James Allen: An Introduction to Micro-battles

Micro-battles can help companies achieve competitive advantage in a world of faster change.


James Allen: An Introduction to Micro-battles

Micro-battles are the "how" in an organization's journey to regain its Founder's Mentality®James Allen, who coleads Bain's Strategy practice, discusses how micro-battles can help companies achieve competitive advantage in a world of faster change.

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Founder's Mentality

Fast-growing companies can become global leaders without losing the values that helped them succeed. Bain’s research explores how large incumbents can also reignite their growth by recapturing their Founder’s Mentality®.

Read the transcript below.

JAMES ALLEN: When we think about companies, we think of them on two dimensions. The first is, how well does a company keep its sense of Founder's Mentality and how well does it benefit from its size as it grows? And by definition, every great company starts as an insurgent. They're at war against their industry on behalf of underserved customers.

And the wildest ambition of that founding team would be to become the incumbent in their industry, properly redefined by what they're doing in their mission.

But in our argument, that comes at a tremendous cost, which is the loss of the original Founder's Mentality of the team. So let's go into a little detail of what we mean by Founder's Mentality. And I'll use this just to set up a lot of the issues that companies face as they become bigger and more bureaucratic.

So the first is this sense of insurgency. It gives the company a great, bold mission, but also real clarity on the capability spikes. What the team knows is we need to be world class at one, two or three things, and it's perfectly okay to be average at the rest. But then what starts happening with companies is what we refer to as the tyranny of functional excellence programs, that every function wants to be world class benchmarked against other functions and other industries, even. And each of these world-class programs creates hundreds of initiatives that mean the entire organization is caught doing almost everything to pursue functional excellence and less and less to do what's right for the customer and the consumer.

Now, that leads to the second issue, which is frontline obsession. If you're in a company with strong Founder's Mentality, you know that everything needs to be translated into those that execute. They're the ones that are the heroes of the company. And there's no such thing as a strategy unless it's translated into the routines and behaviors of the front line.

So this sense of frontline obsession is huge. What then starts to happen is the professional managerial class that's brought in to provide leverage and to begin to gain the benefits of scale starts believing they're more important than the actual people that execute. And suddenly everybody is having horizontal discussions about strategy and organization, and nobody is translating that into the routines and behaviors of the people that need to execute.

The third is this issue of owner mindset. And in particular, what we want to talk about is this idea of bias to action and this notion of deep work. That's a term coined by Cal Newport in his book on deep work. And he defines deep work as a thing that everybody does six to eight hours a day, because it's exhausting, that uniquely leverages their talents to increase the value of the enterprise in which they're working.

That's deep work. Shallow work is everything else. And what Cal argues is that over time, as a company loses its sense of owner mindset, loses its bias to action, everybody is working on shallow work, and everybody's forgotten even what deep work is.

So this is a lot to lose.

But for a while, the journey from insurgency to incumbency is positive because, of course, the benefits of size are very real. And you bring in a lot of professionals to gain those benefits, and that's great. So for a while, the journey feels positive. But now you're a large incumbent, and you're facing a world of new insurgents in your industry. And they have one asset you'll never have, which is speed.

And what these companies are discovering is their scale becomes a liability. And they move from incumbency to struggling bureaucracy. And we refer to this as the default path. Unless the leadership team takes action to prevent this, this happens to every company on earth.

In the longer-form video of the background of Founder's Mentality, we go into the forces that work against you. We call some of these westward winds and some of these southward winds. I'm only going to refer to one today, because it matters a lot as we begin our discussion of micro-battles. And that's this idea of the curse of the matrix.

Now, first, the matrix is here to stay. In fact, most people call it a networked organization now because we're linking on so many dimensions. But we refer to the curse of the matrix as the fact that companies lose sight that one of the primary reasons for good organizational design is to create conflict.

And there are three great conflicts in business.

