“Strategy is an integrated set of choices that uniquely positions a firm in its industry as to create sustainable advantage and superior value relative to the competition” – A.G. Lafley, Former Chairman and CEO, Proctor & Gamble.
Simply put, strategy is about making decisions on winning.
However, before we solve a problem, we need to know what we’re solving, this is strategy 101. And in the era of digital, the world and all that is in it is quantifiable, cue the advent of data professionals.
Data’s a strategist right-hand man. Jagger’s Keith Richards, Martin’s Lewis. When you see one, you see the other.
You’ve been there before, your company or client has a problem and needs to make a big decision, say launching a new product or move into a new market space. What do you do first? Analysis; fact finding, gathering data, segmenting, probing, discussing, concluding.
From here, there’s usually executive input and some form of process leading to a final decision.
However, according to a recent McKinsey research paper, which looked at 1,048 major decisions within five years, good analysis in the hands of capable managers with good judgement won’t naturally yield good decisions. Bad decisions, means bad strategy.
So what’s missing? According to the research, the decision-making process is key. The process matters more than analysis – by a factor of six. This doesn’t mean quality analysis isn’t essential, no strong decisions could be made without proper analysis. Rather, a truly unbiased decision-making process will unearth poor analysis.
Essentially, you can have as much quality data and analysis as you want but without a decision-making process, that addresses the hard choices in an unbiased way, you’re running bad business.
A Big Decision Made, a Big Decision Won: Cirque du Soleil
Consider Cirque du Soleil. Founded in 1984 by a group of street performers, their productions have been seen by over 40 million people in 90 cities around the world. They’ve achieved this rapid growth, within two decades of an industry facing its biggest decline since its inception, the circus industry. Children, the primary circus audience had been swept away into the world of entertainment on demand, video games, social media, television – when I want, where I want. Not to mention other factors like animal rights and increase in talent wages.
Yet Cirque has profitably increased revenue by a factor of 22 over the last ten years. How did they do this? Well, as their tagline reads, they “reinvent the circus”. CEO of Cirque, Guy Laliberté drove what is called a ‘blue ocean’ creation, that is, he took the circus into a new unknown market space, one without competition, one where demand had to be created. If you’ve been to a Cirque performance, you know it’s no regular circus, it’s targeted at adults for starters.
It’s relatively obvious what the original analysis would’ve uncovered. A decreasing audience, negative sentiment, high barrier to entry. Hard choices had to be made; it was through this very decision-making process that Laliberté and his leadership team reflected and made those choices. Rather do what other people do but better, or do something completely new. The winning choice paid off to the tune of US$810 million in annual revenue.
No Decision Made, Death Comes Looming: Foxtel
Now consider a company like Foxtel Australia, the ailing pay-tv company. The level of data that exists within their network is unfathomable, the analysis that has been conducted could fill a State Library. Yet they’re struggling to hold onto their premium-paying subscribers, in 2014, their net profit was down 53%. Affordable entertainment on demand has shaken the pay-tv model. Their response has been a ‘me-to’ approach with Presto and to slash costs to their subscriber packages, not the most sustainable of tactics.
It’s not like they didn’t see the problem coming, the change in market demand and behaviour hit the company more like a handcar than a freight train. The shift has been coming for over ten years. All the analysis in the world didn’t save them, hard choices were on the table, poor decisions or lack of any decision, are to blame.
A Good Decision Making Process
What makes a good decision? Well, sorry kids, we can’t really define a good decision until we’ve made one and can measure the outcomes. We can, however, set the parameters for a good decision-making process.
1.Assess the quality of the data analysis.
Question the integrity, there’s bias in analysis, make sure you see all sides of the die. Unfortunately, it an attempt to satisfy, those who report upwards may hide some less flattering facts and insights (for example, a media agency that misses all of its targets and reports primarily on the ones it does hit). Things such as ‘affect heuristics‘ also plays a role, this is when evaluating something we like, we tend to minimise the risk and costs and exaggerate its benefits. When assessing something we dislike, we do the opposite. As a decision maker, demand the truth, be wary of the biases in the analysis, and ask for complete visibility over the problem areas, no matter how ugly. As Richard Branson says, you need to protect your downside.
2.Remove Your Own Cognitive Biases, as The Decision Maker.
Cognitive biases are tendencies to think in certain ways that can influence rational or good judgement. Such as the aforementioned ‘affect heuristics’. To remove biases completely in my opinion is inhuman and improbable. However, we can set activities to manage the degree of biases in the decision-making process. Allocating time and setting the environment for impersonal debate and challenges, as well as collecting and using unbiased data within arguments are two good techniques.
Ensure you allow participation in the decision-making process. When reviewing the analysis, you want to include perspectives that may contradict your own or other senior leaders point of view. Skill and knowledge in this process supersedes rank, so allow discussions to be included by those with skill and experience rather than only by rank. Provide an accommodating setting to do so, where the rules of the discussion are known.
Possibly the best of all, a leader must have a high degree of self-awareness. They must reflect on their response to the problem and question if it’s an emotional or logical reaction and if they are the best person to solve it. Then be able to ask others for their honest, professional input (and be wise enough to listen).
3. Be Clear About Your Winning Aspiration
If anything, all of your decisions must boil down to why you’re in business. The purpose of your company, it’s motivating aspiration. Referring once more to A.G. Lafley, strategy is about winning, but if you don’t know what you want to win and why, then you have a ship and no lighthouse.
Crucial Tip: Face the hard choice. Always make the decision.
It is a leader’s job to navigated their choices, face the ugly truths and make decisions. However, it is often the people around the leader who’s job it is to provide those harsh realities. In an attempt to please, the very people hired to give counsel to the CEO or key decision maker, stay quiet. I see agencies do this frequently, concerned they’ll lose the account. These silent lies lead to false decisions. Ensure that the hard choices are made clear through encouragement and assurance with those involved in counsel. Then you must face them.
More is lost through indecision than wrong decision. Leaders, like everybody at times, can be indecisive, some may be perfectionists (also known as one who has a fear of failure). Once the diligence of the process is complete, face the hard choice, make the decision. A poor decision is recoverable; indecisiveness is fatal.
Information, even in the hands of the capable, is not enough. The art of decision-making is crucial. When it comes to strategy, analysis and the decision-making process is a marriage of thought and action. We can’t have one without the other. As in all unities, not all are perfect but it is our job as analysts, strategists, consultants and leaders to remain unattached from our subjectivity, face the hard choices and decide…