Tag Archives: institutional psychology

The New Psychology of Business Models

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Management 3.0 – a psychological shift

You have a great business idea but you are not sure how to develop it. Should you follow conventional wisdom and write-up a thirty-page business plan? No. In my management 3.0 model, startups will have more success if they adopt lean and agile business development principles, where failing fast is the premium strategy and the lean business model reigns supreme.

I first encountered the idea of developing a one-page business model in 2007 when I came across the Osterwalder model on the web. This struck me as an attractive alternative to the starting point for a business instead of, say, a 30-page business plan. What I didn’t understand then, was that the beauty and power of a business model is not that it is just a boiled down summary of a business plan, but rather a way to change my psychological approach to building a business.  Nobody was around to tell me this, so my startup (an early attempt to gamify corporate wellness), died a needlessly slow and painful death.

Fortunately, it all clicked when I encountered the literature around lean startups. In this article, my description of management 3.0 for business models draws on the work of several very bright entrepreneurs and thinkers, including: Alex Osterwalder, Steve Blank, Eric Ries, and Ash Maurya. I include links to their work at the end of this piece. I have also taken ideas from the efforts of Tor Grønsund and Rob Fitzpatrick.

It begins with a different starting point

Now that you have an idea for your business, or perhaps your company has an idea for a new division, or you want to reboot, either way you need a business model. “But wait!” you might say. “What about doing market research?”  Good point. In the management 3.0 process, some market research can still be done during the idea development stage. But things have changed. It is now possible to shift a large part of the market research into the product development phase. You do this by launching sooner than later. And you start by developing the simplest working version of your idea. You call this your minimum viable product (MVP). MVPs, continuous deployment, rapid iterations all represent major changes in growing a business. All of which is possible because of something I call, the collapse of the customer feedback float.

The collapse of the customer feedback float

In 1982 John Naisbitt wrote, in his classic book on future studies Megatrends, about the collapse of the information float. He defined the information float as the amount of time information spends in any media channel. The float was the amount of time between transmission and reception. As technology-satellites, cellular networks, etc…- made the transmission and reception nearly instantaneously, this float collapsed.

Today, technologies such as social media, smart phones, high-speed data mining, ubiquitously networked electronic devices, etc… have precipitated the collapse of the customer feedback float. This float refers to the amount of time it takes a vendor to understand whether their product suits the market’s interests.  As this float collapses, what used to take longer to figure out, costing a great deal, can now be determined faster and much cheaper. This collapse of the customer feedback float becomes part of the new psychology behind the lean business model.

The old school approach to business modeling

To contrast the differences I’ve been explaining, let’s breakdown the old school approach to business modeling (Figure 1 – below). First, you would do market research to gain some insight into a potential market or an underserved market. This would result in a prospective idea/solution. This idea would then be expanded into products/services to address the possible market need.

In this way, the old system would produce a defined solution for a defined problem. From this, a detailed plan for execution filled with scope and projections would rise up out of the business ether like Mount Olympus.  Hopefully, all the expensive market research was right on and success would follow. Unfortunately, most of the time, it wasn’t. What did follow, almost every time, was creeping or even ballooning scope, increasingly large investments to support a lengthy development process with little iterative feedback, and a big resource commitment to create an amazing product or service that the in the end market may not actually want.

The Old School Business Model

Figure 1 – The Old School Business Model

Now let’s consider what the collapse of the customer feedback float makes possible.

When you launch a minimally viable version of your product or service, the current uber-connected market place allows you to get high quality feedback from your potential markets almost immediately. This data can then inform your development process, ensuring that you are building products based on real-time, market demand. Developmental efficiency increases because it comes from shorter, iterative, development cycles that hew more closely to products and services the market actually wants. However, the really interesting benefit to this act-analyze-adjust approach is the way it impacts organizational and personal psychology.

The new lean business model – embracing the undefinable

By moving from a long view of development to an iterative view, you must be ok with not knowing all the answers. This is a psychologically superior position because it allows for greater innovation, resilience and adaptability. The old school methods of long-term planning and development created a false sense of security or pseudo-stability that has long been valued by stifling corporate bureaucracy. Overcoming this tendency gives both the new startup and the rebooting business a big advantage.

