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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Read the transcript below.

JAMES ALLEN: So this video is about micro-battles, which we have found to be probably the most common solution to how to rediscover your Founder's Mentality. But before going into a detailed discussion on micro-battles, I felt it would be good to give you a quick overview again of Founder's Mentality and the core concepts, and then talk about the six building blocks, which we would refer to as the what you need to do to rediscover Founder's Mentality. And then I'll get into micro-battles, which we would talk about as the how of getting into rediscovering your Founder's Mentality.

So everything we talk about with Founder's Mentality starts with the issue of sustainable profitable growth. And the fact is, it's the hardest act in business. Only 1 in 11 companies grow sustainably and profitably over time. And yet, the fascinating thing is, when you talk to the 10 out of 11 who failed, and say why did you fail to grow sustainably and profitably, and in 85% of cases they answer, it was for internal reasons. In only 15% of cases do they cite the external marketplace. And this has led us to talk about the growth paradox.

And the growth paradox is growth creates complexity, and complexity kills growth. So just when you are at your most successful externally, you're likely to build up all this complexity that will kill you internally. And we talk about, you've got to look at a company on two dimensions. One, how well over its life cycle did it maintain its sense of Founder's Mentality? And how well did it benefit from size?

And by definition, every great company starts as an insurgent at war against their industry on behalf of underserved customers. And the wildest dream of that founder team would be to become the incumbent in their industry. But that comes at a loss. And the loss is Founder's Mentality.

And we define Founder's Mentality on three dimensions. First, as I mentioned, this sense of insurgency. It gives everybody a bold mission, clarity on your spiky capabilities. We know we have to be world class at one, two or three things. And we can be average at the rest because our customers only care about those two or three things.

And we have limitless horizons. We're there to transform industries, so we're not going to be governed by their benchmarks or their growth rates. And then, of course, there's the whole idea of frontline obsession, that everything is about customer advocacy and empowering our frontline to get customers to come back and occasionally bring a friend. And we discover that all of our organic growth comes from the relentless experimentation that occurs when we're constantly cocreating the next set of solutions with our best customers.

And the final dimension is owner mindset, this idea that we all own the firm's assets and will redeploy them to the next area of growth. One founder said our SG&A line is our capability currency, that we're always reinvesting in ourselves to grow, this bias to action. We will make things happen. We will keep the idea of getting stuff done as being the central purpose of the enterprise. And we hate bureaucracy at all costs.

That's a lot to lose. But the reason we don't notice we're losing it is, of course, we're gaining by our size. We're gaining scale and scope advantages, we're building learning systems, we're gaining market power and influence. And all of that means that, for a while, this journey is a positive one.

At some point, then, the fact of the matter is, you become the incumbent in your industry. You've lost all that sense of Founder's Mentality. And most large incumbents, when looking at the world of turbulence around them, and the new insurgents emerging in their industry, will say our size no longer is even an asset. It's actually becoming a liability.

And we refer to this as the default path. Guys, this is going to happen to you unless your No. 1 issue is to rediscover your sense of Founder's Mentality. And so we gave some actions. One set of actions is just have awareness of the forces working against you. This isn't personal. This isn't political. There are eight objective forces working against you.

We refer to the westward winds that take small companies and blow them off track. We refer to the southward winds, which finally kill you off and turn incumbents into struggling bureaucracies. So have awareness of these forces, and talk about them honestly.

But the second part of the action is to find the ambition of businesses to become the scale insurgent in your industry. Wherever your starting point is, say we have to both rediscover or maintain our sense of Founder's Mentality and benefit from size, and benefit from our scale as we grow. So it's an and argument.

We spent the last three years talking about what are the solutions to becoming a scale insurgent. No matter what path you're on, how do we become a scale insurgent? And we've been working with companies and founders all over the world, and we've come up with six building blocks. And they're building blocks; they're part of a Chinese menu. It all depends on where you think the issue is.

So for example, if you think the issue is our insurgent mission, then we talk about two solutions. One is, you've got to rediscover with your people what the original insurgent mission of the company was. We refer to insurgency on a hand.

Everybody in your company should be able to say, with their thumb, what is the insurgent mission is defined as a customer mission, not a shareholder value goal or a competitive battle. But what is the consumer mission? And with their fingers, and they're biologically constrained, they need to talk about the spiky capabilities that delivered it.

And the idea is to rediscover common instincts. If we understand our insurgent mission, we can all row the same way with the same instincts. But the second part of insurgency is around engine 1, engine 2. How do we create a company that thrives in turbulence, that recognizes, on one hand, we must continue to reinforce our core engine 1, our core engine of growth, and drive it to full potential?

But in order to also be the disrupters, we need to be building engine 2 even if it cannibalizes engine 1. Because if we're not doing it, someone else will. And we have to create a company that is comfortable with balancing resources across engine 1 and engine 2.

