The Circles Model (Part 1)
When people ask me for a simple way to help define their strategy, I usually start with the very simple “A to B” model that I was taught years ago.
The A to B model provides a simple guide for those of you that know where your organisation is today, have a good sense of where it is going, and prompts you to answer the question of how exactly you will get there.
However, if you are less sure how to describe where your Point B is, or what your options are. or even where you truly are today, you may instead need to use more detailed strategy tools and frameworks to help explore those questions.
The common challenge then is that there are a great many other strategy tools and frameworks available today that you could use, but which ones are relevant to your particular needs?
Whilst some models and frameworks are still quite simple, others require more effort to use and can quickly get into a lot of detail. So, the question is often, “where should I start”?
What if you could use just one simple model that can represent some of the useful insights from some of the more detailed strategy tools and frameworks which could give you a quick way to do an initial review in order to get your bearings?
Introducing the circles model
I’ve developed a simple visual model using circles to represent a range of concepts from a number of other popular strategy tools and frameworks in just one diagram, which I have called the circles model.
Each circle represents a key factor which leading strategy theorists have identified as being a fundamental component of most organisation’s strategies.
What I will show in this series of articles is how these key factors can be represented on just one diagram to provide a high-level holistic picture of an organisations strategy over time.
My intent is that the circles model will provide users with a simple but useful way to carry out an initial review of their strategy using just a pencil and paper or whiteboard and pen.
From this initial high-level review, it should become more evident as to where any more detailed strategic analysis should be focused using more specialised tools and frameworks.
The foundations of the circles model
The Circles Model initially combines from two models described by Clayton Christensen in his classic 1997 book on disruptive innovation The Innovators Dilemma.
1. The Value Network
In Chapter 2 of his book, Christensen introduces the concept of the value network which he describes as:
“the context within which a firm identifies and responds to customers’ needs, solves problems, procures input, reacts to competitors, and strives for profit”*.
2. The Resources, Processes and Values Framework (RPV)
In Chapter 8 of The Innovators Dilemma, Christensen introduces an organisational capabilities framework which describes three classes of factors that affect what an organization can and cannot do: its resources, its processes, and its values.
Representing the above two models as related circles results in the following diagram:
Aligning The Circles
The above diagram is intended to convey a sense that the focus of an organisation, and therefore the task of its leaders and managers, is to align its RPV Network with the needs of its customers within the supporting market environment.
In an ideal situation, these circles would be concentric — aligned and centred on the customer need.
In reality, if you represent your organisation and its markets today using this model, you may find that the circles are not perfectly aligned, and may intersect with each other.
In the diagram on the right, the RPV Framework circle and Customer Needs circle intersect, which would represent a situation where the organisation does not meet all of the needs of its customer because it has not fully aligned its RPV framework with them.
The Importance of Alignment
The example above reflects the findings of a PWC survey** of 4,400 executives between 2010–15 which found that “about 2/3rds said that their company’s capabilities did not support the way they create value in the market”, which is clearly an issue.
One of the fundamental concept that the Circles Model seeks to represent is the degree of alignment between the key factors that will determine the success of an organisation over time.
Once you have grasped this key concept of alignment which the circles model seeks to convey, we can then overlay a number of other simple strategy concepts which will add to the richness of the model without making it overly complicated.
Overlaying the PEST Analysis
The Supporting EnvironmentCircle can be given more depth by overlaying it with the classic PEST analysis model which highlights the political, economic, social and technological factors that influence the market and wider environment.
In the diagram shown, the area inside the PEST circles represent the supporting environment factors that are necessary to stimulate and support both the customer needs and the way that the market operates. More circles can be added if you want to use one of the extended PEST models.
Overlaying the circles model on the A to B Model
The Circles Model can be overlaid on the original A to B model to create the following diagram.
The intent of this diagram is to supplement the questions of where the organisation is going and how it will get there by also asking what are the key factors at play and how they may change over time.
Additional thoughts on the original article
Why use Circles?
I just landed upon using circles whilst hacking around with a range of strategy tools on whiteboards. They are simple to draw and similar to Venn Diagrams from which they borrow some familiar conventions and meaning.
Combined Diagram
Next Article — Part 2:
In the next article, I explore the question of how and where customer needs arise from, and therefore the degree of inter dependency between the factors represented by the circles.
References:
* Christensen, Clayton M.. The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (Management of Innovation and Change). Harvard Business Review Press.
**PWC Strategy& Survey: https://www.strategyand.pwc.com/strategythatworks