So, the basis for the old business model was that market research leads to a defined problem that leads to a defined solution that leads to big scope development which then risk a great deal of resource. So what does a Management 3.0 business model look like?

As a Management 3.0 lean business model entrepreneur you:

1) Take a step back from any pre-defined ideas about a product or service and think about possible consumer pains or undiscovered needs and…

2) Assume that you have an undefinable problem around a general pain or potential consumer need.

3) You then put forward an untested solution for your moving target of a problem.

4) Next you describe your Minimum Viable Product. This is your business hypothesis.

This approach (see figure -2) represents a new psychological positioning for the entrepreneur. The challenge is to admit that you only have an untested solution for an unproven problem. So what is the benefit to taking this position of uncertainty? You can now develop a business model around an evolving hypothesis that is subject to constant testing and iteration. This working hypothesis becomes your minimum viable product.

Figure 2 – a management 3.0 lean business model

The Management 3.0 lean business model canvass (Figure -3)

At this point, you are ready to write a business model around this hypothesis that begins with answering eight questions, and after filling out your lean canvas you begin testing your M.V.P. hypothesis in a cyclical approach.

The cycle is simple:

  • ACT – design, build, code, develop;
  • ANALYSE – release, test, measure, discuss;
  • ADJUST – design, build, code, develop;

Rinse, lather, repeat…

Each newly tested version of your evolving hypothesis – a.k.a. your iterating Minimum Viable Product gets plugged back into your business model. The eight questions can then be revisited and your model continues to adapt to market reality.

Management 3.0 Lean Business Model Canvass

Figure 3 – Management 3.0 Lean Business Model Canvass

The Eight Questions

Four questions expand on the product side (your untested solution) and four describe your approach to the market (your undefined problem). Remember, the undefined status is an asset because it keeps you in a testing, innovating mindset.

Product questions: built around your initial business hypothesis or M.V.P.

1) Outside support – what other businesses and services will you draw on for support?

  • Potential partners
  • Cloud SaaS providers
  • Incubators, accelerators, business networks
  • Investors
  • Marketing partners

2) Development – what tech or other resources will you need to build your business?

  • Open source, SaaS, existing platforms
  • Programmers, UX/AI, MBA, agile product/project manager, other specialists…
  • User generated content, crowd sourcing

3) Key Metrics – how will you get and measure continuous customer feedback?

  • A/B testing
  • Continuous deployment assessments
  • SEO, SMO and other new media stats
  • Landing page conversions
  • New customers acquired
  • Demographic analysis of individuals (potential customers) applying to become customers, and the levels of approval, rejections, and pending numbers.
  • Status of existing customers
  • Repeat behavior
  • Customer attrition
  • Turnover (i.e. revenue) generated by segments of the customer population.
  • Customer lifetime cycle and lifetime value

4) Costs – what is your cost per sale/customer?

  • Pro-rated fixed costs
  • Variable costs
  • What are your economies of scale (how much less will produce more of your product cost)
  • What are your economies of scope (what other products or services can you use offer using your existing structure)?

Market questions: built around your untested solution and who you feel will be interested

5) Target Audience – who will want this product?

  • Define and describe the demographic(s)
  • Psych profile
  • Niche vs. mass

6) Unique Advantage – what makes customers choose you over your competitor?

  • What makes you unique?
  • What do you do that will be difficult for your competition to copy or buy?

7) Customer development – how will you connect to and interact with your customers?

  • Web marketing: SEO, SEM, SMM,
  • Internet advertising
  • PR – blogs, press releases,
  • Events, demos, conventions
  • TV, radio, magazines, newspaper
  • Direct mail, flyers
  • Polls, surveys,
  • Beta testing
  • CRM options (sales force, pipeliner, google apps…)

8) Revenue – how will you make money?