The first is scale vs. intimacy. If I'm Unilever, I demand that my head of Indonesia fights on behalf of her consumers to deliver spicier soup. She's delivering the benefits of difference. I know you and can tailor my propositions to you, or the benefits of intimacy. But in the exact same debate, I demand that my head of supply chain is delivering to the same consumer the benefits of Unilever's scale or its sameness.

And so, yes, you want him to say, I can deliver spicier soup, but do I really need 52 different kinds of mustard seed? Or could I begin to do it off of 10 types of mustard seed? So this scale vs. intimacy is a critical thing, a critical trade-off that you want in business because your consumers benefit.

The second conflict is routine vs. disruption. I demand that about 85% of the activities of a firm are just simple routines. I want my front line just to be executing against a known playbook. I'm flying this week to Munich, and when I get on my airplane, I do not want the pilot to say, "Welcome to our agile flight. We're gonna be innovating new ways of landing in Munich today." No, I demand that the entire history of aviation is reflected in that pilot's checklist that he actually has when he's checking off the things that he's going to do.

So the idea is that most of the time we want people that are executing against known playbooks, but of course, we want people disrupting sometimes. And we would say probably 5% to 15% of the activity of a firm is disruption of product and services, disruption of business processes, or even the business model of the company itself.

The third is short term vs. long term. I demand that someone in my organization is losing sleep about tomorrow's trading numbers, and I demand that someone in my organization is thinking, Will this company survive two more generations?

So we build this conflict in everywhere, and then we forget to do one tiny little thing. And that's to resolve these conflicts. And so our people are locked into silo fights that can only get resolved at the top, and that paralyzes the organization. So that's enough about problem statements, but that's why we're here, to talk about solutions.

And so the first set of solutions that we talk about we refer to as building blocks. And we say if your issue is insurgency, we have two ideas for you. If your issue is frontline obsession, we have two ideas for you. If your issue is owner mindset, we have two ideas for you. And as you're thinking about how we restore our sense of Founder's Mentality, any one of these ideas may be critical.

I'll only bring up one now because, again, it's going to be very important when we get into micro-battles. And that's this idea of making sure that you understand that your operating model is designed to support your franchise players. Now, what the heck do we mean by franchise players?

What we say is once you understand your insurgent mission, the next question is to ask, who delivers that insurgent mission to our customers every day? And we particularly want to say, who delivers the benefits of intimacy and who delivers the benefits of scale?

Imagine I'm a big global retailer fighting in the US to deliver everyday low prices to my consumers. My insurgent mission may be something about how if they save, they can do something better with their life.

So let's imagine a customer now going into that store trying to buy an item of infant clothing. Who delivers the insurgent mission of everyday low pricing? Well, the first would be the woman who manages the category for infant clothing in the store. She is delivering the benefit of intimacy. She might have regional discretion to choose different clothing. If it's in a warmer climate, it would be lighter clothing, etcetera. She also either keeps that aisle clean, or it's dirty. And it's either something that you have very instant product choice that you know you want, or not.

But who is the second person delivering the insurgent mission of everyday low price? Well, it's actually the global buyer for infant clothing. That person is delivering the benefit of the retailer's scale, while the person in charge of the aisle is delivering to the consumer the benefits of intimacy. And that's really important to our way of thinking around micro-battles, because we want micro-battles to unite the person who delivers scale and the person who delivers intimacy onto the same battle.

We've been working on these six building blocks for years now in helping companies think through how to restore Founder's Mentality. And the one thing we've discovered is those are the what, but the how is equally important. And we've come up with this notion of micro-battles to begin to discuss the issue of how.

The idea of micro-battles is very simple, which is we're trying to help companies rediscover the art of getting stuff done. And in fact, what happens in these large bureaucracies is everything just takes too long. We were with one CEO who says, "Isn't it funny that the bigger you get as a company, every corporate initiative takes exactly 18 months to fail?"

