MH: So you make people draw the network and where they fit into it?

DF: Yes. And it is a good idea not to place your company bang in the middle of the board, but somewhere up at the right-hand corner.  Then you sketch in the entire network and you look at all the processes that every node carries out to create solutions.  Include your competitors and your suppliers as well.  Look also at how the other nodes see you – where you fit into their view of the world.

It is a humbling process – you realise just how little you can actually do on your own, and how much you depend upon others.  You also see the range and diversity of competition, from companies that make most of what they sell in-house and provide all the associated service, to those who do hardly anything themselves.  Most of us grew up in a world of similar competitors all working in the same way.  It’s no longer so. 

Then we sing, "Twinkle, twinkle, little star."

MH: What! They do or you do?

DF: Well, I do, and maybe they join in.  "Up above the sky so high, how I wonder what you are." Most companies are far less important to others than they think they are.  Just tiny, tiny stars of which the end-customers are pretty unaware.

MH: So once you have sketched out a network like that, what can you see?

DF: Well, you see how little you can do on your own to solve customers’ problems.  You also start to make sense of the importance of other relationships to your own offering and of how important you are relative to other suppliers or customers.  If you look at the process through their eyes and map out their other relationships and where you fit in, you will discover how little room for manoeuvre you really have.

The exercise also serves to separate the task of strategy from the task of implementation and organisation.  We tend to wrap these together, so that we get a strategy that is pushed by the current state of the organisation.  Look at the way the banks spent decades trying to think of ways of using their existing branch networks!

MH: And all this leads to?

DF: A much clearer idea of how your company works with other companies to develop and deliver solutions to end-customers.  It also gives a much better idea of where you can make changes and where, given the nature of relationships, you perhaps can’t.  Most suppliers attempt to exercise far more power than they actually have.

But the secret is really to understand what customers are looking for and how what you offer fits in with that solution.

It also highlights what is often a huge discrepancy between the cost to the customer of the solution and the supplier’s price tag, rather than focusing on the distribution costs of the manufacturer. We worked with a software company with ambitious growth targets and it became plain that, to meet them, they would have to either strip out a lot of costs and become an IKEA in their approach to customers, or increase their costs and provide a complete solution to the customer.