  • Single sales
  • Repeatable sales
  • Subscription service
  • Freemium to premium model
  • Add-ons
  • Advertising revenues
  • Licensing/commissions
  • Sales projections (what are they based on?)
  • Projected customer life cycle and lifetime value

My canvas is one of several iterations based on the original Osterwalder version. All of them have value. Although this one is especially suited for agile development. The important thing is to start with one and begin testing your hypothesis.

A Better Way to Think

Allowing your perspective to shift from a big-plan-specific vision to a fluid-discovery-process is an important part of Management 3.0. Seeing business growth as a series of discrete discoveries instead of an overreaching plan wires your brain for flexibility. This, in turn, will enhance your creativity and your ability to innovate.  As you can see, Management 3.0 is more than just new tools for growing your business. It is a new way of thinking; a clearer, braver way to think.

———————–

Here are some links for more insight into this topic:

Osterwalder’s Business Model
Ash Maurya
Eric Ries
Steve Blank
Tor Grønsund
Rob Fitzpatrick

Looking forward to your comments and please share if you like 🙂

Co-Founder Dating: what you should know

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 Looking for business partnersYou Are Ready To Make Your Next Million
You have a great idea for a new business, an invention, an iPhone app, or you are ready to create the next Internet. Now all you need is a partner, or maybe even partners*, to bring your vision to life. How should you go about looking? How can you lower the risk of choosing poorly?
(*Check out this blog on the 4 crucial roles in a start up.) 

Clarity Improves the Odds of Finding the Right Partner
There are many issues to consider when deciding whom to work with. You have to consider skill sets, experience, availability and ambition. You also must consider the all-important issue of temperament. Someone who has the first four qualifications but lacks the ability to get along and work without undue conflict with others will result in a dismal and often costly counterproductive situation.

One way to learn about choosing partners is from the mistakes of others.  I am currently collecting anecdotal summaries and reports on this topic from those who have experienced the phenomenon and I strongly recommend you do the same. Social science also has much to say about this. Some of the existing research tells us that:

  • Partnerships are not a soft option but hard work;
  • Partnerships take time to develop;
  • Partnerships must be realistic and aim for what can be achieved, not be set up to fail by being too ambitious;
  • Partnerships can, if successful, achieve more than individual agencies working alone.
    (How to create successful partnerships—a review of the literature, Wildridge, Childs, Cawthra, Madge; Health Information & Libraries Journal, 2004)

Among some of my findings on the nature of why partnerships fail  is that people mistake partnerships as something that will make their lives easier. The reality is, that most of the time, partnerships make life harder and the most compelling reason to add such a burden to one’s life is because the two parties (or more) can create something together that they could not create alone. Having clarity about the value of that potential creation is necessary for overcoming the added difficulty of the partnership. 

Allow Patience to Temper Enthusiasm
Many partnerships have begun on the best of intentions based on apparent compatibility among associates and then somehow degraded into conflict and discontent.

One clue is in the concept of “apparent compatibility’. Sometimes this apparent compatibility is actually the product of your enthusiasm. Enthusiasm can mask potential flaws in prospective partners and associates. This also happens in romantic relationships when the initial chemistry fails to reveal psychological differences between partners. In both situations the heady hopes that this person is “the one” clouds your ability to discern.

Sometimes excitement about an idea makes you feel desperate to find someone with whom you can develop the idea further. You may meet someone who seems perfect because of his or her talent or experience but this is where you must learn to exercise patience. Ask yourself how you really feel about this person. If they did have the expertise or resource that is exciting you, consider whether you would want them as a friend? Would you want to spend a lot of time with them? Get the opinion of others who know you and who may have an easier time being objective.

Natural Language Sessions and the Transcript Solution
Dorene Lehavi, Ph.D. (a principal of Next Level Business and Professional Coaching) has talked about the negative impacts of money problems, partners with control issues, and conflict due to changing vision. (http://successfulbusinesspartnership.blogspot.com/)

Part of what contributes to future conflict is the optimism and enthusiasm of a new venture. Filled with hope and aspiration, cofounders, new partners, closely involved investors and principal stakeholders layout a blueprint for the future; one made of projections, business plans, corporate bylaws, shareholder agreements, etc.…  In this prospect filled process, difficult and potentially painful questions go unanswered.

