Strategy can never be scientific

As we have discussed before, strategy is a discipline which is used to make decisions under conditions of uncertainty. When you’re facing a task which doesn’t have a solution which you know will work at the outset.

 There is no “strategy” to fixing a muffler, or flying a jet, or tying pigtails; there is just a method. Strategy is reserved for the many walks of life where there are no neat and tidy solutions like this. Economics, politics, marriage, fashion sense, investing, becoming a pop star, and of course, running a business.

Understandably, a lot of people have a problem with this. It means that you are utterly culpable for your decisions. There’s no hiding from it. You have to make big calls which, rather than being factual and objective, are merely judgement calls.  Opinions. 

Strategy isn’t scientific, even if it’s informed by a set of facts, because it pertains to the predicted interaction of those facts. In other words, it’s just somebody’s hunch when you get right down to it; and if that somebody is you, you’re going to be left exposed if things go wrong.

A willingness to put your neck on the line like this is one of the most fundamental attributes required in a founder. You know that “Logan Roy” (from Succession - watch it!) stereotype of entrepreneurs as people who make decisions based on gut-feeling, and who hold numbers-obsessed “boffins” in contempt? That stereotype exists for a reason. You need to be comfortable with making opinion-based decisions, because most of the time, that’s the only type of decision you’ll be able to make.

Unfortunately, in recent times, there has been a challenge to this strategic way of operating: “data”.

Data, the way most people use the term, simply means quantified information. Numbers. Hard and supposedly objective. Data is what scientists and engineers use in order to get predictable and replicable outcomes. When you’re designing a bridge, there’s no question of whether your “strategy” to prevent it collapsing will work. You aren’t just taking a punt based on your opinion, your "personal read" of the situation. You know it will work, because you have an objective “data driven” (scientific) solution to the problem. Strategy doesn’t come into it.

Wouldn’t it be nice then, if we could have a similar level of certainty when it comes to business matters? Imagine if we could collect enough cold hard data that our decisions ceased to be speculative punts, and instead become as reliable and scientific as those of the engineer?

This, of course, is complete nonsense. Such an aspiration, if someone was stupid enough to hold it, would be committing a grave category error, by confusing open “chaotic” problems (like business) with closed “ordered” problems (like engineering). With open problems, there is no amount of data you could hypothetically collect which would remove opinion (AKA strategic thinking) from the equation, because you are exposed to an infinite number of constantly changing variables, which interact in unpredictable ways.

Very few people (although not zero) fall for such a fallacy, thank God. But a great number of people do fall for its softer cousin, what I call the “numbers bias”.

With the numbers bias, founders (or anyone really), will lean too heavily on available “numbers data” in their decision making, at the expense of everything else, due to the illusion of objectivity it brings. They aren’t deluded enough to believe that their decisions are “scientific”, but data at least gives their decisions that sort of “flavour”, and thus makes them feel more secure. If things go wrong you can always say “hey, I was just doing what the data told me”, which sounds sort of plausible until you remember that data can never tell you what to do, only your strategic interpretation can.

Therefore, contrary perhaps to the statty image “strategists” sometimes have, in order to make strong decisions in business you need to have a healthy scepticism for data, and to be immune from the numbers bias.

Now don’t misunderstand me, I’m not saying “ignore data” here. What I’m saying is “don’t put it on a pedestal over other forms of evidence just because it feels more safe”.

Data is merely one form of evidence - and not an especially good one at that. There are all sorts of other forms of evidence which should influence your thinking which don’t come packaged in data form, for instance:

• What are the qualities of your product? What are its strengths and weaknesses? What is surprising about it? What is different about it? How might people react to it?
• What are the dynamics of the market? Who’s on the up, who’s on the down? Who do you admire, who do you hate? Who is stocked where? What moves are your competitors making?
• What do your employees think? What would motivate them? What would motivate you? What seems like it would be fun?
• What is your history? What do people expect from you? What would they not expect from you?
• What are the relevant characteristics of the culture you're operating in? What could you bounce off in your actions? What do people associate you with?

And so on and so on.

All of this stuff is also data - and just because it doesn’t have a number attached to it, or isn't unimpeachably objective, that doesn’t make it any less relevant or powerful. Your job is to absorb all of this information, as much as you can, and then simply give your opinion on how it all clicks together. That’s it. Your opinion is your strategy. Sure, some people have better opinions than others (this newsletter is concerned with improving the quality of your opinion), but make no mistake, it will never be anything more than your subjective take.

The unsophisticated, blunt, gut-instinct-driven founder is simply the founder who has absorbed this kind of information, views it holistically, and makes their decisions accordingly.

In this way they are actually far far more sophisticated than the precision-oriented analyst: who reduces problems to something carrying the air of objectivity, but in doing so removes the fluid dynamic of reality.

The good news in all this for independent businesses, is that this is an area where they can have a big advantage over large corporates.

Firstly, they don’t tend to actually have a lot of data, and so don’t even have the option of naively outsourcing their decisions to it. Indeed, a great number of my clients have had essentially no usable data when I’ve worked with them. Clearly this isn’t a good thing (quality information of any shape is always welcome), but at least it forced us to gather evidence for our thinking broadly and insightfully. Conversely, the disadvantage for a business with a lot of data is that they often assume that the “answer” will lie somewhere within it, and thus are liable to ignore everything else. The absolute nadir of this disease - which is rare but not unheard of - is data dogmatism; where data is demanded to “prove” any statement, including the ones which should be self-evident via common sense. If you sink that deep into “objectivity” then I’m afraid there’s no coming back.

The second advantage that an independent business has over a corporate in this regard is having a true decision maker - the founder. Typically executives in public corporations don’t have (or don’t want) the freedom to make “non-objective” decisions, and thus are bound by the scope of their data. This means they struggle to make bold strategic plays, and thus become gradually more and more ossified. An independent business doesn’t get its advantage over such companies by being more “agile”, but by being more free - free to make “unsubstantiated” decisions.

So recognise this supposed weakness of yours for what it is - a strength. And get comfortable with having an opinion, because you’re going to need it.

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This piece is from my bi-monthly newsletter The Way, covering ideas and thought experiments designed to sharpen your strategic thinking. Subscribe here: https://mailchi.mp/53e8061f1686/basicarts