To build a sustainable competitive advantage, it’s essential to adopt an outcome mindset, which allows a business to focus on long-term goals while executing shorter-term strategies.
4 minute read
To build a sustainable competitive advantage, it’s essential to adopt an outcome mindset, which allows a business to focus on long-term goals while executing shorter-term strategies. That means keeping purpose and desired outcomes as a North Star instead of processes. Here’s how a business can implement this kind of purpose-driven strategy to innovate more effectively.
Last year, the CEO of Microsoft said the company had seen two years’ worth of digital transformation in two months. While much of this was no doubt pandemic-related, it’s no secret that technology has been advancing at a progressively faster rate for years now. This exponential rate of change has made it increasingly difficult—if not impossible—for existing enterprises to simply stick with what they do best in order to succeed. Instead, businesses of all sizes have to continuously innovate if they want to stay alive.
Of course, saying this and actually making that happen are very different things. Many companies aren’t well-versed in developing business growth strategies centered on innovation, preferring instead not to rock the boat. Even in organizations where innovation programs exist, the majority of them are still in their early stages, well behind where they need to be in order to offer a competitive advantage.
Luckily, it is possible for virtually any business to become an innovation-oriented company. They just need to be willing to change how they think.
In a traditional environment, teams will often find themselves building products or features of questionable value that nevertheless continue to be supported and maintained because so much time and money has already gone into their creation. Without a willingness to experiment or learn from failure, businesses can quickly stagnate, going nowhere fast with their products.
An outcome mindset, on the other hand, is a skill that allows a business to focus on long-term goals while executing shorter-term strategies. Teams on the ground are deployed to run experiments, learn from the data, and continue to inform the company of the next best step forward.
This type of strategy is especially useful today because it also ensures that the customer experience becomes a top priority. Companies centered on the customer experience are 60% more profitable than those that aren’t. An outcome mindset, by its very nature, has to take into account the experience of the user in order to understand a feature’s true impact. In other words, this is a strategy designed to make a company smarter and more customer-friendly with every step.
Even better, an outcome mindset isn’t an overly complicated or expensive approach to implement. It can be accomplished in just a few steps:
While a successful outcome-oriented mindset is closely tied to the end user’s experience, that doesn’t mean you should just take customer feedback at face value and use that to direct your strategy. It’s common wisdom that customers will tell you what they want; it’s our job to discover what they truly need. To create a sustainable competitive advantage, you need to figure out the core reason (or reasons) behind a particular ask or complaint (often through direct observation of the job they are trying to do). After all, what good does it ultimately do to fix up the exterior of a house if the foundation is cracked?
The strategy of the “five whys” is designed specifically for this type of root-cause analysis. When faced with a particular problem or need, the first step, of course, is to ask “why?”: Why is it a problem? Or why does the customer want this particular feature? You then need to follow up the answer to that “why” with another “why” and repeat this process two more times. You’ll quickly find that your picture of the problem gets more detailed, and your countermeasure becomes more effective.
To pursue an outcome-oriented approach, you need to first define what your desired outcome looks like on a practical level so you can then figure out how to measure true success. In some ways, this process is similar to the five whys. Start by considering the broad objectives you’re aiming for—this list of 10 universal objectives might be helpful—and then dive down into the why of those objectives.
Sustainable value, for instance, is better for supporting the core value of your product, while a goal of higher profits will support lower costs and allow you to make the most of your existing assets. Once you know what objectives are most important to you—and why—you’ll then be able to accurately measure the success or failure of each outcome.
When it comes to transitioning to a purpose-driven strategy, one of the biggest struggles for established businesses is accepting the idea that failure is not only acceptable—it means the strategy is working. Your expected outcome should essentially act as your hypothesis, while your development process should act as the experiment. It’s through this experimentation that your competitive advantage is forged.
Before you build a solution, ask questions about what you expect to happen. Gather a baseline to measure change and let the data inform your next steps. It might sound odd to put money and time into a bunch of projects that will fail, but that’s exactly what the most successful companies do. It’s important to build the right thing, but eliminating the wrong things from taking up precious resource time is infinitely more valuable to the business in the long term.
Bosch’s Accelerator Program is an excellent example of the experimentation mindset in action. The program doesn’t have a pitch concept; instead, it has “lessons learned” presentations whose purpose is to evaluate evidence and give teams a no-go or go opportunity. Seventy percent of teams never make it past the first phase of discovery, while another 70% don’t make it past phase two. And this is exactly what Bosch is expecting. Finding the right opportunity is only possible by eliminating the wrong ones all along the way.
Technology will continue to change at a breathtaking pace for years to come. In order to not only keep up but stay ahead of the pack, businesses need to move away from older inflexible strategies and adopt something that focuses on outcomes rather than processes. A purpose-driven strategy will provide your company with exactly what it needs to keep customers happy and take on whatever comes next.