Taking the time to sit together and answer questions that the Atman Approach provides can go a long way to reducing future pain and even untimely death to a viable project. The Atman Approach uses automated (or when possible live) facilitation through questionnaires. Often the process can seem almost like a therapy session. It is not. It is, however, a vital means of uncovering unseen emotional hazards early on and making provisions for them.

Money is usually the biggest cause of future conflict. So in the Natural Language Session we give that issue the most attention. For example the questionnaire takes future partners through a number of scenarios to develop a clear strategy for overcoming such situations.

The process uses natural or conversational language. The whole session is recorded and a transcript is produced. This transcript is then delivered to the attorney for the business entity and a legal document, partner agreement; additions to bylaws, etc.… are drafted. This turns the frank and open-hearted discussion into a far more mature legal framework for the venture. This type of preemptive work has the potential to save money and cut the likelihood of future heartache.

Reminders

  • While part of the issue is choosing well a more significant part to building successful partnership is in the execution of the relationship
  • Refining intuition is possible and when combined with hard data can make you a better judge of character. (Face reading and empathy can help with this.)
  • Seeing people as conscious beings who are struggling due to a misplaced sense of self provides a new platform for understanding emotions and motivational needs
  • Partnerships require resilience and adaptive expectations
  • Pick partners that you like. Are they someone you want to do social things with?
  • Learn more about how face reading can make you a better judge of future partners and employees here.

How to hack a management system [brief talk]

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[A 5 minute talk given at LA Hackers on April 23, 2011 at Coloft]

My name is Atma

I am an industrial psychologist

That’s kind of like a project manager on academic steroids

I specialize in the psychology of organizations and am currently working on my PhD in this topic

Part of the power of organizational psychology is that it leverages emotional energy.

Emotional energy comes from human desire, those things you want deeply or strongly, and it is a pervasive phenomenon.

Put another way I traffic in disruptive ideas that can make people better, higher functioning, and happier

I do this by focusing on changes in the work environment rather than singling out the individual

Better environments create better humans; better humans create a better society

I believe we can create a better world by changing the way we interact in daily life.

My goal is to teach whoever is ready to re-engineer their business, startup, or organization.

The suite of solutions I work with can be used to make any business or team more effective (consequently more profitable)

Some of the tools in this suite include:

  1. Screening partners, and hires with face reading and other cutting edge profiling techniques including clique psychology
  2. Wiring in innovation as a cultural behavior
  3. Game theory applications – tapping into mutualistic dynamics
  4. Training for charisma, confidence, and presentation skills
  5. Human centric design based on my model of generative grammar in organizations
  6. Hacking your management system
  7. The role of discipline in forging leaders
  8. Training to be comfortable and confident in any social situation
  9. Repurposing stress – training to thrive amidst chaos
  10. Super Group Networks
  11. XY cluster companies – a new  type of agglomeration
  12. Changing the communication model,

Here is a simple example of one way to hack a management system…

To make a meaningful change in the way an organization functions you need to figure out what is the generative grammar of that business or group. It’s like understanding the nature of code at the deepest structural level in a massive program written 30 or 40 years ago. You can similarly assume that your work environment is like an antiquated system riddled with legacy code. Only instead of the byzantine application of a formal language you are dealing with emotional needs, cultural expectations, societal mores, all operating in an invisible and impossibly complex array.

But if you can change the underlying grammar or code you change the way humans behave. This is partly because humans have enormous plasticity or capacity to adapt.

For example say we all worked together and somebody came in and said I will pay each of you a significant bonus for every month you show a demonstrable positive change in your health stats. Now I know from previous studies about how many of you would take advantage of that offer. Often it would be those of you who need it the least.

But let’s say I came in and said I will pay each of you the same bonus for the improvements shown by a randomly assigned coworker, as opposed to your own improvements (which would be tied to someone else’s bonus.)

