Customer-Vendor Loopthree days beforeI’ve been sketching a bunch of compounding loops this week, and wondering…Making sense of SWOT with customer-vendor loops

Organizational pathology2022I was reading the latest book by Richard Rumelt, The Crux, and…Customer-Vendor Loop2022I’ve been sketching a bunch of compounding loops this week, and wondering…When brainstorming entries for a SWOT analysis, it might be useful to have a bit more structure. Let’s see if we can use the customer-vendor loop for that purpose.

Customer-vendor loops and their setting2022

To frame this exercise a bit, I am going to rely on the notion of stocks and flows in the loop. We have four stocks and four flows that connect these stocks. Each stock represents a value that we want the loop to compound, and each flow represents the means by which we could achieve that.

Continuously Integrated Strategy2022Somehow, these amazing ideas don’t seem to extend to strategy. In the…Through this lens, the strengths and weaknesses of an enterprise will be described by the state of the stocks. Similarly, the nature of the flows between these stocks will tell us about threats and opportunities. This gives us a recipe to start filling out a SWOT table.

For each stock (Vendors, Products, Customers, Interactions), we can ask questions that produce strengths and weaknesses entries. Put very simply, high values are strengths and low values are weaknesses. Just like stocks, strengths and weaknesses are static qualities – these are the things we have or hold.

The OODA Loop2021One of the lenses for which I tend to reach frequently is…For each flow (Vendors build, Products attract, Customers engage in, Interactions attract), we ask questions that produce entries for opportunities and threats. Threats attenuate flows and opportunities accelerate them. Flows are dynamic, and so are the threats and opportunities. They increase or decrease the value of stocks over time.

In addition to producing SWOT entries, this exercise can be very useful for getting a better sense of the examined customer-vendor loop. If it produces nonsensical entries, chances are the loop doesn’t actually represent our aspirations.

Becoming a setting2022I’ve been geeking out about this fascinating phenomenon when parts of one…For example, one common mistake I kept making was failing to recognize that the notion of value is relative to the other components in the loop. To make this more concrete, let’s imagine that one of our friends (Vendor) made a really cool klaxon sound mobile app (Product) that has tons of Users (Customers) — who doesn’t want a klaxon on their phone?! — and these users mash the titular button multiple times per day (Interactions). We might conclude that the high number of Interactions signifies significant value of the corresponding stock. Unfortunately, this app is free, and so is its key interaction, which means that there’s no value attached to it. Any multiplier of zero is zero. Despite a large number of interactions intuitively seeming like a valuable thing, it is their relative value that matters within the loop.

Product and ecosystem loop perspectives2022Let’s also pretend we’re very lucky and that the compounding strength of…In such cases, it might be worth looking into motivations and/or considering that maybe we’ve got some parts of the loop wrong. What if the main reason our friend made this app was to showcase their programming skills? In this case, the value of Interactions is primarily in the “shipped an app that has X million active users” line in their resume. Though the Klaxon app customer-vendor loop is unlikely to be compounding, it might get our friend a great next gig.

Stages of the customer-vendor loop2022One other thing that seems useful is the idea that the feedback…Correlated compounding loops2021A thing that became a bit more visible for me is this…Such seemingly non-compounding loops are found quite often in the wild. They exist as tools, as flow accelerants or stock accumulators for some other loops. They may appear as useless or incomplete when viewed in isolation. However, when combined with another loop, they suddenly sparkle compounding magic. A large part of strategy is about discerning the combination of incomplete loops that form a thriving, symbiotic relationship. From this perspective, a business is a large collection of incomplete loops striving to form into a single something that generates value. Whether or not they succeed defines the viability of the business.

Loops: dead or alive2022There are two important shifts to consider when examining a setting. The…Asymptote analysis using customer-vendor loopthe day afterAnother potentially useful source of insights is using the customer-vendor loop for…Finding the settinglinks here, 2022The approach that seems effective is by studying the stocks of adjacent…Zooming back into the local perspective, it might be helpful for a team to recognize when their customer-vendor loop is incomplete and stay conscious of it. Even if they are an effective tool for another loop, incompleteness is still a weakness and a source of potential future threats and opportunities. Loop dependencies are dynamic in nature. They shift and change.