Sort of right

I keep my watch about 5 minutes fast. I do it mostly to remind me that I'm committed to being on time. And, I mentally adjust for the 5 minutes, so I have a rough sense of what time it really is. Here's what struck me this morning: my watch is never right. But, it's sort of right, and good enough for my purposes. By way of contrast, I could have a watch that was - at times - exactly right: if the hands never moved. Of course, that would be useless for anything.

I think a lot of strategy processes are aiming for "really right", but end up with a false sense of confidence. The sort of analysis that underpins much strategic work is sometimes right, but it's hard to know from the analysis when it's not. Too often, the result is decisions that don't reflect the degree to which is the underlying analysis might be wrong. I'd rather have a watch I know is roughly right, than one I think is exactly right, but only now and then.

What to do when you just don't know

Exec teams and Boards spend a lot of time focused on risk and risk management.  Rightly so in today's world.  But, there's something else - different from risk, but often confused with it - that senior executives and Board members should be equally, if not more, concerned about. It's radical uncertainty. John Kay, in a recent column in the FT (The other multiplier effect, or Keynes's view of probability - http://on.ft.com/OslEcY) touched on this topic:

Keynes believed that the financial and business environment was characterised by “radical uncertainty”. The only reasonable response to the question “what will interest rates be in 20 years’ time?” is “we simply do not know”.

I suspect that admitting "I don't know, we don't know, it can't be known" is difficult for many business leaders - particular on any topic related to their business.  There's a lot that could be said about why that is, and the sometimes negative consequences.  But, there's a different angle I'd like to explore.  If you accept that your business is facing some degree of radical uncertainty, how does that change the way you ought to think about strategy?

A lot of strategic thinking is based on the assumption that you can forecast the future (or at least assign realistic probabilities to a known range of outcomes in the future) and then pick the actions most likely to give you what you want.  But, "radical uncertainty" means you can't even know the full list of possible outcomes, much less how likely each one is. No matter how well you do your analysis, there are just going to be some key decisions where that way of thinking doesn't work .

Of course, it's not all fog and darkness either.  Businesses have more data, more analytical tools, more knowledge available to them than ever before.  And, our ability to model complex business ecosystems and see previously unexpected interactions and outcomes has also improved. But, most of these tools work best for "how" sorts of things: How many new customers are we going to get if we spend £x? How long will it take develop the next version of our product? Plus, they are based on extrapolation from the past, which means that they only work as long as the future looks a lot like the past.  Don't assume that's going to be the case.

So, what does this mean for strategic thinking - particularly at the top team level?  At minimum, since you almost certainly face some degree of "radical uncertainty", it's worth discussing as a Board how that very fact might need to modify your decision making process. Even better, consider this question: "If we can't know for certain what will result from our actions, are there still things we would want to do or be - for themselves, not for what they bring?"

SWOT analysis - the AK47 of strategy tools

Discussing an upcoming strategy workshop with a new client recently, they said they wanted to use SWOT as one of the key tools.  SWOT analysis is an almost universally known strategy tool, but - for those who don't compulsively collect strategy tools - it's simply a listing (usually in a 2 x 2 grid) of an organisation's Strengths, Weaknesses, Opportunities, and Threats.   It's basic, sometimes seemingly too basic.  It's the AK47 of strategy tools - widely used (particularly by organisations that can't afford the latest and greatest), robust, can be used  with almost no training. Plus, it's surprisingly effective. And, a bit like the AK47, it's been around for a while: SWOT analysis, or perhaps an early precursor to it, was developed in the 1960s by Albert Humphrey, an American consultant who eventually moved to London (I gather for love, like so many other good consultants).

As I was opening my mouth, getting ready to explain to my client that we really might want to try something a bit more modern, and a bit more sophisticated, I stopped.  In a flash, two thoughts struck me: 1) If sensible business leaders have been using it for so long, and so widely - particularly in organisations, like this one, that didn't have the luxury of faffing about things that don't work - it must be good.  2) When I've used it, even when I didn't expect much from it, it always was useful.

