Continuously Integrated Strategysix days beforeHere’s a possibly useful analogy when talking about strategy work with engineering…Customer-Vendor Loop

I’ve been sketching a bunch of compounding loops this week, and wondering if I am seeing a pattern. I am calling this figment of my imagination the Customer-Vendor Loop. I am not great at clever names. I briefly named it Maker-Taker loop, but after sleeping on it, decided to go with something more prosaic.

Correlated compounding loops2021A thing that became a bit more visible for me is this…Causal chains2021My experience is that most folks around me (myself included) enjoy employing…Before the pattern jumped out at me, I was playing with a convention for drawing a compounding loop. This convention insisted that when we document a loop, we draw it as a causal chain that contains the alternating sequence of nouns and verbs. I drew nouns as boxes and verbs as arrows. It’s that far from how we describe causal chains in English. “A confectioner makes ice cream, which attracts customers” follows the convention above quite nicely. Some of these nouns are people and others are things that people produce. Following this convention, we can now string more causal chains like “customers pay money, which supports the confectioner”.

Ka-blam! The money that the confectioner collects closes the feedback loop. However, whether or not this loop is compounding is not yet unknown. What would make this loop compound? Well, if the ice cream turns out exceptionally delicious, it attracts more customers, and perhaps the customers would be willing to pay more money, allowing the confectioner to make more ice cream. Every iteration of the loop begins to compound value and the cycle becomes virtuous.

Loops like this are always interesting, because each of their components tends to interact with another. If the ice cream is not that great, there will be fewer customers, attracting fewer customers, bringing less money to the confectioner, thus turning the cycle vicious. The causality remains the same, but the loop is no longer compounding. There’s still feedback, but it doesn’t accumulate value.

As I mentioned earlier, drawing a few of these revealed a general pattern. There are usually two parties: Customers and Vendors, who each produce two artifacts, each potentially interesting to the other party. In the case of our ice cream parlor, the two parties are 1) the confectioner and 2) the customers. The two artifacts are 1) ice cream and 2) the payment of money. Each artifact is produced by one party and is attractive to another party.

To turn it into a template, visualize a loop that consists of four boxes: Vendors, Products, Customers, Interactions. There are four arrows that connect them: Vendors make Products, Products attract Customers, Customers engage in Interactions, Interactions attract Vendors. This template basically asks four questions:

1. Who are the Vendors?
2. What are the Products they make?
3. Who are the Customers?
4. What are the Interactions that they engage in?

Edgewise Thinking2023I stumbled into this framing when talking about product/platform thinking with my…In different environments, the boxes and arrows will have different names. In a marketplace, it might be Sellers, Listings, and Buyers. When applied to services, it could be Provides, Services, and Consumers. For the software engineering team, I will use Developers, Products, Users, and Interactions, though the pattern remains the same.

Live as our customer2023This principle is something that feels very intuitive at first blush, but…For a typical engineering product team setup, filling out this template should be fairly straightforward. Our team is the Developers. Our shipping product is the Product we make. Our product’s users are obviously Users, and the Interaction is the outcome of our users’ engagement with the product, which will depend on the nature of the product.

How to think and what to think2023We act on what we think, so “what to think” is close…The customer-vendor loop contains a few useful insights. First, it asks us to separate nouns and verbs, because action is something that can be influenced, while the noun is the outcome of the action. In the language of System Dynamics, verbs are flows and nouns are stocks.

The OODA Loop2021One of the lenses for which I tend to reach frequently is…To understand the state of the loop, we look at stocks (nouns). To find ways to influence the loop, we look at flows (verbs). For example, DAU will tell us about the state of the Users stock. To improve the quality of the product we ship, we must change the way we build it. If you are familiar with the OKR system, you can view Os (objectives) as our tactics to influence flows (verbs) and KRs (key results) as our means to measure stocks (nouns).

Second, Developers have direct agency only over the verbs adjacent to them: “attract” and “build”. There are two other verbs that can only be influenced indirectly. When a team commits to building great software, they assert that they will do their best to accelerate the flows they have agency over. This may or may not be enough to turn the customer-vendor loop into a compounding one.

A user-situated trustworthiness model2022At least within this framework, it is now easy to see that…Third, the two “attract” arrows are significant. The one that points at Users makes intuitive sense. After all, the whole notion of attracting users is fairly familiar to us. We promote our software, make it seem cool in commercials, we build reputation, and/or make onboarding as easy as possible – these are all familiar methods by which we attract users.

Makers and Magicians2023But where do makers fit in? A good way to think of…The arrow that points at the Developers needs a bit more discussion. How do Interactions attract Developers? In the simplest scenario, an interaction is a purchase of some sort, which makes the attraction obvious: revenue from purchases supports developers and funds further development.

However, there are many teams where the presence of this arrow is not as clear. What is the nature of the attraction for peeps who contribute to open source projects in their free time? If a team ships a free library, how does it close the loop? What is the source of energy that keeps them going? Answering these questions seems important, since if there is nothing that keeps developers coming back for the next iteration of the loop, there’s no feedback loop. Yet somehow, they continue to exist. What’s happening?

Making sense of SWOT with customer-vendor loopsthree days after, links hereWhen brainstorming entries for a SWOT analysis, it might be useful to…Asymptote analysis using customer-vendor looplinks here, 2022Another potentially useful source of insights is using the customer-vendor loop for…Stages of the customer-vendor looplinks here, 2022Let’s start with a stage I call aspirational. A customer-vendor loop at…Product and ecosystem loop perspectiveslinks here, 2022There is a useful distinction that arises from examining our position in…Customer-vendor loops and their settinglinks here, 2022The notion of a setting for a customer-vendor loop is fairly intuitive.…Finding the settinglinks here, 2022In the previous story, I talked at length about finding the setting,…Becoming a settinglinks here, 2022I’ve been geeking out about this fascinating phenomenon when parts of one…Loops: dead or alivelinks here, 2022There are two important shifts to consider when examining a setting. The…Puzzling over this often hard-to-see closure has been a really a really fun challenge, and I’ll keep you in the loop (ha!) on what I learn from the adventure.