When it comes to strategy, we simply love data analyses. Nothing is so reassuring as to anchor a strategy in robust, fact-based analyses. We have every reason to do so. Business strategy is about important decisions affecting the future of our companies and the essence of where and how to allocate resources.
Research for a book on “The Future of Strategy” I co-authored highlighted a problem with this, however. Data is biased and the consequences of this bias are worse in fast-changing environments. Data after all favors the known over the unknown and the past over the future. There is simply no data on the unknown and the future.
This doesn’t matter so much in a stable environment. Smart use of data allows for relevant extrapolations providing us with the necessary strategic insights and decision-making support. But when things heat up and start changing faster and more profoundly, there will simply be more unknown and more future still to happen, both of which are impossible to cover directly with our data analyses.
This creates two risks.
One risk comes from only deciding on what can be confidently substantiated with data analyses. Doing so will simply leave a growing part of future business opportunities and potential sources of competitive advantage out of scope. Something we can ill afford in today’s business environment with increasingly demanding customers and ever more present competition.
Another risk is that we don’t develop the necessary skills for dealing with this growing amount of unknown and future still to happen. For this we will have to leave our data-padded comfort zones and enter the realms of abductive logic—a kind of logic pioneered by American philosopher Charles Sanders Peirce and discussed in Roger Martin’s book “The Design of Business: Why design thinking is the next competitive advantage.” This opens up a new set of questions for strategists such as: Might this become true? How likely is it to become true? What will follow if it becomes true?
This doesn’t mean that data analyses will not be important anymore. On the contrary, we still need to make well founded decisions after all. What it does mean is that we need to change the order around. Instead of deriving strategic insights from data analyses, we will more and more have to derive those insights from thinking through strategic drivers of change using abductive logic and then using data analyses to validate those insights where possible.
For this to take effect, we will have to reset the productive balance between analytical and abductive thinking so that analyses won’t hold our strategies back anymore.
