9. The Big Picture

Note: This essence-only approach saves you time. Yet despite appearances, the content is rich. Remember, "A picture tells a thousand words!" Therefore, we recommend careful analysis of the axiom and the chart (click to enlarge) before joining the discussion. (For your convenience, you can also download a PDF version of all chapters.)

Comments

[Cristian]

Hello,

Other characteristics of the business environment that have a roughly linear evolution (ascendant or descendant) along the customer's problem solving behavior include:

> Average Gross Margins (ascendant from Type I to Type III)
> Marketing "Push" (descendant from Type I to Type III)
> Marketing "Pull" (ascendant from Type I to Type III)
> Culture of Innovation (ascendant from Type I to Type III)
> Overall Process Standardization (descendant from Type I to Type III)

Can you think of other characteristics that have such a predictable evolution? Or more interesting, can you think of any characteristic that describes the environment and does not have a predictable evolution along the customer's problem solving behavior?

Cristian | BizBigPic

[Cristian]

Here's more:

> Vertical Integration (ascendant from Type I to Type III)
> Direct Competition (descendant form Type I to Type III)
(Note that direct competitive battles take place only at the ofmos level!)

[Ania]

Hi,
I am just a student trying to understand your theory.Can you please explain Big Picture or me?I can see there are three types of alignment corresponding to each type of solution, but I don't get what characteristic of business environment have to do with this?I simply do not understand the chart, I think. Are they the cause or the result? What are commoditization and innovation doing here and how do they refer to these characteristics? I really want to understand. I was looking for an answer in your article,but I can't find it. Thank you!

Ania

[Cristian]

Hi Ania,

Let me start this post by reiterating the fact that business leaders strive to understand the big picture in order to foresee the future, and therefore be able to choose/make the decisions that will lead to the best results in those future environmental conditions.

Now, as the chapter's principle (slide's title) suggests, a firm's business environment should be analyzed in relation to the continuum of the customer's problem solving behavior, which is the one-dimensional perspective of the Hierarchical Issues Tree, or the horizontal dimension of the Offering Map (see chapter 3). Why? The level of knowledge relative to an issue-solution (offering) determines how customers behave relative to that particular issue-solution. And, since the vendor's approach must match the customer's behavior, we can deduct how most characteristics of the business environment will evolve under the pressure of commoditization and innovation.

Note: Typically, the environment should be analyzed for each individual ofmos--a vendor's slice of a tofmos, which is a system defined by an offering and a set of customers with similar behavior relative to the offering (see chapter 4). However, for healthy firms (firms in which the alignment between Focus and Center has been achieved), the analysis can be done at the company level, since the Center is a representation of a firm's essential group of ofmos. That's why the three types of alignment (or the types of healthy organizations) appear on the slide.

This theory helps us see the business environment as a collection of commoditizing tofmos. It helps any vendor determine which tofmos to enter or to exit, and at what time. Why is this valuable? Because, at the tofmos level, the evolution of the environment's characteristics is roughly linear. In other words, a vendor can be sure that, for the same tofmos, over time, a characteristic like the average gross margin will decrease in a roughly linear manner, as opposed to having an uncertain, erratic evolution. This level of certainty provided by the theory can give a business leader an edge over its peers that see the business world as highly uncertain.

To determine if the evolution of a characteristic (which is the result of the commoditization process) is ascending or descending, it is easy to start the deduction process with the issue and the issues tree. The commoditization of an issue means that the issue becomes more common, therefore being adopted by more customers. So, more related knowledge means more customers and, most likely, more competition. This means lower gross margins. It also means higher standardization, shorter sales cycles, and so on.

I hope this helps. Thank you for your interest. Cristian.