Applying the principle in practice
To apply the divide and conquer principle, it's often a good idea to start from talent management and consider the unique skills your organization will need in order to simultaneously defend, disrupt and innovate.
To sustain the bottom line and ensure ongoing revenue, all existing lines of business must be run by experienced business managers who excel at meeting current fiscal year revenue and productivity targets as measured by profitability, ROI and cash flow. Meeting these targets is essential because without revenue, it is often difficult to sustain investments in disruption and innovation.
On the disruption side, it’s important to have experienced entrepreneurs who excel at business building. Not only are they skilled at bringing new products to market, they also know how to iteratively increase revenue and present value to the point that a disruptive play can become a core line of business.
Finally, from an innovation perspective, it’s vital for visionaries and thought leaders to be at the helm, as they are best positioned to recognize emergent opportunities in technology, and for your customers and products.
Note that these competencies are distinctly different, and success in one area of the business is unlikely to predict success in another — in fact, it might be the exact opposite. A leader who is excellent at running an existing line of business may not succeed in handling the very different demands of innovation and wayfinding, for example.
Once the right leaders are in place, the next capability is a value-based portfolio, which works backward from the executive vision and strategy to prioritize a portfolio of organizational investments and aligns all levels of the organization to a common purpose. Lean Value Trees are one of the most popular and effective ways to create this alignment. As shown in Figure H below, an LVT is a visualization tool used to articulate how the organizational vision and business strategy will be disseminated into a strategic portfolio of investments.
Figure H: Example of an LVT
LVTs use branches to connect the executive vision to the business portfolio using a cascading metaphor that breaks the vision down into increasingly smaller slices of work known as Outcomes, Bets and Hypotheses.
Outcomes, which we describe in further detail in Principle Six, can be used to express the business vision in an elaborated way that articulates what business results or “outcomes” the organization intends to achieve over the next 12 to 24 months.
Outcomes are connected to Bets, which represent near-term speculative investments that an organization might undertake to determine whether they will be successful at achieving the connected business outcome. Bets are intended to be relatively cheap and use the principle of optionality, which gives leaders the right but not the obligation to invest further based on strong indicators of success.
Lastly, a Hypothesis is a short-term, low scope experiment intended for product teams as a means to validate whether a Bet is likely to be successful.
As you might expect, each node in the LVT is defined by specific and often bespoke measures of success to measure progress, as well as guide further investment decisions.
Finally, the third capability is value-based prioritization, which helps organizations evaluate all of the potential investments they could make using a formal weighting system to determine those opportunities that have the best potential to create value for customers and the organization.
There are many different models for prioritization, but one of the easiest to implement is Weighted Shortest Job First. As shown in Table IV below, WSJF can be used to sequence a portfolio of potential initiatives based on their relative cost of delay divided by their relative job size using a simple calculation. Sequencing initiatives using WSJF ensures the best possible return in the shortest amount of time.
Table IV: Example of Weighted Shortest Job First
Note: To learn more about value based prioritization models like WSJF and others, visit the Value-Based Prioritization section in the appendix.
Thin-slicing this work is essential. It would be impossible to run this program across the entire organization, but it’s not so hard across a program or section of the business. Companies have a hard time managing value-stream budgets based on undefined outcomes, but can readily agree with all of the outcomes they want. Starting with outcomes, you can create more ready agreement on budgeting, investment and talent management processes.
This principle is essentially the reverse of the usual waterfall process. Starting with deciding on the first program to transform, and seeing it through end-to-end, you can then refine and roll out your learnings to subsequent programs. The process can follow this loose program:
- 1.Competency Two: Adaptive portfolio management. Pick a program where you can apply the principles from end-to-end
- 2.Competency Three: Value-based prioritization
- 3.Competency One: Talent Management. Create the right team that can solve your customer challenges at each phase of the product lifecycle.