You may say the issue isn't anything about insurgency. It's all about that frontline obsession thing. And there, we talk about two things. The first is, how do I reorient my company away from this hierarchical pyramid structure of the professional managerial class and get the customer back at the center? And we say the way you need to do that is reorient the operating model around the franchise players that matter.

And the franchise players is, who is it that delivers the benefit of intimacy and benefits of scale to your customers every day? Who delivers that insurgent mission? And how do you connect them together? And then, everybody else in the professional managerial class recognizes their job is to support them, rather than to order them around.

But the other part of frontline obsession is how do we get back to peer-to-peer learning? How do we make sure that, once we've connected those people, they're constantly learning from each other, so as we accumulate experience as we grow, we are learning more than anybody else around?

You may say that's not the issue. The issue is this owner mindset stuff. And there, we talk about two things. One is, how do we get back to the notion that our cost base is our fuel for growth? And the heroes in the company are the ones that learn to do more with less, so they're freeing up that fuel for the next growth platform. How do we get the cost guys to want to continually to be measured by less cost, not by more cost? And how do we make the heroes the folks that free up the costs for future growth?

But the other side is how do we create a company of insurgents? We're never going to get there if this is all top down, done through the hierarchy. We have to get it bottom up. We have to create a culture where everybody feels like they're the insurgent, that they're the ones that can act like mini-founders. And we can scale through all the mini-founding experiences of the company.

So that's kind of the what; the six building blocks are the what. The how is micro-battles. And that's where I want to spend the majority of my time now. So as we talk about micro-battles, let's just start with, what's the problem that we're trying to solve here? And the problem we're trying to solve is that most management teams are exhausted, and most CEOs are so frustrated, that the levers that they normally use for broad corporate change are just getting diminishing returns.

They all complain about the fact that when they go into executive committee meetings, 80% of the time is on functional report-outs, and everybody's going around the room saying how busy they are.

And every initiative that they try to pursue in the company, they find all they're doing is getting all the bureaucrats around them to declare war on one another. And everything seems to be at headquarters, and everything seems to be these exhausting discussions that take up all our time, but do nothing to actually fix customer problems or beat competitors in the field.

And the whole idea of micro-battles is to bring back, at least in balance, vertical actions of change. How do we actually just get stuff done? So now, let me just try to describe a micro-battle. So if I'm a global beer company, Fred's Grog, I probably have a strategy called Win in China. Now, of course, we know that's not a strategy; that's a chapter heading of a strategy. But I'll have something that says Win in China. But that's not a micro-battle. To win in China, Fred's Grog needs to beat all the other imported premium beers trying to compete in China.

Well, in beer, I got to beat them below the line in on-trade promotions, not above the line. And so I got to beat them in the best bars in the most affluent places in China. And so a micro-battle is saying, how do I take my most important strategic initiatives and define the first failure point, define the thing that I need to start failing at, so that I can become incredibly good, get through failure very cheaply, learn from all my failure, and then get something right. So I have to start testing trade promotions in the on-trade to figure out how I win the Chinese consumer versus all these other competitors.

The other part about micro-battles is we're going to fight them like the microcosm of the company we want to become. Yes, we want to become a scale insurgent. But it would be the kiss of death to launch a horizontal program entitled Be a Scale Insurgent. No. We've got to just act like a scale insurgent with each micro-battle that we fight. So the two concepts of what a micro-battle is, is first, it's got to address failure point. Where do I need to focus on first? And second, within the micro-battle, I need to act like the company I want to become.

So we've studied a lot, what is this skill set that founders really bring to the table? And what is the skill set that scale insurgents bring? And how do we bring that together in this idea of micro-battles? So on any individual micro-battle, we talk about the win-scale model. And what we said is, part of what you need to do in a micro-battle is take a strategic initiative and figure out what I need to prototype. What is the thing I need to be testing in the market and failing like crazy? That's the winning part, and it's what founders do incredibly well.

But that's not sufficient. I also need to think about how to scale that across the organization. So my next question is, what is the repeatable model I'm trying to build here? Why am I doing this? In Fred's Grog example, I could be trying to figure out a new way to win in China, or I could be figuring out a new way to win in emerging markets.

But I'd better be clear what I'm doing. Let's just take Fred's Grog's example. Maybe what I'm trying to do is create a repeatable model for how I win in emerging markets. So if I'm doing that, then it's not enough to win in China; I need to test for transferability to Nigeria and India.

And that means, on my team, I need to include someone from Nigeria and someone from India that is constantly making sure this is a true, repeatable model. But I also, then, need to address, what are the behavioral changes that we're going to have to put in place across the organization for us to do this? If this were part of the day job and easy, I wouldn't need a micro-battle. So the whole idea of fighting a micro-battle is keeping in balance winning and then scaling.

