Strategy is not an analytical exercise
Why many business books mislead you
If you put all the books on management and strategy in one stack, it'll reach the Moon. Books on business and money are in the top-5 bestselling eBook categories on Amazon. Scientists thoroughly studied all aspects of corporate life, from marketing and finance to leadership and supply chain.
But still, so many businesses fail. And one of the reasons is that many business book authors use an inappropriate method to study business success.
The scientific method
Is the Earth round? We take the notion for granted. But in 1632, Galileo Galilei had serious problems with the catholic church after publishing his book Dialogue Concerning the Two Chief World Systems. In this book, he described a heliocentric world. Today a person who doubts this theory looks weird – at the very least. However, in 1632 Pope Urban VIII didn't think that was a good idea. And Galilei spent the rest of his life under house arrest.
We don't question the concept because it was proven with the so-called "scientific method." It is a generally accepted way to prove a hypothesis.
Simply put, it works like this:
– A scientist makes a hypothesis.
– She conducts a series of experiments
– If the hypothesis is confirmed during many tests and under different appropriate conditions, it may be considered proven.
For instance, if a group of patients takes medicine, and their health improves, whereas a control group's members who get a placebo don't demonstrate the signs of improvement, this medicine is efficient.
And it works for science but not for business.
The scientific method and business
After World War II, business leaders were self-taught. Business theory and MBA programs didn't exist. The first book on strategy – Corporate Strategy by Igor Ansoff – appeared in the mid-1960s. The leaders looked for the key to success, and some scientific institutions started working on it. And they used the scientific method as well:
If many companies used a tool X and they became successful, and
If many other companies didn't use the tool and they failed, it means that
The tool X helps businesses thrive
As simple as that. And it doesn't work.
One of the brightest examples of this approach's failure is Jim Collins's bestsellers Built to Last (1994) and Good to Great (2001). In both books, the authors tried to find the holy grail of business success.
And those books didn't just reflect Collins's opinion – he and his teams spent years collecting and analyzing evidence according to the scientific method.
But look at some "built to last" or "great" companies studied in the books – Fannie May, Ford, General Electric, Motorola, Sony, Circuit City, and Kroger. Would you invest all your savings in these firms now?
The scientific method works perfectly when it comes to unchangeable conditions. For instance, the laws of physics work the same way in the USA, Asia, and Africa. The principles of chemical reactions don't depend on social development.
But business is a fast-changing world. And what worked perfectly for an American company in 2001 won't necessarily be applicable to a Chinese enterprise in 2023.
Imagine that a researcher found out that companies with strong mission statements are more successful than those without. Is it enough to claim that having a mission statement is the key to prosperity? No, it would be true only if it was the only difference between the two groups of firms. But success depends on thousands of factors. And no researcher could consider all of them in their study.
The scientific method and strategy
The same approach trickled down to strategic theory. The scientific method implies making decisions based on firm facts and confirmed evidence. That's why so many strategic theorists and big consulting companies rely on analytical tools and industrial benchmarks so much.
They need to prove that their proposed strategic moves have already been successfully used elsewhere.
But strategy is about tomorrow. And, as Dr. David Hulett said, there are no facts about the future. So we can't predict the future, however carefully we collect and analyze the data.
In 2016 Gartner assumed that by 2020, 100 million consumers would shop in augmented reality, and 30% of web browsing sessions would be done without a screen (source). You can find a lot of wrong projections of that kind made by professional analysis on the Internet.
So, even people whose job is to trace the trends make mistakes. We can't rely on numbers and analytical tools only while formulating our strategy. We need creativity.
Strategy and creativity
We shouldn't ignore current markets' analysis and trend watching. Our business doesn't operate in a vacuum. But we must remember that the primary goal for any business is not just to succeed. We have to grow by creating something that has never existed before. It may be a product, a service, or a business model. But it is the only way to make our success long-term.
Here is some creative techniques I use when I work with the teams on strategy:
Dive deep into customer needs
Any business earns money by satisfying customer needs. All the people on Earth share the same list of sixteen basic needs. Investigating these needs may be a great source of inspiration. Talk to your customers, ask them questions, and learn more about their life and work routines.
You can read more about identifying customer needs and download some free templates here.
Use design thinking tools, such as CJM, to delve deeply into the customer experience. Many believe that CJM helps to refine the business workflow only, but it also can bring invaluable insights.
I recommend the book Mapping Experiences: A Complete Guide to Customer Alignment Through Journeys, Blueprints, and Diagrams by James Kalbach. It contains lots of information on different kinds of maps that can be very useful for solving this task.
Use foresight instead of forecasts
As forecasts aim to predict the future, companies use foresight tools to create some plausible future scenarios. And they need it not to guess the future but to unleash the teams' creativity. So a major goal of a foresight game is to imagine the future in which your team members would like to live. And then, you can devise a strategy on how to make it real.
You don't need a strategy to follow the trends. You need a strategy to create your own's.
You can learn more about foresight games here.
Invite outsiders to your strategic discussions
If your team members work together for a long time, chances are it has become difficult for them to look at your company and industry from a different point of view. There are too many things they take for granted. Inviting people from related industries can stretch their imaginations and find new insights.
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