Understanding Activity Systems as a Service Designer

April 28, 2020

Preface

I wrote the following blog before we were hit by the Coronavirus outbreak in the United States—before we had even heard much at all about its appearance overseas. It was in the queue to be posted right about the time that we as a company decided not to come into the office on Monday, or for the next “few weeks.” At the last minute, before it was to be published, I asked to have it held back. 

I was beginning to see many of my friends lose their jobs, beginning to see so many companies unable to keep doing business as usual, unable to keep up the very activities that have composed their competitive strategy up to now. From local restaurants that began selling produce from their suppliers as a CSA offering, to the distillery that began to manufacture hand sanitizer, to large sports gear, fashion, and consumer goods companies that began manufacturing medical equipment and PPE, businesses have found that they need to operate outside their established activity model in order to survive, pay their employees, or make a difference in this new, bleak world. I knew that this needed to be recognized and celebrated. These temporary suspensions of competitive strategy in favor of contributing to a greater good are heroic gestures in today’s context, where they may have been foolish forays months before. In a time of existential crisis and reaction, was this the appropriate time to talk about Porter’s theory of strategic fit? A time when I would personally prefer to see businesses navigating with a moral rather than strategic compass? 

After a month of deliberation, I decided to press play on this blog with the addition of this preface because I want to use it as a foundation to discuss how we’re learning to adapt these concepts in a world where there’s a new urgency to be ethical rather than profitable, a new constraint of social distancing, and a general atmosphere of fear and anxiety for some, and a drive to be generous and charitable for others. I plan to have this discussion with my colleagues at Harmonic and write a follow-up post about that discussion.

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How much do we need to understand about business strategy to be effective as service designers? I think everyone at Harmonic would answer that differently.

Entering this field with a background in film production and industrial design, I came to service design with a strong toolkit but a somewhat weaker tacit knowledge of the materials I would be working with. I have had to learn a lot about how organizations work on the fly. On one client project, I started an acronym glossary that ended up having over 35 entries – and most of these were particular to that company, not even knowledge that I would be able to use in other client work! I have vacillated between days where I tell myself “I’m here as the design expert, not the business expert; I don’t need to know everything about (insert acronym here),” and days I wonder if I should pitch to my boss that I need to go to night school to get an MBA in order to really perform my role.

I want to root for the “I’m a design expert, not a business expert” position in most cases, but I have a nagging sense that the more I learn about business the stronger I will be as a service designer. That’s what prompted me to pick up On Strategy –one of the books in the HBR 10 Must Reads series. I’m writing this blog post after reading the first essay in the book: “What is Strategy?” by Michael Porter. Though this classic 1996 article is likely required reading for MBA-types, it may be less known among designers. Every service designer who does not come from a business background should read this article and adopt a key tool from this piece into their process: activity system mapping.

Dear service designer, do you ever hear your clients lament about not being able to take the time to step back and look at the big picture? Of course you do, that’s why you’re there! What I find so interesting is that this was the same problem Porter pointed out in 1996 when he wrote that operational effectiveness, operational efficiency, and management tools have taken the place of strategy. Of course, operational efficiency has its place – it leads to lower operational costs which can lead to price competitiveness in the market – and who doesn’t want that? The problem arises if that’s the singular priority, because it’s not a strategy. If you and your competitors are racing to do the same thing fastest, cheapest, and best – you’re all going to get there. And then it’s not so much of a race as an arm-in-arm skip down the path of late-stage capitalism. Porter describes this trajectory as the race to the “Productivity frontier (state of best practice)”

Operational effectiveness diagram
Figure 1: Productivity frontier diagram from: Porter, Michael. “What Is Strategy.” Harvard Business Review, 1996, pp. 61–78.

Ideally, since 1996, your clients have taken some time to think beyond skipping to the productivity frontier, and focused on occupying a unique position in the market. However, even if an organization has found their niche, there are many ways they risk losing their way, which Porter gets to later – but first – What do we service designers need to understand about how our clients are positioned in the market?

