Thinking Globally When Constructing the Value Chain
The Theory of Constraints teaches us the difference between local and global thinking with respect to systems and their performance. To think locally is to optimize each individual component of a system with the expectation that the overall result will be an optimized system. We know the opposite to be true; any improvement at a non-bottleneck is an illusion and may even worsen system performance. To think globally is to expand on this concept by focusing improvement only on the bottleneck of the entire system, thus improving overall system performance. If the goal is to deliver value through any system, global thinking is an imperative.
Systems Thinking for User Needs
Strategy (via Simon Wardley) requires that we subordinate our thinking to user needs, but identifying the users themselves may not be as obvious as it seems.
If we think locally, our user may be the customer who directly purchases our product. In many cases, however, our overall success relies on the customer’s ability to succeed in providing some service to others while using our product. Could it be naive to limit our thinking to only the initial customer?
If we think locally and are party to dysfunction, our user may be another department or an authority figure within the organization (assuming our value creation is intended to escape the company and is not strictly internal). How can our value remain relevant to even the initial customer if we optimize for internal satisfaction?
Thinking globally means taking in a greater perspective — that of the overall system. Examining at a higher level, who depends on our initial customer? And once we’ve identified that entity, who depends on them? And so on, until we reach a level of thinking that is just about intangible (a good place to stop). It goes the other way, too. Who do we depend on? And who do they depend on? And so on (it’s turtles all the way down). Overall, what is the flow of value from its initial creation all the way to final delivery, across people, organizations, markets, and industries? We are but a single component in a value chain that extends far above and below us.
To identify the users, think globally. Your immediate customer still exists (and is important), but they might be only the next piece in a larger system. Their customer is your supercustomer, and each customer beyond is your further-removed supercustomer. We can trace the flow of value all the way to that final supracustomer (“supra-” meaning beyond limits) — the customer whose needs are at such a high level of abstraction as to be completely intangible and therefore useless in any strategy or thought.
By orienting around the users of the entire system, up to but not beyond the level of intangibility (and diminishing returns of probable impact), we optimize in the interest of systemic success.
It’s not that we focus only on the user at the highest level; rather, in order to fulfill the highest-level user needs, we are forced to be aware of and cultivate capabilities needed by all users along the way.
The Value Chain
As mentioned earlier, strategy must be subordinated to user needs. To do otherwise undermines true purpose, resulting in wounds of the self-inflicted variety. Likewise, what happens when we only think locally with respect to user needs? The incentives jump out to get us. Ask yourself, “for what do we optimize, at the expense of all else?”
You are the User
For fun, we can begin with the concept of the self as the user. You may be building a product, but if psychological safety is low and organizational dysfunction is rampant, you may optimize for your own user need (survival) over all else. The value you create will be optimized to cover your ass and pay your bills — nothing more.
Your Boss is the User
Moving to a higher view, you may optimize for satisfaction of an authority figure (which may itself be tied to your own survival). However, just like self as the user, this approach drastically undermines the value being created by subordinating it to the satisfaction of an individual. You do what you’re told without connecting to any higher purpose.
The Product Department is the User
Moving along (though still in the realm of organizational dysfunction), perhaps you optimize for satisfying documented requirements bestowed upon you by another department. The thing you build (say, a web app) will resemble something that is almost, but not quite, entirely unlike what the customer wanted. The probability that the user needs will be adequately translated and codified into exact feature sets is slim. The road to ruin is paved with the best intentions of intermediaries, but hey at least you’re connecting to a slightly higher purpose (keeping multiple people in another department from being upset with you).
Survival is still in the back of your mind, but you are mostly protected by the blessed CYA of bureaucratic process. “But I adhered to all the requirements and submitted all the right forms,” you might say. “It’s not my fault we built something the customer doesn’t want!”
The Customer is the User
What a novel idea! Now we’re thinking at the same level as the people directly consuming the value we create. Instead of just building a simple “web app,” we might think in terms of our user’s needs, such as building a collaboration platform so that our customer can collect feedback from their users. The purpose is clear enough, and we can deliver value even though we are demonstrating relatively local thinking. In some situations, it might be just fine if the story ends here. For many others, the issue now is not so much that we’re doing the wrong thing but that we are hyperoptimizing for our customer’s short-term needs without enabling them (and thereby us) to succeed within the larger context. We miss out on so much potential insight and value, and we threaten our collective long-term success.
The Customer’s Customer is also the User
The disposition of our thinking is transitioning from local to global. We begin to understand the larger context, particularly how the product we build fits into the larger scope of the world. In our example, our direct customer wants to collect feedback, but our supercustomer wants to exert influence. In view of the broader picture, our survival as a provider (and collectively, as a value chain) may be tied to how we consider and balance the user needs of the influencer and the influenced. We may become sensitive to the inter-organizational patterns, and our value creation can be strategic; that is, our decisions can be informed by the larger context and may as a result invoke actual gameplay.
Once again, we do not ignore the user needs of the lower-level components; in order to exert influence, the user needs related to gathering feedback still need to be fulfilled. The key is to recognize that the low-level components are now considered necessary but not sufficient to accommodating the full context.
What About the Customer’s Customer’s Customer (and Beyond)?
There may be more users above the supercustomer (i.e., other supercustomers) and corresponding understanding to build, but at a certain point the usefulness of the greater perspective begins to expire (or at least become academic). The supracustomer (again, “supra-” meaning beyond limits) might be, for example, as high-level as society itself.
What are society’s user needs in relation to what we do? In this example, if society demands “progress,” is that something we can design through our fulfillment of influence, feedback, or other activities? It’s possible, but our thinking might also be acutely complex and dealing in the most unknowable of unknowables. To seek understanding is perhaps worthwhile, but attempting to deliberately effect change at that level might be best left to the uncanny.
We may decide to take one step back from the edge, returning to the realm of activities more easily managed by humans. We stretched our understanding to the limits, and now we know the system is not limited to our product but is a series of interconnected components.
Now that we are more globally aware, we can identify the different users and user needs and create maps from each perspective. It’s perfectly fine to map the breakdown of one component in isolation and map it again as a higher-level component with all the surrounding context. The point is to continue to think globally so you optimize for the right thing every step of the way.
Once you understand the global system, you can also apply the Theory of Constraints to recognize the bottleneck for value delivery. The constraint may be within your product, the market itself, or another organization. The systemic consequences will still hurt regardless of where the constraint is within or without your organization. Global awareness means having the wherewithal to leverage partnership (and strategic gameplay) to attack the real problem and improve overall flow.
In other words, we may now have options where before there were none.