Strategy – Eyes Behind, Blinds In Front
Too many management consultants have held Corporate Strategy as the guiding light, the North Star, that illuminates the path to success. Countless books, seminars, and consultancies promise to hone one's strategic prowess, but do these efforts truly equip us to navigate the future? A closer look reveals that strategy, often, fails to help us peer forward; instead, at best, it serves as a retrospective lens through which we understand the past. Used as a case study, it would help you to think critically, but by itself, it is no predictor for the future. This is similar to why ‘best practice’ fails when the need of the hour is ‘next practice’.
At the outset, let us acknowledge the elephant in the room: the hindsight bias. Hindsight bias is a cognitive phenomenon deeply ingrained in human psychology, that clouds our ability to assess events in retrospect accurately. It leads us to believe that outcomes, especially successes or failures, were more predictable than they were at the time of decision-making. This distortion of memory can hinder our ability to learn from past experiences, as we tend to attribute too much foresight to those involved, overlooking the complexities and uncertainties that influenced their choices. Recognising and mitigating the effects of hindsight bias is essential for making more informed decisions and crafting effective strategies. When analysing past successes or failures, we tend to overlook the unpredictable nature of the world, making our strategies seem more prescient than they were.
Strategic planning/scenario building often breeds a false sense of certainty. In the boardrooms and the offices of policymakers, crafting detailed strategies can create an illusion of control over an inherently uncertain future. The meticulous spreadsheets, market analyses, and projections can give leaders a comforting belief that they have mapped out the path to success. However, this confidence can be misleading, as it disregards the dynamic nature of the world; it is not a static entity that can be predicted with absolute certainty. External factors, market disruptions, and unforeseen events have a way of rendering even the most well-thought-out strategies obsolete. The danger lies in mistaking the plan for reality and failing to adapt when circumstances inevitably shift.
Data too, can deceive. History is replete with case studies of many who have been arrogant, relying on the ‘numbers’ to tell the tale. The abundance of information at our fingertips can lull us into thinking that we possess the means to predict and control the future. Yet, as we saw, for example, in the 2008 financial crisis, complex mathematical models and data-driven decision-making can crumble in the face of unforeseen events. Prior to the crisis, financial institutions relied heavily on intricate risk assessment models, underpinned by historical data, to gauge the stability of the markets. However, these models failed to account for the systemic risks that ultimately led to the meltdown. This stark reminder teaches us that while data is a powerful tool for decision-making, it must be used judiciously and alongside a healthy dose of scepticism. Blind faith in data can lead to a false sense of security and a dangerous underestimation of the unpredictable factors that shape our world. The "black swan" concept, popularised by author Nassim Nicholas Taleb, is the goat fattened before an upcoming feast. From the goat’s perspective, the data shows he is being well looked after/fed well till an unforeseeable and cataclysmic event occurs for the goat!
In 1982, Tom Peters and Robert H. Waterman Jr. wrote "In Search of Excellence" which turned out to be a bestseller. The authors argued ‘Eight Basic Principles of Excellence,’ in management and organisational development. Several companies were highlighted to establish the principles. While some remain strong, others have strayed.
The key to addressing strategy's shortcomings lies in embracing adaptability over unwavering certainty. In a world where change is the only constant, rigid, long-term plans can quickly become obsolete. Organisations that prioritise adaptability are better equipped to navigate the unpredictable twists and turns of the business landscape. They foster a culture of continuous learning, where failures are viewed as valuable lessons and not as reasons for blame. By remaining agile and open to adjustments, these organisations can seize emerging opportunities and swiftly respond to unforeseen challenges. Moreover, they understand that strategy isn't a one-time, static document; it's a dynamic process that requires constant refinement based on real-time feedback and market dynamics.
As we scrutinise strategy's role in business and decision-making, it becomes evident that its primary function is to help us understand the past, not predict the future. The world is complex and dynamic, and no amount of strategic planning can eliminate uncertainty. To thrive in such an environment, we must shift from attempting to peer forward with unwavering precision to building organisations that can adapt and pivot in response to the unpredictable.
Success has an uncanny ability to cast a golden glow over every aspect of the endeavour that achieved it. Once a venture or initiative becomes successful, it often takes on a mythical quality, with its strategies, leaders, and decisions hailed as visionary and flawless. This halo effect can obscure the critical role that factors like serendipity, timing, and external circumstances played in the success, leading to the erroneous belief that replicating the same approach will guarantee victory in other contexts. True strategic wisdom requires not just celebrating success but also examining it critically, acknowledging the role of chance, and recognising that a strategy’s effectiveness can be highly context-dependent, making it crucial to factor in failures and execution to craft a comprehensive and adaptable strategy. Only then can we navigate the uncharted waters of the future with confidence.
