Bridging the Gap Between Data and Strategy
“What’s the use of running if you’re on the wrong road?” (German proverb)
“A man of thought who won’t act is ineffective; a man of action who won’t think is dangerous.” (Nixon)
Perhaps no business concept is as debated and often misunderstood as strategy. Professionals often hear the advice, “Be strategic,” but few understand what exactly that means and how to go about it. There’s a vague sense that they should be “doing” less and “thinking” more, that their focus should shift from the trenches to the battlefield. And in some ways this is true; strategy needs to encompass a broad perspective that takes many pieces and players into account. However, many would-be strategists fail when they don’t base their strategies on a solid foundation of facts.
There are several critical components to developing effective, even game-changing strategies. The first is access to unfiltered data, raw information. This can take many forms: proprietary databases, website analytics, industry publications, customer surveys, and in-the-field interviews. Just having data isn’t enough, though. You need to know the right questions to ask, which patterns to look for and how to interpret them. The analysis is what generates insight, and it is from insight that potential strategies are formed. Strategy, then, is developed from an intimate and analytical knowledge of a company and its ecosystem.
In most organizations, the generals setting strategy have little interaction with the troops, the ones with boots on the ground. There’s a dividing line that separates the functions. At most, strategists get reports that have been filtered and scrubbed (what analysts pejoratively refer to as “idiot lights“), effectively neutered and incapable of generating real insight.
Those with access to raw information often don’t have the experience and overarching visibility to ask the right questions and generate insight. Conversely, the executives – the ones counted on to lead the company – do have the experience and visibility, but without access to the data, they don’t know which questions to ask, and so are left with answers to questions that may or may not be the right ones. It’s like asking a general to storm a hill, or a grunt to manage the battlefield. Neither is equipped for the task.
There’s a recent, very public and very expensive example of how failure to dig into the details by a CEO led to a strategy which, in a matter of weeks, bled billions of dollars from JP Morgan’s coffers. As recounted in The Wall Street Journal:
On April 30, associates who were gathered in a conference room handed Mr. Dimon summaries and analyses of the losses. But there were no details about the trades themselves. “I want to see the positions!” he barked, throwing down the papers, according to the attendees. “Now! I want to see everything!” When Mr. Dimon saw the numbers, these people say, he couldn’t breathe.
Dimon’s failure wasn’t that he didn’t have a system in place to analyze the data, or an executive team setting strategy. It’s that he and his strategists didn’t insist on raw, unfiltered and unsummarized data. His failure was not getting into the detail of what his team was doing, not lending his significant experience and expertise. If he had, it’s conceivable that JP Morgan would be billions of dollars richer than it is today. As Michael Schrage argues, “There’s a reason why great chefs visit the farms and markets that source their restaurants: The raw ingredients are critical to success.”
Of course, leaders can’t spend all of their time in the detail. In What Got You Here Won’t Get You There, Goldsmith and Reiter make this point explicitly. Indeed, people get promoted because of their ability to execute operationally, but are then implicitly admonished to cross the divide separating thinking from doing, to become visionary leaders. Yet in Great By Choice, Jim Collins finds that successful leaders aren’t especially bold, visionary, or innovative. Instead, “They observed what worked (data), figured out why it worked (analysis), and built upon proven foundations (strategy).” A somewhat boring approach, perhaps, but effective.
Strategy isn’t easy, but it’s not rocket science either. You have to understand your market, your customers, your direct and indirect competitors, and the intricacies of the systems in which you operate. You must use your analytical skills to ferret out key insights. And these insights must then be tied to strategies.
For a broader perspective on the strategy journey from beginning to end, see this recent McKinsey article.
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