Strategy is Both Art and Science

I am often fascinated by how entrepreneurs approach the creation of strategy. There is something of a debate underfoot about whether instincts are more important than data, or if art is as important as science. I believe it is essential that formation of strategy be an amalgamation of both.

The most inventive entrepreneurs have extraordinary instincts and managerial courage.  They navigate the shark filled waters looking for “blue ocean”, and often identify opportunities based on gut instinct.

Yet making decisions based on instinct alone is inherently dangerous.  Expansion into new products or markets, or even hiring decisions should be supported by data and analysis.

The emergence of powerful databases is expanding our ability to access data and convert it into meaningful information.  As big data has gained acceptance as a powerful business tool (and potential game changer), strategists should be looking for new ways to vet their strategies and support them with useful analysis.

The role of data scientist is amongst the hottest  of fields, as companies seek out people who can make data sing.  One of our $30 Million revenue clients hired an analyst a couple of years ago. Having an analyst is a little like remodeling your kitchen (the return on investment is easy to see and quantify).  In the last year they hired a second analyst to supplement a finance and accounting staff that spends most of their time pumping out financial information.  Poor integration of accounting systems magnifies problems that many companies have in managing data.

The art vs. science argument has been made before, most notably by Malcolm Gladwell in his book Blink.  One could easily argue that companies could become paralyzed in data, which could stifle creative thinking and innovation.

Yet, I would argue that most small and mid-market companies make instinctive decisions because they do not believe that quality information exists.  The reality is that quality information (including market data) does exist, but few know where to find it. Even more disconcerting is that companies are often unwilling to pay to acquire it.

I was once working with a client who was interested in finding new customers. Our firm provided access to a database of imports (everything that crosses a port in the U.S. is in public record). Armed with the new database, the client could see a description of every pallet entering through a major US port that was only a few miles from their office.  When I asked the client if the information was useful, he told me that I had “given him the keys to the castle”.

If nothing else, solid analysis can inform in such a way as to put creative decisions in better context. Say an entrepreneur thought there were two new markets to enter. If one is a $50 Billion market growing at 10%, it may be more attractive than a $30 Billion market growing at 3%. Such data can inform, if not govern decision making.

So make the investments to better understand markets and create the systems within your company to analyze information so that you can make fact-based decisions.

Marc Emmer is President of Optimize Inc., a management consulting form, specializing in Strategic Planning. Marc can be reached at marc@optimizinc.net 

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