First, there are several ways in which a company can position themselves to capture different shares of a market. Here are some examples from the article that could serve as a starting place for conversations with your clients: 

Dimension 1: who is served

3 strategic positions:

  • Serving few needs of many people
  • Serving broad needs of few people
  • Serving broad needs of many people in a narrow market

Dimension 2: generic strategies – the simplest, broadest level of positioning

  • Cost leadership – lowest cost wins
  • Differentiation – unique premium product
  • Focus – cost leadership or differentiation strategy, but ‘focused’ on a particular customer segment

Dimension 3: in addition to overlapping with other dimensions, these may overlap each other in a strategic position:

  • Variety based positioning – excels at one specific product or service
  • Needs based positioning – based on needs of a customer segment, or customer segment + occasion (e.g. wealthy adventurer on business travel vs wealthy adventurer on vacation)
  • Access based positioning – the key differentiator is about who has access to this product or service, and whether they have access to similar products or services.

Porter makes the point that businesses do best when they have a strongly defined strategic position, and everything they do, all of their ‘activities’ as a business arise from and reinforce that strategic position. 

Activity Systems

Though the cheeseburger on the right may look like it would take more skill to produce, if that restaurant wanted to suddenly compete with the restaurant that produced the cheeseburgers on the left, imagine the kinds of changes they would have to make to their operations, technology, staff, front of house, kitchen design, marketing… It may seem obvious that this wouldn’t be a wise business decision for them. We need to make sure that we understand exactly what kind of service our clients offer and how it’s positioned in the market, such that we don’t make suggestions that would have unrealistic implications for their activity ecosystem (unless a complete overhaul is what they’re looking for). 

Activity systems Map
Activity System

Porter maps these strategies and how business activities reinforce them to show the importance of knowledge of these strategies when planning new ways of operating. As service designers, we are a little obsessed with mapping – so why not add one more tool to the kit? 

How and why we should adopt activity system mapping in a client project: 

There’s a strong case for developing activity system maps with our clients during initial discovery work. They may even already have one, but if not, building one together could help us quickly get a thorough understanding of the fabric of their business, and the goals we are aiming to address with our project. We could then bring this map through as part of the narrative we tell before going into opportunity identification and ideation. This kind of alignment could be extremely powerful to guard against some common strategic pitfalls that companies face when trying to innovate.

A danger organizations face as they grow is that they can become distracted by what competitors are doing, new tech trends, or a desire to serve new and different customer segments. These temptations may encourage them to add activities that dilute their strategic position. In fact, the danger is not just that their strategy gets watered down, but that it springs a leak and sinks the whole ship!

Deviations from an established and successful strategy can be catastrophic because of the interconnected nature of activity systems. Porter gives the example of Continental Lite. Long story short: Continental airlines, a full-service airline, saw what Southwest was doing offering cheaper flights on short commuter routes, and that their business model was very successful. Thus, Continental decided to try to straddle two strategies to serve two different segments by keeping their full-service brand, and making a fighter brand: Continental Lite, that would poach customers from Southwest. It didn’t work. Because they did not create a model that copied every activity that Southwest had created, Continental did not have the infrastructure in place to make a low-cost model profitable, and the whole project crashed and burned.

Porter has many examples of activity system maps in the article, and other examples of how organizations have failed to play to their own strategy in their attempts at innovation and been unsuccessful. A more recent example is the failure of Walmart’s Jetblack service, which promised to cater to a new market segment in a new way using tech buzz words such as “conversational commerce,” but was not set up for profitability in terms of backstage infrastructure. This service, which is not a terrible idea in itself, did not “fit” into Walmart’s strategic activity system. 

Because of the clear and present danger inherent in designing new business activities that waywardly follow tech trends, competitor moves, or attractive new customer segments, but don’t reinforce an organization’s strengths in its strategic positioning, introducing activity system maps before coming up with new concepts to improve a service offering could help focus solutions on activities that will reinforce, rather than broaden an organization’s strategic position.

Later, after new concepts have been developed and new capabilities catalogued, we often help our clients plan how to evolve towards this north star vision. This is another point in a project where the activity system map can come in handy: as we plan this evolution we can visualize how each change will affect related parts of the system. If Continental Lite had done this, they may have seen that many parts of their infrastructure would need to go through a more intensive re-tooling in order to actualize their desired new position.

Source: 

Porter, Michael. “What Is Strategy.” Harvard Business Review, 1996, pp. 61–78.

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