Let’s assume that a government transportation committee examined whether to add more lanes to an urban highway.
The conclusion of their study went something like this:
Yes, we concede that during a brief period of the day (rush hour), the highway becomes highly congested and traffic stops moving. However, outside of rush hour, the highway is operating well below capacity and flows very smoothly. Since the highway is well below capacity for approximately 85% of the day, we see no reason to add any lanes. After all, 85% efficiency for a highway is quite acceptable.
The response from a consumer group advocating extra lanes went something like this:
The reason why the highway flows well outside of rush hour is because that is not the time when the highway is most used and most needed. According to our research, 85% of the cars using the highway use it during the congested rush hour period when cars greatly outnumber the current highway capacity. Since the highway is well above capacity when 85% of the drivers are on it, we see a clear justification for adding more lanes to the highway. After all, 85% inefficiency for a highway is quite unacceptable.
So is the current highway 85% efficient or 85% inefficient?
Strategy creation involves making decisions. Facts are a key input for making those decisions. In fact, I had a boss once who on a daily basis would say that he would not make any decisions unless they were “fact-based.”
But how reliable is the “fact-based” approach? In the story above, two groups used facts to reach a conclusion. The transportation committee used facts to “prove” that the highway was 85% efficient. The consumer group used facts to “prove” that the highway was 85% inefficient. These facts lead each group to come to a different conclusion about adding lanes to the highway.
Was one group’s facts right and the other group’s wrong? No, both groups had equally true facts:
a) 85% of the TIME OF DAY the highway had excess capacity.
b) 85% of the TIME OF DRIVERS using the highway was during times of inadequate capacity.
So what is the right “fact-based” decision? Obviously, we need more than just these facts to reach an acceptable decision. And when it comes to strategy we need more than just facts as well.
The principle here has to do with perspective. Facts alone do not automatically lead to the proper conclusion. It is only when we place those facts within the context of the proper perspective that we see what is the right thing to do. Therefore as much care and effort should be given to developing the proper perspective as is given to acquiring the right facts.
Perspective depends on two items: Where one is looking from and what one is looking at. In strategic analysis there are usually multiple places to look from and multiple items to look at. If you miss out on examining some of these options, you may come to the wrong conclusion.
Perspective #1: Where One Is Looking From
From the eyes of the transportation officials looking at the highway from afar, what they saw was smooth operations nearly all day long. From the eyes of the drivers on the highway, nearly all of them saw congestion nearly every moment they were on the highway. Their different perspectives cause them to see the situation very differently.
A similar situation can occur in developing your strategy. From the eyes of the executives inside your organization, you may see a particular strategic option as ideal for your bottom line. But how does that option look from the perspective of other eyes?
Perhaps your decision places added burdens on your suppliers, causing them to no longer want to supply you or only supply you if they get added compensation for those added burdens. That added compensation might wipe out a lot of the original advantages you saw from the internal executive eyes. A similar situation could also occur with your distributors.
Or perhaps your decision triggers an adverse reaction from your customers when they see it. This problem could not be seen with the internal executive eyes, but was quickly apparent to the customers’ eyes. The unperceived adverse consumer reaction could make that original strategic option no longer as viable as first seen.
Or perhaps when your competition sees the strategy, they perceive it as a bigger threat than you thought and they react far more aggressively than anticipated. This aggressive reaction wipes out your perceived benefit.
Or maybe when those ideas from headquarters get down to the factory floor, they cannot be operationalized as smoothly as one thought. Something gets lost in the implementation on the factory floor which hurts the strategy’s effectiveness.
Therefore, before making a decision, step away from the pile of facts and look at the situation through other sets of eyes. How will the decision be seen by all the other relevant parties (suppliers, distributors, customers, competition, front line employees, the government, etc.)? How will their perspective affect their behavior, and how will that behavior impact your strategy?
You may find a need to modify your strategy in order to get all of the players see the situation in a manner which moves them all in a favorable direction for your business.
In addition, consider how you communicate your decisions, so that you can help influence how others see it. How the decision is communicatted may be just as important as the decision itself when it comes to implementation.
Perspective #2: What One Is Looking At
In the story, everyone was looking at the same issue: what is the proper number of lanes to have on the highway. It assumes that the only way to address congestion is by looking at lane-count for the highway. Is this a fair assumption?
Perhaps there are other solutions one could look at, like:
a) Increasing use of public transportation;
b) Convincing more people to use alternate routes;
c) Getting businesses to stagger the hours employees work;
d) Reallocation of traffic direction for the current lanes depending upon time of day (e.g., more inbound lanes in the morning and more outbound lanes in the evening).
e) Financial incentives for carpooling.
f) Building a separate road nearby.
How do you know you are making the right decision if you have not fully explored all potential options? All those facts you’ve gathered may only be applicable to examining one particular option. If you look at the problem in a different way, you may find that you need a different set of facts altogether.
Remember, business success usually depends on offering a superior solution to your customers’ problems. There may be many distinctively different ways to solve that problem. Unless you examine many alternatives, you may not offer the right solution.
Perfecting the obsolete is not a path to success. After all, even a mediocre smart phone is far superior to the best Morse code telegraph solution, no matter how much time you spend trying to perfect it.
So don’t frame your strategic discussion too narrowly. Before deciding on the best way to do something, first make sure it is something worth doing. First frame the discussion around finding the best solution rather than just finding ways to improve the status quo.
Facts are useful, but facts alone are incomplete. Facts are only useful if seen from the proper perspectives. Therefore, before deciding a course of action, improve your perspective by:
a) Looking at the problem through all the eyes of the various people who have an influence on the successfulness of the strategy (suppliers, distributors, customers, competition, front line employees, the government, etc.).
b) Looking at multiple ways to solve the problem. Creative, superior solutions may look nothing like the status quo.