Framework Validation Model

A method to identify area requiring improvement

How did this model evolve?

Till the late 1990s, companies were able to works across departments using buffers. Buffers helped
isolate one department’s inefficiencies from affecting the other. Thus any problem happening in one
department was easier to isolate, and it usually did not affect the performance of other departments.
Buffers were created between Production / Operations and Sales and Marketing, Production with
Finance, Human Resources with Sales & Marketing and so on. Such a system (of buffers) worked fine till
the time the economies were growing and the consumers were in apposition to absorb the additional
costs as their incomes grew at a pace faster.

The Japanese system of Just in Time and other such methodologies helped in bringing the costs down,
however it also helped in breaking down the silos that the buffer system created. It exposed the
companies to the reality that every aspect of a company was interlinked with each other; an
understanding that all were aware, but did not experience. Now the actions of one department had an
immediate impact on the other. So if finance was not able to raise money, production was slowed for a
period, which affected sales, which affected the brand salience, which affected sales even when things
were stabilized.

This meant that the small changes took time to show up as a problem. It are these changes that were
difficult to identify in an interlinked environment. In most of the situations, in my interaction over the
last 3 decades, the one thing that shows up is that the changes in the parameters of operation that are
tiny themselves, creep into the inefficiency of another area in a small way, but magnify as a problem at a
later stage. Usually, all such ultimately reflect of the sales figures.

While working with a company when I was called to help improve the sales, the core of the problem was
the company was unable to get repeat orders. This was happening for some time now. The detail
analysis indicated that as the production needed to reduce the costs, they reduced the lot size (they
usually manufactured more than the order size). This meant the company was unable to fulfill the full
order in several instances, due to quality rejections, and that made them un-reliable suppliers. It took
the company additional three years to return to the reliability tag.

Overall then in today’s scenario, in almost all cases I have worked on, it are these assumptions made
about the business, and anywhere in the company, that need to be identified, that is affecting the
performance. It is no longer feasible to fix the problem where it ultimately shows up, as that place is the
last post for the chain reaction.

It no longer helps in asking a consultant to suggest a new organization structure just because the sales
are slowing down. Unless the root cause is identified, any subsequent changes only magnify the
problem outcome as the organization now has to cope with the changes plus live with the core problem.

The model I developed is based on the experience of working with several such cases where my
intervention was requested for a problem that seemed difficult to solve.
Working on Impressions
One factor that stands out in almost every company is the need to have an instant answer or a solution
within the organization. This then invariably leads to identifying the underlying cause based on
impressions or inadequate data. Dr. Daniel Kahnman, Nobel Laureate in Economics, who started the
discipline called Prospect Theory (with Amos Tversky) states that most decisions in companies are based
on intuitive statistics, and more often the decisions are incorrect. In the theory, they go on to show that
an error in decisions (or losses) bite 2.25 times the equivalent gain.

There are many reasons for intuitive statistics and instant decision making. Among others it is the need
to come across as decisive, a disease in the corporate world of leadership. The other problem of
corporate world is the need to show that I am right, as Dr. Eric Burns calls “I’m OK You’re not OK”.

It is not important to go into the reasons, but to recognize that it is prevalent in all companies. While
working with companies I found that the intuitive statistics plays out in every area for the same
problem. The key to the “Framework Validation Model” is to identify all these assumptions (of the
problem) and then use data to validate which ones are valid and which ones are not. In short, move
away from intuitive decisions.

Importance of the “Framework Validation Model”

The Model is critically important in today’s corporate scenario. First the time to rectify has shortened
meaning that the time to experiment with alternatives has reduced. The need to accurately identify the
causal relationship to the problem the first time is critically important. The Model assists the
practitioner / Manager to accurately identify the key parameters of the business that would require
addressing to solve the problem on hand.

Think of the Model to be a collage of photographs all giving a perspective of the problem on hand.
Every photograph is a true representation, but not a complete one. Intuitive Statistics is when a
manager takes a decision based on a few but not all. The Model has the ability to put forward all the
angles so that the right decision can be taken.

