Step 1: Use the Connected Strategy Matrix to Map Your Own Activities and the Activities of Your Competitors

In this step, we want you to use the connected strategy matrix to capture the status quo in your industry. You will do this by comparing your connection architectures and the connected customer experiences they create with what your competitors do, including longtime competitors as well as recent entrants to your industry. In the next step, you will use the connected strategy matrix as an innovation tool.

For this first step, start by making a list of your competitors, old and new alike. Next, turn to the matrix in worksheet 10-1 and use it to position your own activities, as well as those by your competitors. What customer experiences are you and your competitors creating? What connection architectures are used for that?

WORKSHEET 10-1

The connected strategy matrix: Inventory of your and your competitors’ actions

It is often particularly insightful to understand where new entrants are emerging. By mapping them onto the connected strategy matrix, you can see what kind of strategy they are using and how they differ from existing competitors. This might help you spot where you are vulnerable for disruptions.

Your first task in this workshop is to fill out worksheet 10-1. Remember, a firm can be in more than one of the cells in the matrix. Many firms try to create more than one connected customer experience. Likewise, while most firms operate only in one column, some firms (e.g., Netflix, Amazon, Nike) operate with multiple connection architectures, as we saw in chapter 7.

Step 2: Use the Empty Cells in the Connected Strategy Matrix to Create New Ideas for Connected Strategies

Giving managers a blank sheet of paper and imploring them to innovate is often a frustrating experience for everyone involved. Where do you even start? We find that the connected strategy matrix can serve as a helpful tool to guide your innovation process.

For each cell of the connected strategy matrix, especially for those cells in which you are currently not active, ask yourself the following questions:

• What would it mean if we tried to operate in this cell?
• What kind of service or product would we offer to our customers?
• Which of the necessary activities would we engage in ourselves, and which would we provide through other players in the industry?
• What kind of connections to other players would we have to create to pull this off?

This exercise forces you to stretch your thinking (and your existing business model), particularly for those cells that lie outside your existing column—that is, your current connection architecture.

A second starting point for idea generation is to ask which inefficiencies could be reduced or what better services could be created if you could connect (currently unconnected) entity A with entity B. As we saw with the examples of grocery retailing and ride hailing in chapter 2 and then again in our discussion of connection architectures in chapter 7, efficiency can be improved by forming new connections. So, as you consider the different connection architectures, ask yourself the following questions:

• What are the most expensive resources in creating our product or service now?
• Where do we waste costs or capacity now, and how might this be reduced if we connected entity A with entity B?
• How could a connection architecture be used to share or reduce the risks associated with fluctuating demand or other forms of volatility?

For instance, in the hospitality business, the most valuable resource for a connected producer is a hotel room. Capacity gets wasted when a room is idle, either because it was not booked in the first place or because of a last-minute cancellation. By connecting empty rooms with potential guests—as (connected market maker) Expedia or (crowd orchestrator) Airbnb does—new reservations are made and empty hotel rooms are reduced. In addition, peer-to-peer networks and crowd orchestrators can help provide additional capacity when demand is high.

As you are considering new connection architectures or connected customer experiences, be it to increase the willingness-to-pay or to improve efficiency, you need to answer the following questions:

• What information flow will have to happen between these players? (This foreshadows the technological infrastructure that you might need to put into place, which you will analyze in more depth later in this workshop.)
• What incentives are you going to provide to the various players to be connected by you? (This foreshadows the revenue model that you will have to adopt, the subject of the next part of this workshop.)

Use worksheet 10-2 to keep track of your work.

Step 3: Understand Your Existing Revenue Model, Identify Its Main Limitations, and Consider Alternatives for Your Current Activities, as well as for the Ideas Created in the Previous Step

How do you make money? First, think about all the financial flows that you have with your customers. The following questions might help with this:

• What does the customer pay for?
• What are your different revenue streams? (e.g., initial sales, service)?
• Who is paying (e.g., the user, a third party)?
• When does payment occur? (At time of purchase? At time of use? Once or over time as in a subscription model?)

