check tide tables, GPS and radar; monitor wind speed and direction, atmospheric pressure, cloud formation, and wave structure; listen to regular weather forecasts; and monitor the radio for coastguard announcements and distress calls.
Together, these factors come together to enable a sailor to predict—with reasonable certainty—what is going to happen over the next 12, 24 or 48 hours, if not longer. Rather than finding themselves at panic stations, with no time to turn back, when they spot a major storm on the way, an experienced sailor has already made allowances. They may even have set off early for a different port. By the time the storm hits, they’re already tucked up in harbour. In contrast, the sailor who relied only on their view of the horizon may already be lost at sea.
For me, this is a lesson for both life and for our businesses. Critical conversations are much like tide tables, radar, weather forecasts, cloud formations and radio announcements. They enable you to see what someone else sees and to spot both trouble and opportunities before it’s too late to adjust your course. Although these conversations can be easy to avoid and ignore, particularly when you already have a strategy in place and a destination in mind, seeking out critical conversations will hopefully ensure that you never hear, “I could have told you so!”
So who should you converse with?
The short answer? Those who see further ahead or who see the world from a different perspective to yourself.
More practically, McGrath suggests there are three types of people with whom conversations are likely to yield valuable insights:
- Leading technologists within your firm or those working on designing next generation concepts. It is their job to be gazing into the future and to tease out and develop future concepts. More often than not, technologists will realise future possibilities well before you do—they may see existing markets disappearing before their eyes or new markets emerging. However, as McGrath points out, technologists and designers often do not actively share what their insights mean for your business, so you will need to seek them out and ask critical questions.
- People who are knowledgable about oblique competitors and substitutes. McGrath cites the example of an entertainment company—typically, entertainment requires that customers spend their time in a particular way and anything else that consumes their time will compete for their attention and therefore for sales. By understanding those competitors and substitutes that do not compete head-to-head with your organisation but nonetheless have the potential to unseat your influence gives you a much broader perspective and places you in a much stronger position.
- People who aren’t your customers today but could be yours or someone else’s tomorrow. According to McGrath, these are generally customers who are “too poor to afford your offer, or who are geographically remote or otherwise somehow not in [your] firm’s immediate line of sight”. Although these people do not directly influence your organisation today, this does not mean that they will not influence it in the future. Understanding their needs and opinions may also offer a valuable learning opportunity for today.
I’d like to add several other sources:
- Your employees. Although many employees are not paid to give their opinions, they are nonetheless likely to hold them. Those employees who interact with your customers every day probably know your customers far better than you do. New graduates and recruits often have an uncoloured and excited view of the future. Many of these people are able to offer a different and important perspective.
- Relevant bloggers and thought leaders. Reticent and retiring these people are not. They spend vast swathes of time reading, learning and looking at things from a bird’s eye perspective. It is their job to develop opinions and they usually don’t mind sharing them. In some cases, they may know more about where your business is headed and customer opinion than you. At other times, they will be able to see and anticipate unexpected trends, events and factors long before they begin to have a noticeable effect.
- Futurists and futurologists. Futurology is defined as “the science and study of sociological and technological developments, values and trends, with a view to planning for the future” and Wikipedia observes that it is often concerned with the three P’s and a W: Possible, Probable, and Preferable futures, plus Wildcards. Whilst it can be expensive to hire futurists, many organisations and individuals publish books, reports, blogs and other insights—although not conversational these can certainly serve as sources of insight. Conferences and events, such as those held by TED, are also a great place to meet and converse with people looking to the future.
- Experts in industries that are not directly related to your own. It may sound like a strange idea to deliberately look to industries that, on the surface, appear to be largely irrelevant to your own. However, by keeping an eye out for disruptive innovations that have the power to change the way we all work or to directly impact your own industry, you ensure that you stay ahead of the game. Not only that but even unlikely industries can have shared characteristics and yield valuable insights.
How should you hold a critical conversation?
To hold a decent critical conversation requires emotional and intellectual maturity. Your aim is to question, listen and hear with an open mind. It really doesn’t matter at this stage if you agree or disagree with the responses. Even opinions with which you vehemently disagree can be an important window on the future—they may even turn out to be right. Treat the person you’re talking to a little like a mystic or oracle—although you may not always understand the relevance of what they are saying, stay open-minded and take the time to work out what it means for you.
Ask open and challenging questions. Ask dangerous questions. Ask questions that challenge the status quo. Ask questions about the future.
You are looking for the unknowns. Factors that are almost imperceptible but vital to your success. Just because something is out of sight for you, doesn’t mean it is for others—you only have to consider Blockbuster versus Lovefilm, or Kodak versus digital, for practical examples of this in action.
After your conversations, take time to reflect, filter and understand. Engage with their content wisely. Not all critical conversations will be right and not all of them will agree with one another. Remember your lessons from GCSE history—assess your source! Consider every insight and learn from those opinions you believe are relevant. Discuss the insights with your management team and encourage them to engage in their own critical conversations.
Turning insight into action
If a conversation is truly critical, it will inevitably require both change and action. As a team, you will need to decide what the insights mean for your organisation:
- What changes do you need to make?
- What does it mean for your strategy?
- What does it mean for your business model?
- Do the insights change your goals/markets/products/services/people/partners?
- How does what you’ve learned translate into action?
- How are you going to implement change?
The true value of critical conversations lies not in their insights but in the impact of the resulting action that is taken.
Interestingly, action brings us full circle to the main focus of McGrath’s paper: using a discovery driven (rather than analytical) approach—one that involves “significant experimentation and learning”. It’s likely that your critical conversations will raise many questions and there will still be many unknowns—taking action is not about knowing the right answer or getting your implementation and ideas right first time. Instead, move forward with a discovery driven approach: develop assumptions, prototype and test, rework and rebuild until your organisation and your business model work. And then do it all over again.
And for those of you who like the research…
McGrath, R. (2010). Business models: a discovery driven approach. Long Range Planning. (43) 247-261.