The hobgoblin of business strategists

If your strategy can’t be wrong, it’s not right.

Geoff Wilson

Business strategy, like any real strategic pursuit, is fundamentally ambiguous.  It involves estimating the future along many axes–regulatory policies, competitive behavior, customer tastes, supply shocks, organizational zeal, and investor requirements are just a few.

Ambiguity has a terrible consequence for some senior management teams and most strategy consultants: It leads them to adopt a style of communication and assertion that is unassailable.  You’ve probably seen it:  A request for a recommendation for what to do in the face of a possible change in trade policy turns into a long explanation from your consultant on how “it depends.” On the way to trying to be completely right, many of today’s management strategists turn to arguments that can’t be wrong, and an argument about ambiguous things that can’t be wrong is a pseudoargument.

Famous philosopher-scientist Karl Popper had this comment to describe the phenomenon:

In so far as a scientific statement speaks about reality, it must be falsifiable; and in so far as it is not falsifiable, it does not speak about reality.

So if you are a top manager who likes to resort to platitudes and spin vs. direction and argument, Popper would say you aren’t actually confronting reality, and confronting reality is the first order of business for any leader or adviser.

How does this actually look in the real world?  I think the best way to see it is to look for arguments that can’t possibly be wrong no matter the evidence placed in front of you. If your management strategist tells you that restructuring an industry via an aggressive M&A agenda is the right strategy, and you say “but valuations are too high” to only get the response that “this means M&A is the right thing to do because everybody is already seeing the value,” then your management strategist might be engaging in an un-falsifiable strategic argument.

A strategic argument must be falsifiable a priori.  That is, you must be able to say in which states of the world you might be wrong when the strategy is built, not after.  Anybody can tell you why a strategy was wrong once it encounters the real world; but if you can’t say what makes your strategy wrong, you probably don’t have a strategy (or at least a sound method for defining the strategy) in the first place.

That’s why strategies that only focus on inputs are often wrong: They are not falsifiable.  “Innovate” says the strategist, or “become more productive,” or “hire better talent.”  Those are all great strategic inputs, but they don’t survive the falsifiability test.  How about these:

  • Innovate in the personalized medicine space to meet a current need for cystic fibrosis therapy
  • Become more productive in our pipeline repair process to regain lost capacity to serve existing customers
  • Hire better talent at CEO to avoid management platitudes and ensure sound strategy

See what I mean?  The comments above are falsifiable in states of the world where (1) there is no need for CF therapies, (2) there is no need for capacity to serve customers, and (3) the CEO understands the need for falsifiable business strategy. Strategy is an argument, and ideally it’s a scientific argument. But for an argument to be scientific, it must be precise enough to be wrong when presented with countervailing evidence.  In short, your business strategy must be falsifiable.

Try it out:  Ask yourself what your strategy is, and then test whether you can envision a future where it is wrong.  If you can, then you are probably standing on solid ground. If you can’t?  Well, you are probably engaging in pseudoscience.  This is the hobgoblin of top management consultants and senior managers of all stripes.

If your strategy can’t be wrong, it’s not right.

What do you think?  Do you see “strategies” that are merely platitudes disguised as science? 

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