Next, look for inefficiencies in your revenue model. Do you use this revenue model because you believe it is the right one, or are you constrained by connectivity to the customer? Recall from our discussion in chapter 8 that there are three typical inefficiencies:

• Limited information flow
• Limited trust
• Transactional friction

WORKSHEET 10-2

The connected strategy matrix: Imagine your company in each cell

Now that you understand the current revenue model, consider ways to overcome these inefficiencies. For example, in chapter 8, we discussed the following improvements:

• Reduce inefficiencies due to a prior lack of monitoring ability.
• Make pricing contingent on performance.
• Get paid as value is created for the customer.

Moreover, ask yourself who, besides the customer, benefits from your product and who in the ecosystem would benefit from the data that you are collecting. Through the right choice of revenue model, you might be able to benefit from value that is being created in the entire ecosystem, not just from your customer.

Finally, turn to the new ideas you created in the previous steps and look for revenue models for them as well. What new revenue model would you implement if you were able to create new connected customer experiences (e.g., coach behavior or automated execution)? In other words, what new revenue models would be possible or required if you decided to move to new rows in the connected strategy matrix given your existing connection architecture?

In the same manner, you also need to think about how changing your connection architecture would influence your revenue model.

Step 4: Deconstruct Your Connected Strategy into Technological Subfunctions and Then Catalog Currently Used Technological Solutions for Each Subfunction

By this point, you have hopefully created a list of possible ideas for connected strategies for your organization. Refer back to the ideas you came up with in the workshop in chapter 6 and the ideas you came up with in parts I and II in this workshop.

Next, we want you to deconstruct your connected strategy ideas by identifying the necessary technological functions that need to be carried out. As we discussed in chapter 9, this is best done along the steps of the customer journey and the additional dimensions of connected architecture and revenue model. Each of those then can be further deconstructed into subfunctions using the STAR approach, asking for each function what is needed along the dimensions of sensing, transmitting, analyzing, and reacting. Keep track of your analysis on worksheet 10-3.

Each cell in worksheet 10-3 corresponds to a “job to be done.” List what possible technological solutions exist to complete each of these jobs in worksheet 10-4. Note that the same technology might solve several subfunctions. This step should not only involve an internal search of technology options that you get from your own technology experts, but also your observations of how other firms are solving this particular subfunction. As a starting point, here are some technologies, grouped using the STAR typology:

SENSING TECHNOLOGIES

In this category fit all technologies that directly measure aspects of the world that hold clues about the needs or desires of customers or that help users express their needs. This category includes all types of sensors, whether they are embedded in devices or in roads or are wearable or ingestible. This category also includes technologies such as gesture and voice interfaces, and conversational platforms that make it easier for customers to express their needs (and that ask for clarification if the need is not completely understood). Likewise, augmented and virtual reality technologies enable customers to express and understand their needs and desires—for instance, by showing customers different options in a very life-like setting.

WORKSHEET 10-3

Deconstruct your connected strategy into subfunctions

Step 5: Identify New Technological Solutions and How Those Might Enable Further Innovations in Your Connected Strategy Not Identified So Far

A big challenge for managers is to keep up with new technological developments. We have found it very helpful to keep track of new technologies by asking what subfunctions a new technology can facilitate. Thus, as you discover or read about new technological advances, place them into worksheet 10-5 or use the matrix you have filled out in worksheet 10-4.

WORKSHEET 10-4

Possible technological solutions for each subfunction

WORKSHEET 10-5

New technological solutions that would enable a new connected strategy

Cross-checking this against the “jobs to be done” you outlined earlier can give you insights into possible new ways of implementing your connected strategy: when a new technology emerges, it might enable a new connected relationship or a new connection architecture.

This type of bottom-up innovation is oftentimes referred to as technology push. Rather than thinking about the needs of the customer, you start with a given technology that substantially improves the execution of a function. Then ask yourself, “How might we take advantage of technology X?” For example, you might ask, “How can our business benefit from advances in natural language processing or in augmented reality?” Place the answers to these questions alongside the new technologies in worksheet 10-5.