And his point was is that when we do strategy, we have an awful lot of initiatives, but we never focus on the really hard things where we know we're going to fail a lot and we have to learn and adapt while we go. We tend to postpone those things and do all the knowable and often very expensive things first. And then as we start doing the very hard things, we start failing around 18 months in.

So a micro-battle... let me try to bring this to life. So let's invent a company called Fred's Grog, from Fred Flintstone, and so grog is the beer. And let's say they have a strategy to win in China.

Now, we know that's not a strategy, "win in China." That's a chapter heading for a strategy that needs to be written. In the beer industry, if you're going to win in China, you can do a lot of things. You have to buy a lot of Chinese brands, and that's expensive, but that builds up distribution scale. You can build a huge salesforce, which you inevitably have to do. It's knowable how to do it, and it's expensive, and you can do that. But ultimately, to win in China, Fred's Grog as the premier beer needs to beat all the other foreign beers—the Heinekens, Budweisers, Carlsbergs of the world—in China.

And if you know anything about the beer industry, that's not an above-the-line game, where you're working on advertising and working in shops and stores. It is absolutely you need to win in the on-trade, which means you're going to need to win in the most affluent bars in China. And that means Fred's Grog is going to have to come up with a trade promotion that in the real life of a real bar outcompetes against the Budweisers, Carlsbergs and Heinekens.

Now, trade promotions take an awful long time, so you could end up taking 12 months to try one trade promotion to see if it can beat these competing beers. The idea of a micro-battle is to say, we are going to focus on the most important part of our win in China strategy. And that is to make sure we have a winning trade promotion against these foreign imported beers. And we're going to have to get into a cycle of testing a new trade promotion every four weeks.

And in fact, let's even be more aggressive: We will try six different ones every four weeks in six different bars. And a micro-battle may fail four straight cycles, meaning 24 different times we don't have a proposition that's good enough to beat. But by the 25th, we have something outstanding.

And the idea of a micro-battle is this idea of taking the most essential part of strategy and then actually making sure that you're working on it. And in fact, what we talk about is, when fighting a micro battle, you want to act like a microcosm of a scale insurgent, of the company you want to become that has both strong Founder's Mentality and gains the benefit of size.

So when we refer to a micro-battle team, we say they are led by the franchise players that deliver scale and intimacy.

In this case, it would be my top Chinese salesperson who is working in the top key accounts of my bars in one of my best regions of China. And it would be my global brand director for Fred's Grog. Now, it may be the global brand director needs to stay in the US, so he or she needs to deputize someone that would go to China with full decision rights to work with the key account manager and come up with the right trade promotion.

The idea is you're connecting the people in charge of scale and intimacy into the micro-battle so they don't need to escalate anything outside their micro-battle team.

So when we refer to the micro-battle team, we talk about the Win-Scale Model. Winning is this idea of how do I take a strategic intention and figure out the first failure point, which gives me the idea of what I need to start prototyping in the marketplace. That's the idea of winning. Scaling is, how do I take the insights from that particular prototype and create a repeatable model that can be deployed throughout the organization.

Now, the winning part will sound familiar. Sounds an awful lot like what we used to call pilots. And we know there are two rules for pilots. First, pilots always work, because you over-resource them, put your best people on it, do whatever it takes to win, and you always get a pilot.

The problem is the second rule of pilots is when you try to scale pilots, they never work. And that's because we never make sure that the lessons of that early prototype are translated into a real, repeatable model. So when we refer to micro-battles, it is this dual act of winning and scaling. It is the difficult way of going from strategic intent to something to prototype, then the difficult journey of going from prototype to a repeatable model, and then thinking about a repeatable model that can be deployed across the whole organization.

The left is very much Founder's Mentality—the idea, let's get stuff done, make the problem smaller. And the right is the benefits of size and scale, because I want to industrialize innovation. And one of the issues that's going on a lot right now is as people are doing agile badly—I'm not talking about people that do well, but when they're doing agile badly—they're focusing a lot on this initial innovation, but not enough time on the scaling or industrialization of that innovation across the board.

