How do you build strategies? If you ask executives, they will all give different answers. Some will talk about gut feel, others will talk about data driven techniques, some will talk about watching competition, others will talk about internal capabilities and values. The overarching answer is that for building strategies, executives look at the world around them, interpret what they see and translate this to the best next action they can think of for their business. We call this the three-step process for strategic thinking. Some companies do this at high speed in agile cycles, others at a slower pace with yearly cycles. In most cases leadership and only a selection of other talent in the organization is involved in this three-step process. In the best case it is supported by some tools to measure and accelerate.
The three-step process for strategic thinking gives transparency in what happens unconsciously and perfectly reveals the limitations of the current practice in international companies. We want to highlight how collective intelligence can give a company a competitive advantage when applied in strategy development.
Collect data – Expand horizons
The first step in strategy development is collecting data. Multiple tactics, tools, techniques and methods exist for data collection. Probably the easiest way is conversation. Most knowledge we have about our environment comes from talking with our peers; colleagues, friends, neighbors, clients, customers, partners, etc. The input we gather is an unstructured collection of views, opinions and facts. We typically collect this data and unconsciously form an aggregated image combining these multiple views. Being a very efficient way, this “gut feel” based data collection can lead to very incorrect deductions and thus end up providing the wrong data to begin with.
Being increasingly conscious about the limitations of gut feel, companies start to measure objective data points to later use as a basis for decision making. KPI’s, standard reports, dashboards, scorecards are examples of tools to measure and collect facts. Being a very logical and seemingly straightforward tactic, more and more companies realize that the cost and effort to collect this kind of objective data is very high and demands an impactful change in behavior across functions and departments. On small scale change is feasible but for global companies, barriers to scale are hard to cross. For strategic decisions of today, we often still don’t have the necessary objective data points making this method nice in theory but difficult in practice at scale for now.
On top of the two above methods, executives typically apply additional tactics. Examples include buying data from brokers analyzing markets and trends and going through research from universities, business schools, etc. Although interesting and often useful, these tactics are both expensive and time consuming without any guarantee of value and correctness.
For most of these tactics the horizon scanned for data collection is limited, either by design (conversation, research, …) or due to high cost in time and resources (measurements, data brokers, …). Generally, at the time where a company needs to make strategic decisions, they don’t have his time and resources and the actual challenge becomes how to collect data from a broad horizon fast without high costs.
Using the collective intelligence of a company can provide an answer. When collecting data mainly from conversation, collective intelligence can expand the horizons with the number of conversational agents consulted. In this case aggregation increases objectivity. When consulting colleagues close to “the field” this will further generate new insights, weak signals or trends which were unknown to executives but valuable for strategy.
The need for objective measurements will decrease if the people working closely to the processes of interest can be consulted directly. Cost efficiency in assembly lines could be measured with data points but can be measured faster by consulting workers. Finance processes could be measured with KPI’s but can be measured faster by consulting finance departments and direct stakeholders. Bias of course exists but will have less of a negative impact on the data when aggregated.
Collective intelligence at scale can expand horizons in data collection for strategy in a cheap and fast way resulting in objective knowledge and broader insights.
Process data – remove bias
The next step in strategy development is processing of data. Data is only valuable when the right conclusions are being deducted. In this step, links are being drawn between the different data points leading to conclusions. When done in the typical setup with a limited audience of strategists and executives, bias is introduced. Many biases unconsciously influence our thinking and might lead to less rational conclusions. Some typical examples include:
Confirmation bias: People tend to prefer conclusions that confirm their hypothesis rather than deny it, ignoring essential pieces of information that prove them wrong. In strategic thinking this shows in executives consistently making choices towards one same direction, ignoring the information they are provided that shows other directions might be more interesting and viable.
Authority bias: People tend to trust the opinions of authority figures more than others. In strategic thinking this means that a more experienced executive can easily impose an opinion on other strategists who might blindly follow it without consulting more data.
IKEA effect: People tend to hold more value to things they created themselves. In strategic thinking amongst established executives this might introduce conclusion deduction confirming past decisions, leaning towards more of the same for the future even if data shows this is not optimal.
The more colleagues collaborate on conclusion deduction, the more the effect of cognitive bias is balanced out. Looking at the same data with multiple people might introduce new viewpoints based on new ways of thinking. Building on collective intelligence can lead to more objective interpretation of available data building the right foundation for making the best decisions.
Decide on action – increase brainpower
In the third step of the three-step process for strategic thinking, data and conclusions are translated into actions. Although tools and methods such as simulations, heuristics, forecasting, etc. exist, this step mainly requires brainpower and creativity. We distinguish two phases: ideation and prioritization. The desired outcome after these two phases is to find the best next action(s) to take as a business. For both phases collective intelligence can be valuable.
Ideation – collective brainstorming
In ideation, we use our creativity to find possible actions and solutions to current challenges that are viable for the company. The data collected and insights generated in the previous two steps can be used as inspiration. In traditional approaches, the brains of executives and strategists are picked to find these possible actions for a company to take next. In the best case they engage in some sort of brainstorming exercise reinforcing creative thinking and evaluating combined ideas. Although having more ideas does not necessarily mean better, ignoring bright minds can lead to missed opportunities. Well managed brainstorming at scale, leveraging on collective intelligence increases the odds of at least having the best idea on the table.
Prioritization – collective decision making
Based on all ideas coming out of ideation, priorities need to be set. At this point we have all necessary data and a collection of possibilities to support this decision and in the end make the most viable choice. Much like in the second step where we discuss biases, here too, collective intelligence can balance out bias. On top of only resulting in a choice validated by more people, you also get buy-in for the choices made. Of course any decisions will need to be validated by the company leadership but collective intelligence can voice an objective opinion carried out by a wide audience.
In many large companies, the three-step process for strategic thinking is a process only for executives and strategists. Collective intelligence can reinforce and accelerate this process by expanding horizons, removing bias and increasing brainpower. If a company succeeds in applying this at scale, more viable decisions can be made resulting in a significant competitive advantage.
Don’t hesitate to reach out if you want to learn more.