Description of the “Framework Validation Model” (FVM for short)

The First Step
In the FVM, the key is to be able to identify all the People Market
assumptions that are being played out for a specific
problem. This is done by getting the perspective of
Assumption
different stakeholders of the problem. Every person who Assumption Classification
Manufact
directly contributes to the problem is asked on their views Listing Finance uring /
on how the problem occurred and how it can be solved. Delivery
This process will give the total perspective of the problem.
All these perspectives are important in understanding the core issues that are
impacting the performance.
Challenging Esoteric
The Next Step
As the next step, the perspectives are put into four main boxes. Perspectives related to People, Finance,
Manufacturing/Operations and Marketing and Sales. These four boxes constitute the universe of
activities of every company. The grouping into the categories starts building up and already the picture
starts emerging on where the solution may lie.

Two outlier conditions

In many a case, a perspective that is proffered is outside the boundary of the Company. These can be
from external competition or from perceived threats. In recent times, I am facing a fair amount of these
external perspectives. In the retail business, perspective of the online stores affecting the business is
often cited as a perspective. Such situations is to be classified into the category of challenging (A
category that can be addressed as a solution). The other reason is a generic perception of threat that
can only be attributed to general environmental conditions, and require serious statistics to determine
the truth. It is not feasible for most companies. Only those who have a strong economics department
can attempt to decipher the possibilities. Examples I have seen are
perspective that the threat of war is preventing growth. Such kind
A well-established R&D Company has
of perspective is categorized into esoteric classification.
developed a unique product for the consumer
market
The Emerging Pattern The Company was looking to develop a
complete business model for the new product
The perspectives when classified starts giving a picture of how the
problem is seen within the company and it also starts giving the
• The product is innovative for the market
picture of where the solution may lie. The Company described (Market)
alongside had developed a product and needed a business plan that • The Business Model is to be worked
around product attributes (Market)
will help them sell it in the market. Most of the perspectives and • The Business Model would be simple,
assumptions about the product hinged around the perspective that working around the reliability of the
product (Delivery)
it could be sold as a product. So far they had not achieved much
• The product would be interesting only to
success in that, and therefore sought my intervention. So the key the new customers (Market)
question that emerged was “does the market see it as a product or
as a service?”

Validating the Perspectives

At this stage it is tempting to arrive at a conclusion and work on the
• The Offering was really a solution. However the Model advises to be sure of the cause of the
service offering and not a problem, it is better to validate the findings with data. Choosing the
product offering
• The Customer was the statistic to measure is the key ingredient at this stage.
end-customer and their
needs rather that theThus the next step of the model is to use data both external as well as
implementer of the
product
internal to establish that the perspective on which the company is
working is true or not. In our case of the company, this was done and
we found that indeed the end customer saw it as a service. This meant that the company needed to
change the eco-system to meet the customer expectations. It also meant that the orientation of the
environment was to move from a R&D thinking into a Service Organization.
Bringing the Solution
Once the cause was known, the solution becomes very easy to develop. In our
case, the Company realised what was causing the sales to be inadequate, that
they were approaching the market on a model that was not desired. It was to be
decided whether the company had the environment and the finances to enter
the service market. In this case, they decided against entering directly, instead
provide the product to the providers, who would ultimately deliver the service to
the customer. The company needed only to set up a small service center in each
location they wanted to sell the product. The learning for the company was to
remain within their core cometency at this time.

Assumptons that move Companies Forward

As the “Framework Validation Model” is used to identify and develop the solution to more and more
companies, I recognize how the model is able to bring about a fundamental change in the thinking
within companies. Many are unable to cope with the required changes, but for most, the solution that
evolves from using the model, has brought about the growth and improvent that eluded them so far.

The model also highlights that on analysis, many of the companies have come to realize that, with
changing times, many of the assumptions they held to be so dear are the very reasons that is affecting
the performance. It also requires sheer will to make the changes and many of the required changes go
to the very top of the organization’s thinking.

The Model also helps highlight what need to be kept and what need to be allowed to go.

The Model was found to have other uses as well. A distilled version of the model, where the detailed
analysis was reduced, is used as a tool to provide advisory to CEO’s, many of whom found it to be very
beneficial. They were able to discuss freely on problem areas that could not be discuused with
emloyees.

To conclude, this new approach is found to be very useful in addressing problems that transcend
functional boundaries as silos within the company has started to breakdown due to changing
environments and competitive pressures from worldwide influences.

You can call me to dialogue on a specific instance where you think I may be of help to you.