In one of my previous articles I wrote about a growth formula from a philosophical perspective, but today I want to share with you a different technique. It is an understated and somewhat hidden technique but is vital to building both corporate and personal growth strategies. That is Compartmentalization.
Compartmentalization is a cognitive mechanism we use – mostly without knowing – to divide complex tasks or structures into smaller pieces so we can understand and often manage it better. It is one of our many psychological defense mechanisms which lies deep in our subconscious to avoid cognitive dissonance or mental discomfort. Not to be confused with other defense mechanisms like isolation or rationalization which we use to justified and explain controversialities. But, thanks to our capability of compartmentalizing, conflicting thoughts can co-exist in our brain without driving us crazy. If one could hold and manage hundreds of contradictory or even sometimes complimentary ideas easily, then we wouldn’t need things like organization charts or different software modules.
So, how does compartmentalization becomes a secret weapon? Especially in this era, where companies are moving in the fourth industrial revolution and adapting artificial intelligence, it is becoming more and more critical to identify the corporate AI vision and strategy in a top-down approach. This idea is unlike the popular belief of AI being just an algorithm and needs to be built bottom-up from engineering. Given the exponentially increasing technology solutions, combined with your organization’s current status it is becoming harder and harder to develop a clear strategy. Having led AI products and teams at Yahoo and eBay and also having spent time with many mid-size businesses in Silicon Valley, I’ve noted that utilizing AI for profitability is a corporate mindset which needs to be cultured into the whole organization. It starts with being able to compartmentalize. I’ll mention couple strategy frameworks and models but they play an instrumental role, and I hope your main takeaway will be the concept of compartmentalization whenever you face a situation where you need a strategy.
Compartmentalization in Corporate Growth Strategies
So, you figured out that you need to grow your organization or maybe your department. But what do you do next? Create more products, hire more people, expand to a new country, make more investment? What is your next step? How can you keep your current business working while having a contradicting exploratory initiative? Please, think about this for a minute and remember the state of your confusion as it is right now. Rationally it is impossible to find a way out without using compartmentalization. But, think of multi-dimensional and hierarchical compartmentalization.
At the top level, we need to start with something straightforward. For example, utilizing McKinsey’s three horizon’s of growth framework (https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/enduring-ideas-the-three-horizons-of-growth) – as the root level – is as simple as it gets. It is a highly valuable framework being used by many corporations to move them from inertia to innovation.
(3 Horizons of Growth – The Alchemy of Growth by Mehrdad Baghai and Steve Coley)
Laying out a simple three-step growth strategy makes everything from this point forward easy to understand and easy to manage each specific stage of development: 1) core business, 2) emerging business and 3) new business. It’s like laying out your current, 3-5 years and 5-10 year strategies.
Let’s take the new business idea and go one more level more in-depth and see how we can utilize compartmentalization again to identify opportunities to turn into profitable businesses. This time we could use the Ansoff Matrix (https://en.wikipedia.org/wiki/Ansoff_Matrix) to look at the opportunity in four compartments: 1) current market – current products/services, 2) current market – new products/services, 3) new market – current products/services and 4) new market – new products/services.
Compared to where we started, aren’t things getting more clearer? At this point, we know exactly where we are going. Let’s go a little deeper.
Assume we want to identify opportunities in the product development area based on the Ansoff Matrix. That is the new product or services in the current market for the existing customers. But, how do you determine what product or service will bring you a profitable business? To answer this question, we can look at other tools which fundamentally compartmentalize the customer, product, service or problems areas more in-depth. For example, the TRIZ tool (https://en.wikipedia.org/wiki/TRIZ), SPELIT Power Matrix (https://en.wikipedia.org/wiki/PEST_analysis) or Simplex method (http://www.free-management-ebooks.com/news/simplex-process/) all are great tools to utilize. My personal favorite is the Kano Model (https://en.wikipedia.org/wiki/Kano_model), which was developed in the 1980s by Professor Noriaki Kano. The Kano model classifies customer preferences such that it becomes easy to identify essential customer needs, delighters and provides a stepping stone to find the sweet quality spot between production cost and customer satisfaction.
As you may have noted our strategic approach is still technology agnostic, and you may ask when do we start talking about how convolutional neural network, collaborative filtering solution or a recommendation engine with temporal aspect will save the business. The answer is the same as the answer to the famous question “When should we optimize?”, which is “Not now.” In my opinion, a company is cognified (aka. AI-driven) when they stop asking such questions and have the internal know-how to control their destiny.
Aligning with the fourth industrial revolution at this level we start looking for opportunities in four compartments: 1) automation opportunities, 2) Optimization opportunities, 3) expansion opportunities, 4) Innovation opportunities. The idea is to use a deductive approach based on the proven premise that Artificial Intelligence adds business value in these four different aspects.
Level 4 is the last level I covered, but from this point forward you can create even more levels. For example, if you decide to invest in expansion opportunities, then you could start with the CAGE Distance Framework (https://en.wikipedia.org/wiki/CAGE_Distance_Framework), which identifies differences between counties for international expansion strategies. Without further ado let’s switch to compartmentalization in personal growth.
Compartmentalization in Personal Growth Strategies
I’ve often faced the same simple question from college students, new graduates or even professionals who are starting a new career, “What should I do?” or “What do you suggest to do?”. The answer is even simpler, but every time I answered: “What do you want?” I’ve got the same 30-second gaze. Technically, the ask is for a strategy, but simply put; a strategy is a level of a plan to achieve an aim, which requires at least one aim/goal and one plan. Without the starting point and a goal, there can’t be a plan and a strategy. So, the answer I give nowadays is more towards finding out the current life and the desired life.
But, even with a well-thought starting point and goal aspects, it is almost impossible to come up with a growth strategy without further compartmentalization. This problem takes us to the third dimension of compartmentalization. Think about the confusing aspects of these two question:
- What do you want?
- Where do you like to live?
Isn’t the second one more clear and more straightforward to answer? For example, the following framework will allow you to separate contradicting as well as complementary aspects of life to create individual or even combined strategies.
The aspects on the graph are arbitrary, and the critical point is here to divide complex concepts into smaller aspects and work on them separately. It works by writing your current state in each aspect and the writing a target goal and a date. For example, let’s assume you have an apartment right now and your goal is to buy a specific house in a couple of years.
Strategy is a comprehensive concept, and there are many tools, frameworks, and models you can utilize. In this article, I only covered a few, and I hope you have critical takeaways for your unique goals. Please feel free to reach out to me if you have any questions.