Sometimes you have teams that are fantastic about prototyping in the marketplace. Other teams are fantastic about worry about behavioral change, but doing nothing about prototyping. And the whole idea of micro-battles is, the team needs to have a revised hypothesis every week across all four of these quadrants at once. It is not sequential. Winning is about rediscovering the art of founders, and scaling is about becoming a scale insurgent. And this is what we're talking about.

We said in the what that we have to redesign the operating model around the franchise players. And part of that is, the franchise players need to lead these micro-battles. We need someone, for example, the key account manager in one of our most aspirational bars in China, to lead the intimacy side.

How do I deliver intimacy to the Chinese consumer? But I also need someone, the global brand manager for Fred's Grog, to deputize someone to also be on this battle, so whatever we're doing in China is consistent with what do we want to do with that global brand everywhere?

But the difference is, we're connecting those people together in the battle itself, not somewhere in the global bureaucracy having scale and intimacy meet at the executive committee level. So this is the first part of micro-battles. The second part is how do you manage the portfolio of micro-battles? How does the executive committee work on a series of micro-battles? And we refer to that as the lead-learn cycle.

So the first thing is, when the executive committee meets to review micro-battles, this is a profound behavioral change. That team is used to second-guessing everything. That team is used to making problems bigger and debating ideological stuff. And the first thing we say is, that team needs to focus on a leadership moment. When the micro-battle team comes in for review, which is on a monthly basis, the first act is the job of leading. For goodness' sake, listen to what that team is saying.

They just tested a prototype in the marketplace. Listen to their results, and help that team, almost like a venture capitalist, figure out how to accelerate their initiative or pivot onto something new. And that is very hard for leadership teams. They're so used to battling in a bureaucratic way, for making every problem bigger, for debating ideological. And you're trying to say no, guys, let's get back to what it would feel like if we were all founders. Let's just help our team accelerate and pivot the work that they're doing in the marketplace.

But of course, then the second act that we want them to do is to learn, is to reintroduce learning systems back to companies. What patterns are we seeing across micro-battles? What are we learning about rollout models? What are we learning about our own capacity to change?

How can we help more than one team with lessons that can apply everywhere? And then, how does that help us adjust what we're doing strategically or organizationally? And again, the pattern is the same. The left-hand side is rediscovering what founders do, but the right-hand side is saying, how do we do it like a scale insurgent?

So the whole idea of micro-battles is to introduce a system that is about rediscovering learning and, frankly, rediscovering the art of getting stuff done. How do we get back to execution and stop all the bureaucratic battles? We will fight individual battles with the win-scale model. And we will fight with a portfolio of battles across lead-learn.

So that's a lot to absorb, right? You are trying to run micro-battles in the win-scale way. You're trying to run your portfolio battles in the lead-learn way. What you're doing is, you're trying to rediscover a system of learning in everything you do. And it's a journey, right? The idea is, at least we will act like a scale insurgent in each battle we fight. And over the accumulated nature of the number of micro-battles we fight, we will transform ourselves as an enterprise.

But how do you get started? In everything we've seen, the way to get started is just launch three micro-battles. And be cynical about how you select them. Pick big areas of organizational dysfunctionality that everybody knows you're not dealing with, and if you actually addressed, they'd be pretty happy to be part of your team. Deal with big strategic priorities that are critical to your full potential plan. But also, find winnable battles where you can get stars on board that will actually make sure you win them.

Why start with battles you lose, at least in the early days? So just launch three. But your end vision is, after you do three, run them through four cycles, four different sessions of lead-learn. Then, launch another six, then four cycles, and then double again. And eventually, after 100, 120 days, you'll get up to about 12, then you'll get up to 25 micro-battles.

The end vision is just, imagine you walk into an executive committee meeting, and 80% of that agenda, rather than be on functional report-outs where everybody is telling you around you how busy they are, 80% of the time that you're spending in an executive committee meeting is talking about the real customer and competitor battles that are going on in your marketplace.

And you're not talking to bureaucrats; you're talking to the teams that lead them. The franchise players that are delivering scale and intimacy on each battle are in the room talking about what's actually happening in the marketplace. Imagine how much more liberating that will be.

It's a journey. But it's fun. And the great thing about it is your people will love to be on this journey with you. They will begin to redefine their careers, not as what silos did they enter and march up through the professional managerial class, how many spans they have, how many layers they are above and away from the customer.

They'll define themselves by the micro-battles they fought and won. And they will see, in fighting those micro-battles, that they're rediscovering the insurgent mission of your company, that they're rediscovering the idea of frontline empowerment, that they are at the center of what needs to happen, and rediscovering this sense of owner mindset, that they're on the most important platforms for growth as they go forward. They will love it that you initiated the journey, and they will love to be on the journey. So just get started.

More on micro-battles at FoundersMentality.com >