Humanity is sacred, data is free.
We often think of strategy as a deeply analytical exercise – a confection of data, bar charts and PowerPoint decks that go on for miles. But to come up with truly creative strategies, the human dimension is all-important. When strategy first became enshrined as a core element of good business practice, analysis was squarely at its centre. And that wasn’t wrong. If you knew more about the trajectory of your experience curve than your competition, you could use those insights to price more aggressively, gain share and come up with a lasting advantage.
Yet, today, we need to at least match the power of analytical tools with the human qualities of imagination, insight and empathy if strategies are to be powerful and differentiated. Most data used in business – revenues, return on assets, unit sales – are lagging indicators. These give you information, but their predictive power is only as good as the extent to which the past is like the future. In high-uncertainty environments, you can’t count on that.
A second problem with analytical techniques is the sheer volume of information available. In the analogue past, gathering information was painstaking and slow. Yet the information landscape has changed. What used to require MBAs with clipboards standing on street corners to determine optimal locations for a bank branch can now be discovered with a simple online search.
Chances are, the strategy your organization is pursuing today bears a strong resemblance to the strategy it was pursuing yesterday. Many inertial forces drive this. For instance, your stock market analysts have all been trained to look at traditional key metrics when evaluating your company’s performance and prospects. With a change in strategy, those metrics may well change – leading to a need to re-educate not only your own team but all the people involved with making strategic choices.
Finding a strategic answer in an analytic approach is thus probably not going to create that deeply differentiated, purposeful strategy that people crave. Instead, we can combine analysis with three characteristics that are deeply human: imagination, insight and empathy.
In their wonderful book The Imagination Machine, Martin Reeves and Jack Fuller demonstrate that imagination – the power to conceive of a future possibility that does not yet exist – is uniquely human. Oftentimes it is triggered by dissonance or something unexpected in one’s environment. It is from these weak signals that people can devise truly novel strategies. The mail-order Dollar Shave Club, which transformed the men’s grooming segment, was born of a realization by its founders that the existing high-price model was flawed.
A practical cousin to imagination is insight: a deep understanding of a situation. Insight involves connecting often disparate observations about what is going on into a coherent point of view about the future, which become the bedrock of a firm’s strategic choices. Algorithms can provide you with patterns, but without a clue as to what those patterns mean. Take JD.com. It began in the 1990s as a small Beijing brick-and-mortar store. The 1998 Sars epidemic led to a lightbulb moment for founder Richard Liu – if people wanted to avoid crowds, perhaps they would prefer to buy goods online. Liu’s insight paid off: by 2021, the company’s brand value was some US$44bn.
A third quality that analysis can’t deliver is empathy. Empathy is absolutely core to the design thinking process in which designers seek to arrive at novel solutions for complex problems. During lockdown, Ikea released an employee-created video that showcased products that offer more attractive sleeping, dining and celebratory environments.
The best strategies involve making creative, even unexpected, choices under conditions of competition and limited resources. The more imagination, insight and empathy in the process, the more likely you are to delight your customers and beat your competitors. The triptych of strategy is now uniquely human: it’s the new competitive advantage.
Rita Gunther McGrath is professor of management at Columbia Business School.