Strategy needs to be data driven

March 1, 2018

I fell in love with the ability to measure specific business outcomes. It was back in the early days of digital marketing where I started my career. I became enamoured with having the capability of understanding the impact of actions in nearly real time. This simple insight has kept me interested in marketing and subsequently strategy for fifteen years.

Agile strategic planning is born
Fast forward a few years and I now work at a management consulting firm where we help organizations with their strategy. As a student of business, it’s an immensely rewarding job because we get to have a direct impact on our clients’ strategy and goals. When my partners and I launched the firm, we looked around the existing strategic planning methodologies and came to a realization; all of the thinking and research on strategy development that governs today’s boardrooms was created in the previous century. These classic methodologies are losing relevance in a world that is getting more connected and where data and scientific hypotheses are the norm.

It was clear to us, progress and innovation in strategic planning was moving at a snail’s pace. Further compounding the challenge was the lack of research on technology’s impact on strategy. There is a deep lack of understanding of how technology has fundamentally upended the value chain. The situation is only worsening given the rate of computational improvement. At a macro level, the accelerating capabilities of software and the profusion of data will have an effect on every single industry this century. The impact will be akin to the industrial revolution. We were desperate to solve this challenge; how can organizations move faster in an age where technological progress is exponential?

Often times the best solutions come from different fields, we started searching for ideas in adjacent industries. By examining the technology sector, a simple realization came to light. Most tech companies are employing the principles of Agile to create their products. If implemented properly, the benefits have been widely proven: autonomy, alignment, velocity and continuous learning. If it works for software, why can’t it work for strategy? We set upon creating a new strategic planning methodology based on these principles. Our goal was simple; make strategy actionable, accountable and measurable. The biggest gap that we wanted to address was to take strategy from being intangible to tangible; and thus execution focused.

Getting to predictive strategy
In most strategy definition exercises, there isn’t much that isn’t instinctive – a lot of it is based on the opinion of a small number of people. Will executives in 30 years still be doing a SWOT analysis? It seems highly unlikely that subjective exercises will continue to dominate strategy development. It’s not venturing too far to say that hypotheses based on the scientific method will become the norm for deciding the appropriate course of action.

What we’ll see is that certain aspects of strategy and decision making will become more automated. For instance, decisions on capital allocation will be enhanced with more robust market data (data on customer habits, product usage, etc). Leaders will be able to leverage this data not only to reflect what’s worked in the past but also start predicting how to best apply their resources using machine learning.

We’re already seeing many traditional areas such as marketing becoming much more data driven. Software developers are currently invading the ranks of marketers and optimizing customer acquisition just as they would optimize a product feature. It is only a matter of time before the area of corporate strategy will be taken over by algorithms. This trend is starting to get recognized in academia as well. Harvard Business Review published recently an article that explains how robo-advisors are coming for consulting firms and strategy. Strategy will not only become measurable but also predictable.

A new audacious goal
We’ve set forth a new ambitious goal at our firm, continue investing in our platform until it eventually radically augments the role of consultants and enables us to focus on what matters; people. We are years away from that becoming a reality but it is an inevitability; much of what we know about strategy development today will be radically augmented with data and software.

Because it’s still early and there is not research yet, we are wrestling with what we need to measure. Developing this approach is an uncharted territory and I’m even sure we’ll make mistakes along the way. Share of market growth, growth of competitor’s profits/employees, LTV and NPS trends are among just a few metrics that we’re looking at. Internal capabilities to execute on the strategy is another massively important component in ensuring the recommendations are achievable. It’s still early days in this burgeoning field. Achieving predictive strategy will be a huge boon to the organizations that will be the first to get there – a new competitive advantage will be born. I’d love any feedback on exciting areas to explore and suggestions!