Do you have a data-driven strategy?

Do you have a data-driven strategy? I often see organizations with a non-data-driven strategy.  For a strategy professional, it may be an oxymoron to say that a strategy is not data driven, but it is not uncommon. When firms let an emergent strategy become a de-facto strategy, it can often be driven without data. Such an approach uses people’s gut, common sense, anecdotal evidence and complex theories but does not use data. If you do not have a data-driven strategy, your business may be leaving a lot of money on the table.

Data Lovers Vs Data Avoiders

Over the years, I have taught thousands of MBA students and executives across the world. In a strategy training program, we often discuss interesting and sometimes esoteric concepts. People love to talk in generalities until I insist on data. That’s when the group segregates itself into data lovers and data avoiders.

Data Lovers

Recently, I was teaching strategy to a group of executives MBA students and nudged them to quantify their thinking. It was hard for them, but this team was keen to learn the art of quantification. So I gave them more exercises to be done overnight. It was an exceptional group who spent hours trying to do the quantitative exercises in strategy. It was gratifying to see that these managers will go back and lead the way for a data driven strategy.

Data Avoiders

On the other hand, I had the exact opposite experience with a group of managers within the same month. I was facilitating business strategy development for this group of very talented managers. We went though the basic concept of strategy where the group was very active. Unlike MBA classes, client programs involve getting to the application quickly. So I took the group to a place where they needed to define the opportunity space. As soon as they laid out the opportunity space conceptually, the next step was the quantification of the space. When I explained this next step, there was a stunned silence. Where there was a free flowing discussion, hesitation and awkward silence took place. This is not unusual. People often find it hard to make the leap from conceptual understanding to a data-driven decision making.

Why do people not use a data-driven strategy?

There are two reasons why people often find it hard to take the leap from conceptual decision making to a data-driven decision making.  First converting conceptual models into data models is an alien technique for most managers. Second, the skills needed to become adept at data-driven decision making take a little effort to acquire. Take the example of the managers in the group above. Although they wanted to use data-driven strategy techniques, they found it hard to quantify their markets. Unless a third party report provided the needed data, it was hard for them to triangulate market size, growth rates and market shares with ease.

The Art of Quantification

The art of quantification is something that every manager must acquire. Thinking about the business of Starbucks and its value proposition is often interesting. Understanding the customer experience and the value chain can be a gratifying experience. But unless you begin to convert Starbucks’ business into cups of coffee, capacity per establishment, capacity utilization, and value equation you miss the nuances of the Starbuck’s business.

Unless you acquire the art of thinking in quantitative terms, your strategy may have little meat. You may be holding an empty bag with little power to drive impressive business results. You may have a theory driving your strategy. Even if your theory is interesting, without the data, you may have two problems. First, your theory may be wrong. I often see this happen. People explains their business to me with stories and theory, and when I dig into their data, the data fails to support the narrative. This can lead to wrong decisions and a weak strategy. Second, driving a strategy without data means you are driving a car without a dashboard. I don’t have to explain why it may be the most dangerous thing to do.

So do you have a data-driven strategy?