What kind of shift do you imagine would occur in the way we all interact? Suddenly I have a vested interest in your well being. I will be paying attention to what you eat, encouraging you to be more active, maybe invite you to my gym 3 times a week. And you might be inclined to respond because you are equally concerned with getting your assignee on the right track.

So you see in making one simple adjustment I have altered the generative grammar of our environment and consequently we are all behaving differently.

I am currently involved in a private research project, where I come into small businesses and observe and collect data on the organizational dynamics. It’s free to the company and I always share my findings with them, which is always eye-opening and instructive. If you know any companies that would like to apply for participation please let me know.

My contact information is on the handout I have provided.

Thank you

Organizational Psychology – the dominant force

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Fix the institute; heal the man – the underlying hypothesis for my over all approach to healing society through organizational design and changing the psychology of an institute

Part of my working hypothesis is, “Humans may have originally created the institutions around us, but eventually these institutions come to create us.”

Industrial or organizational psychology is a management process that knows that both humans and institutions have an underlying psychology. The organizational psychologist also understands that of the two, the institutional psychology is the dominant force. Change the psychology of the institute and you will change the psychology of the individuals.

By institution I mean most any place where humans interact regularly: school, work, home, church, and so on. Think of institutions as any matrix of roles, e.g. mother, daughter, grandparents, or worker, supervisor, executive, or student, teacher, administrator.  (Of course for our work we are going to be focusing on the workplace.)

There have always been brave souls who buck the overwhelming influence of societal pressure. Sadly, however, science and history have provided copious evidence for the fact that humans tend to submit to the influence and expectation of the institutions around us.

An institute is not a living being, at least not in the way you and I are. It is, however, a dynamic entity, made up of unspoken and usually unseen expectations, rules, customs, mores, and behavioral demands.  Think of institutional psychology as a deep structure that acts as a hidden, generative grammar. This grammar strongly influences behavior. This grammar is made up of rules that inform the psychology of the institute.

These rules and values enter into the so called psychology of the institute at the time we humans create it, so we are responsible. But we often instill these traits without being aware we are doing it. Consequently the psychological traits of the institution tend to reflect what is going on in the culture at large. If the prevalent traits in society are sexism, racism, classism, individualism, or patriarchal, homophobic, atheistic, fascistic, or any other of the fear based human behaviors, these tend to become imbedded into the psyche of the institute without any one purposely putting them there or even conscious of how it happens.

Once we have built our institutions in such a manner we then tend to live within their expectations and under its influence. And this is dangerous, and a sign of going through life inattentively. But you can see how we are living in our creations.

The bright spot in all this, and the essence of my life’s work, is that humans are marvelously adaptive. So, big and small, we can rebuild the institutions of daily life. We can recreate them in a way that will help shape humanity into the best of traits, such as, kindness, courage, honesty, selflessness, and more.

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This is not to say that humans do not have sufficient free will to define their mores and behaviors on their own, they do. But in general they don’t. This is because we are extremely social and interconnected beings. We appreciate deeply the support and reinforcement of those around us, and we like to offer the same. But in the context of operating within our various institutions, family life, school, the workplace, where the underlying expectations that lead to acceptable or “appropriate” behavior has been infused with the fear based characteristic I mentioned above, then we inadvertently (or unmindfully) but understandably  conform to the norm. Sadly it is easier to just go along with the flow. And sometimes the economic pressure to do so is great. After all, the student needs her degree, the journalist has to pay the rent, so failing to conform can economically unbearable. The added dilemma is that conformity over extended periods of time is rarely superficial. Humans tend to internalize-that is embed into their own psyche-behaviors and expectations that are repeated or maintained over extended periods of time.

This is why I am focused on helping change the psychology of institutions more so than just the individuals (who I am also willing to help). But if I take 1000 people out of an institution with a 1000 people, put them through a three week mindfulness boot camp, strengthening their character and motivating them positively, when I send them back to the unchanged institution, the majority will revert to the influence of the institute’s psychology. Some won’t. But of those, most will end up leaving. This is the overwhelming pattern in humanity today. So you can see why I focus my work around the idea that, “Humans may have originally created the institutions around us, but eventually these institutions come to create us.”