After the meeting I thought for a bit about why it is so effective, when lots of other strategy tools have come and gone.  It focuses attention on  the "here and now" reality of the situation a business faces. And, it covers the waterfront.  It focuses attention on external and internal issues, it focuses attention on the positive as well as the negative.  Organisations often have a bias to focus more heavily on one end or the other of these dimensions; SWOT highlights where there might have been insufficient attention.

But, perhaps most importantly, it stimulates useful discussion and debate. When it comes to strategy, it's generally not the facts that matter.  The interpretation of facts - what they mean and what, therefore, should be done about them - is where the real value lies.

Technology unleashes the revolution

I find New Scientist articles, though seemingly distant from the pragmatic world of commerce, often shed an interesting light on current developments.  A recent article  presented analysis by Kathleen Carley of Carnegie Mellon University that seems to show that the impact of social media in the Arab Spring was much less than has been reported. However, in the same article, another analysis was reported, this one from Philip Howard of the University of Washington, that reached an almost opposite conclusion.  Now, two academics reaching opposite conclusions about the same topic isn't anything particularly new or different.  But, it's an example of how, particularly with the enormous datasets available today, it's generally possible to find plausible analytical support for multiple points of view.

When my clients face these sorts of situations (dueling analysts, PowerPoint decks at 10 paces) I  suggest they  find a different way of looking at the issue.  In this case, happily, Dr Howard does that for us, looking more broadly at the history of previous revolutions: "In each of those other revolutions, there is some sort of media that is new and not controlled by the state. Even newspapers at one point caught dictators off guard."  Viewed from that perspective, it does seem likely that the availability of a new form of communication did lead to a different form of political behaviour.  And, one might comfortably predict that when even newer form of communication arrive (as it seems they will), they too will lead to a further revolutions.

In somewhat the same spirit, it seems likely that the business world is now facing it's own revolution, similar to (though perhaps faster than) the one caused by the internet.  And, it's not just Facebook and Twitter - they are almost extensions of the "old" internet.  The real revolution is likely to come from a combination of things: social of course, but also mobile, local, automated self-monitoring, self monitoring, "free", collaborative innovation, and - as I've heard it described - "the dictatorship of the consumer". Do you see your organisation getting ready?

Storm warning - "Big Data" on the way

We all know there's a lot more data around today than there ever was, that it's coming at us faster, and it's taking on many more shapes and sizes than ever before.  That's a trend that's been going on for some time.  And, like with many trends, once it has a name, then it gets more attention. So, welcome to "big data". This has all the smell of a new management fad, as leading consulting firms, solution providers, and technology firms all tout their particular take on why it's essential and what to do about it.  Like most management fads, at the heart of it is something important that business leaders should pay attention to.  But, two things to bear in mind, as and when you start to hear the question, "What's our strategy for big data?".

First, knowing where you want to take your business is probably more important than finding a faster way to get there.  Here's a checklist to work through before spending too much time on big data:

1. Are we clear and aligned about where we're trying to get to?
2. Can we see where having more, faster, and richer insights about our customers, our suppliers, or other key players in our world would help us get there more quickly?
3. Do we have even a few clues about where in our processes "big data" might sit?

Second, success will depend mostly on the people element, not on the technology.  Shvetank Shah, Andrew Horne, and Jamie Capellá, in "Good Data Won't Guarantee Good Decisions" point out that many managers don't have the data literacy needed to make good use of this new source of insight.  Training and coaching on data usage can help, but there's a deeper issue. Relying too much on the data can make you blind to things that models can't capture.  Equally, going entirely with your intuition can trap you in an outmoded view of the world.  They argue that what's needed are "Informed Skeptics" who can balance analysis with intuition.  And right they are. Building the skill (or habit) of bridging gut-level intuition with head-level analysis is going to be key not only for making "big data" work - but for the bigger task of setting direction in this fast-paced, unpredictable world.

Finally, a great "big data" tip from Dan Woods at Forbes: "I recommend enabling the largest amount of people with the cheapest and easiest tools....".  Not a bad idea to adopt for "big data", and probably most other things.