So we refer to that as the Win-Scale Model. Now, one thing we've discovered in the Win-Scale Model is that every company is actually made up of three communities, and I just want to take a second on this. The first community are the heroes. Remember, those are the execution community—probably 85% of what you do. Fantastic people operating off known routines, maybe even a playbook, and just learning every day by doing the same thing better and better. That's the execution community. We're now introducing the disruption or agile community that's starting to innovate, doing those prototypes that I referred to.

But the problem is, how do you translate a prototype into something that can be put into the industrialized routines of the large enterprise? And that requires what we refer to as the bridge community or the scaling community—people that are really good at helping those in charge of disruption figure out a workable model that could be translated into playbooks. Remember, I talked to you about that as the conflict, that you want part of the organization focused on routine, part on disruption. But you need someone that takes outstanding disruption and brings it into normal routines.

That's the scaling community, and it's absolutely essential to the way we talk about how micro-battles are done.

That's within a micro-battle. Then, of course, you have the executive team, and the executive team is managing the portfolio of micro-battles.

So first, they are trying to take big strategy and translate it into micro-battles that can get things done. And then within a micro-battle, they're trying to take a strategic initiative and helping the team figure out what needs to get prototyped. They're setting up the teams, etcetera. But really, what we are trying to do with micro-battles is to change the fundamental behaviors of the executive team.

Now, remember how I started. I said the executive team is suffering from the tyranny of functional excellence programs. They're reviewing program after program, and they've lost this voice of the front line, voice of the customer. The idea of micro-battles is if we can begin to bring micro-battles into that agenda and get more and more of executive time focusing on the competitive battles that matter in the marketplace, we gradually rob oxygen of a lot of the other initiatives that just simply are not that important to your core customer base. And so micro-battles is a way to do that.

So we talk about the executive team as the Amplify team. When we talk about the Amplify team, there are a set of "what" actions they need to do, and we're very clear about five actions that they need to take. But we're also much more focused on the behavioral change. And we talk about three different kinds of behaviors.

First, it's just leadership behaviors—how they have to role model, what it means to return to Founder's Mentality, get things done quicker, back really good ideas. Those are leadership behaviors. Learning behaviors are, how do we help the organization learn, how do we reconnect peer-to-peer learning?

So this micro-battle team is facing this problem, can I get them with this micro-battle team? How do I start seeing patterns that are going on? And then there's scaling behaviors, which is, how do I make sure everything I'm doing is trying to amplify the results of these micro-battle teams? And this is a profound behavioral change.

When we talk about micro-battles, the teams that are running micro-battles, they will have a terrific time. They love doing it. The issue is the executive group, and it's going to take a long time to change their behaviors from the behaviors of the professional managerial class slowing things down to actually a group of people that are willing to accelerate and align and do everything with speed and purpose. The behavioral change is very, very important to how we think about micro-battles.

So that's the idea of micro-battles. What do you do next? Well, we actually say, start with three, launch them tomorrow. And be a little bit cynical about what you pick.

Obviously, pick three battles that are strategically very important. Make sure that you engage at least your top six leaders to run the micro-battles. Make sure that they deal with a real area of organizational dysfunctionality so people know you're serious. But for your first three, make sure they're also winnable.

Get stuff that you know you can do so that you build momentum behind the idea of micro-battles. And then we talk about the doublings. After you've run maybe four cycles, four months of these three micro-battles, then launch three more. Then after you've run a set of cycles there, launch six more.

After you've run a bit, launch 12 more. You get to roughly a portfolio of 25. And we believe at that point, most of your executive time is then spent on these incredibly important customer and competitive battles, and less and less of your time is spent on the bureaucratic things that used to drown out your agenda. Then you can begin the path to becoming the scale insurgent and kicking butt in your industry. Thanks.

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