The Ultimate Outcome

I saw a study the other day from a Stanford economist exploring the impact on the US workforce as a result of Covid-19.

It continues to blow my mind. My biggest takeaway:

We are officially in the Knowledge Economy because 42% of the population and 67% of the economy are enabled by bits, 1’s and 0s, in efforts to create value for customers.

We’ve been there for a while now, but awareness that we are there has accelerated in the past few months thanks to the Covid-19 wormhole.

Organizations Don’t Create Value. Only Customers Do.

Notice that I didn’t write “in the creation of value for customers.” I intentionally wrote “in efforts to create value for customers.”

The reason for this is outlined in a powerful whitepaper from the Mises Institute called Austrian Economics In Contemporary Business.

“Value is subjective — an experience that takes place entirely in the customer domain.

Logically, no external force can create it or even co-create it.

Only those who ultimately consume can create value.

Value is not “created” by firms.

It may be semantics to some, but not for me.

Every organization (for-profit, non-profit, government) has to figure out a way to bring knowledge together from its disparate parts with the goal of having an external actor (customer, donor, taxpaying citizen) say “Yes, there’s value here for me to consume in the form of this product/service.”

Ultimately, that outcome, the assignment of value by a party (or multiple parties) external to the organization is the reason for being of the organization.

Call it “The Ultimate Outcome.

As Peter Drucker would say: “The purpose of business is to create and keep a customer.”

Non-profits do it for donors, volunteers, etc.

Governments do it for citizens and residents (see Estonia’s Digital Nomad program…or, conversely, outflows of people from high tax US states like CT, IL, NJ, NY, CA to lower tax places like FL, CO, TX, AZ, NC, GA)

Regardless, organizations compete in the marketplace to deliver products and services to customers. However, the final arbiter of value is the customer.

And, if there’s one thing I know about customers, it’s that there are both micro-changes (increased expectations for basic features over time) and macro-changes (Covid-19) that continually change their assessment of “value” on a minute-by-minute basis, if not faster.

The challenge then, for every organization, comes down to this:

In a world where Amazon updates live code every 11.7 seconds and Twitter trending hashtags seem to change at the same rate,

how can anyone design an organization to consistently arrange and re-arrange its knowledge (1’s and 0’s), to predictably, consistently, and reliably get to the Ultimate Outcome?

The Ultimate Outcome

“This has value for me.”

-your customer

Barriers on the Route to Value Creation (by the customer)

A colleague of mine would say:

Where are the high value flows within the larger value stream of the organization?

While I might quibble with the semantics again, he is asking a great question that has helped me think much more deeply about the underlying systems in knowledge organizations vs. industrial organizations.

In a rapidly changing market environment, which leads to extremely high volatility in the customer’s creation/assessment of “value,” it becomes even more critical to deeply understand the relationship between

– the outcomes that individuals, teams, and teams of teams deliver to the organization

with

– the impact that those outcomes have on what the customer perceives as “value.”

Levels of Customer Awareness of the New Reality

Many people know this and recognize the need to adapt their organizational design models. These are the OKR Champions and forward-thinking execs we see today.

For them, the reality is:

“Yes, I’m fully aware of the need to make a change and am committed to driving it in my organization, how can you help me make the transition easier and more manageable?”

But they are a small part of the population. It is my hypothesis that the second group of people is a much, much larger group (at every level of the organization) and possesses a slightly less refined awareness.

While they know that every organization is facing a Darwinian moment of adaptation (thanks to Covid-19), they are not yet aware of the depth of the organization at which these barriers exist.

They are, however, aware of the symptoms of the new reality…it’s become increasingly difficult to allocate resources to the right parts of the organization at the right time in order to exploit opportunities or defend against threats, all in the service of the Ultimate Outcome.

This is happening because almost every organization is premised upon industrial age organizational design principles. These paradigms are designed to measure output, not outcomes. That’s an existential level challenge in the transformation to a full-on knowledge economy.

One can look no further than the hierarchical management and reporting structure as the most poignant reminder of rigid adherence to scientific management principles of Deming and Taylor.

What Organizations of Tomorrow WIll Need

Any organization that is going to be successful tomorrow needs to have clarity and transparency about how they measure outcomes at the level of individuals, teams, and teams of teams.

Only once they do that, they can then begin to identify how these outcomes flow (or don’t) into the Ultimate Outcome: value in the mind of the customer.

A customer will not consistently provide an organization with the Ultimate Outcome (“this creates value for me”) if individual, team, and team of team outcomes are not aligned with the consistently changing needs and wants of the customer.

And outcomes from individuals, teams, and teams of teams cannot align with the customer’s needs and wants if they can’t be measured.

So, every organization has to have a non-negotiable core capability – a way to measure outcomes.

Measuring outcomes

This is where OKRs come in, of course,

There is no better, more proven, methodology anywhere for measuring outcomes than OKRs.

But you can’t measure outcomes if you don’t track the inputs or interpret their relationship to the whole effectively.

This is why organizations need purpose-built outcome measurement software, not a spreadsheet.

Tracking inputs

Organizations have to be able to pull in any data source they rely upon for business information to see if/how it impacts the flows within the organization.

It has to happen in real-time, because that is how quickly the market is changing.

Whenever there is a system that is not connected or there is a lag in turning data into information, the relationship between organizational outcomes and the Ultimate Outcome is blurred. The fewer the inputs, the less interpretation, the more blur. The “fog of war” is thicker.

OK, now what?

Even if all of the inputs are there, that’s not going to be good enough. You might have total transparency of what is going on right now, but that just tells you where you are.

It doesn’t tell you what you need to do next to get to where you are going.

Which brings me to the grand promise of Gtmhub, as I am currently thinking about it.

We want to help every organization make the best decision possible at every moment about the next step they need to take to reach the Ultimate Outcome.

The way we help is reducing the amount of haze in the decision-making process for all knowledge workers, by tracking and interpreting data inputs from anywhere so they can understand and see the relationship between organizational outcomes and the Ultimate Outcome.

This is why we offer the most robust, flexible, guided OKR SaaS platform in the world.

Looking to get started with OKRs? Try Gtmhub FREE for 7 days!

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