The Alignment Diagram provides a simple way to guide our thinking towards the external world of our customers and away from the internal world of our organization. Importantly it helps us map out who is providing value to our customers as they convert our products into outcomes customer want.
The vertical lines represent the products and services we build. Examples of this are;
- Financial Services: Savings Accounts, Credit Cards, Home Loans, Personal Loans, Retirement Funds
- Insurance: Car, Home, Property, Personal, Health
- Telecommunication: Mobile Phones, Home Phones, Internet Service, Video Conferencing, Managed Networks
- Technology: Personal Computers, Smart Devices, Tablets, Servers, Databases, Routers
Typically, organizations are structured around their products, everything from offerings, general ledger, billing engines, organizational structures, measurements and even mission statements. You can tell if this is the case by calling their main phone number and listening to the options, “Press 1 for Savings, Press 2 for Credit Cards…”.
The horizontal lines represent the outcomes our customers want. This can range from;
- Financial Services: maximizing our life through effective use of our finances,
- Insurance: being able to recover in times of emergencies, theft or health scares,
- Telecommunication: communicating and sharing with our friends, family and colleagues no matter where they are in the world,
- Technology: applications that make our lives easier and better
Many organizations claim that they are focused on the horizontal lines. A simple test is to look at their website and see what they are actually selling, is it a product or an outcome.
An old story explains this well, when you go to the hardware store to buy a drill (product), you don’t want a drill, you want a hole (outcome)!
The dotted lines represent the conversion from products to outcomes. This is where the value for the customer is created. Someone has to do it. Often it is the customer. In our drills and holes example it is whoever uses the drill to make the hole, maybe the customer or a trades person.
The mission statement of an organization needs to be aligned to the outcome and not the products. It also has to be embedded in the organization so decisions, structures, offerings, activities, processes are aligned to the outcome and not the products. The story of Kodak provided both in "Why are mission statements critically important?" and "Vertical Leverage" is an excellent example. Their mission statement was focused on delivery returns to their shareholders. Instead it should have been as per their advertising, where Kodak enabled their customers to “Share moments, Share Life”. With a focus on shareholder returns through product sales they continued to focus on their product, photographic film. Today we share moments, share life, through Facebook, Instagram, Twitter, YouTube. While the change for Kodak would have been huge it would have started by them focusing on their outcome aligned mission statement.
Having an embedded mission statement ensures decisions are judged against the outcome. Decisions like;
- determining which products are going to become obsolete; photographic film, video stores, record shops, corded phones, checks and maybe one-day physical money,
- what new solutions we can develop with the latest emerging technology; smart devices, apps, Internet, ecosystems,
- being able to make trade offs between teams as the decision is based on the external goal and not internal turf wars of, budget, headcount and resources.
As we go through our daily life we can easily spot the organizations that focus on the customer outcome side of the Alignment Diagram versus the product side. Unfortunately, the majority focus on the product side. This creates the space for the startups in the world to work out how to build a better outcome.