by Mark Chussil

Introduction

With his heartfelt goodbye-cruel-world article “Peak Intel: How So-Called Strategic In­telligence Actually Makes Us Dumber” in The Atlantic, Eric Garland sparked an elec­tro­nic blaze on LinkedIn. His article fired up many people (see Acknowledgements), includ­ing me, in the fields of competitive strategy and competitive intelligence over a few days in April 2012.

The article and commentary hovered around three themes, which I’ll call Closed Minds, Distorted Markets, and Stormy World. Those themes are perennially old and current-events fresh.

I’m not saying the themes are wrong. I am saying I don’t think the evidence establishes they’re right. They might be right, but they aren’t right yet. Until they are right I believe it’s worth considering other perspectives.

This essay, Closed Minds, is the first of four. It is my commentary on Mr. Garland’s arti­cle, and my commentary on the commentary on his article. See the others: Distorted Markets, Stormy World, and Beyond The Themes.

The Closed Minds Theme

Situation: I gave my client bad news.

Observation: My client didn’t like the bad news.

Outcomes: My client didn’t act on the bad news and didn’t ask for more bad news.

Conclusions: Clients don’t want to pay for bad news. Clients are closed-minded.

A Familiar Anecdote

The Closed Minds theme does not tally successful and unsuccessful consulting engage­ments. It is not a formal analysis. It is an anecdote, or maybe a collage of several.

It is an anecdote to which pretty much all human consultants can relate. Who among us has not experienced rejection or pushback? “They” just don’t get it. We all know the words to the lamentation and we all join the chorus on cue, and because we all sing along we think the song is good and true.

My own anecdotal experience contradicts the Closed Minds anecdotes. The executives who hire me to conduct business war games rarely (about 2%) have a particular out­come in mind. My clients often say explicitly that they want to prevent or dislodge com­placency; they want to be more open to news, good and bad.

It is possible I am interpreting my anecdotal evidence correctly and the Closed Minds pro­ponents are interpreting their anecdotal evidence correctly. Both can be true if our anec­dotes are drawn from different groups of people. It’s like getting differ­ent results from election-year focus groups because I talk to Democrats and you talk to Re­publi­cans. Perhaps people who buy news are more prone to Closed Minds resistance than are people who buy strategies. Not to mention that there’s simply more bad news dur­ing times of recession, burst bubbles, unemployment, and gridlock.

I’m Not Closed-Minded, I’m Principled and Busy

The Closed Minds theme is built on anecdotes, but that doesn’t necessarily mean its propo­nents are misinterpret­ing the anecdotes. Closed-minded people do walk the earth, and some of them become clients. The difficulty is in generalizing from the anecdotes. Not all bad-news deliveries lead to Closed Minds out­comes; open-minded people also walk the earth, and some of them become clients too.

Are closed-minded clients more plentiful than open-minded clients? If anything, I’d ex­pect the reverse. Why would a closed-minded person pay for any news at all?[1]

Think of it this way. When the question arose “who wants to pay for bad news?,” my response was “smart people.” It’s smart to want bad news early. Later on it’s too late to do anything about it. That’s why I think that at least some clients are not closed-minded, and that’s why I think the Closed Minds theme may be true occasionally but not usually.

No one thinks of him- or herself as closed-minded. Principled perhaps, or the proud possessor of superior evidence or expertise, or even too busy to fuss with small stuff, but not closed-minded. Closed-minded is a label bestowed by the other person.

Even though no one thinks of him- or herself as closed-minded, I doubt that anyone is open-minded all the time on every subject. Still, before we stamp a person “closed-minded” we might well consider whether another label fits better.

In other words, don’t assume that a client who rejects bad news must be closed-minded. Ask why an intelligent, open-minded client might reject the news. You can always de­cide they’re closed-minded later, after you’ve been open-minded about it.

Reasons to Reject Bad News

Here are some reasons why an intelligent client might reject your bad news:

• They know something you don’t know.
• They need time to process what you said.
• They’ve heard contrary opinions or evidence, and they disagree with you.
• They have a strong vested interest in the status quo or in sunnier forecasts.
• They’re under terrible pressure to perform or they’ve made huge, irrevocable com­mitments.[2] They’re not going to be thrilled when you tell them they’re going to fail.
• They misunderstood you or you were unclear.
• The bad economy or cost-cutting has sapped their company of resources, so they don’t have the means to do anything about bad news other than be frustrated.
• The audience is, shall we say, awkward. Imagine customers, suppliers, or top manage­ment are in the room. Some attendees, such as investor relations, might even be legally required to disclose bad news.
• They don’t see a way to deal with the bad news and/or you haven’t provided (or been asked for) a way out of the mess.
• They’re not paying for bad news, they’re paying for solutions.

I’m not saying a client receiving bad news is right or wrong to feel those things. I’m only say­ing it’s understandable for a human to feel those things. They’re rational from the client’s perspective, and, despite appearances, they don’t necessarily close the client’s mind permanently. Those possibilities also suggest ways we can deal more delicately with clients and even assist them further.

Finally, there is a very human side to the Closed Minds theme. If the client rejects what I have to say and is closed-minded, it’s sad but it’s not my fault. If the client rejects what I have to say but is not closed-minded, perhaps I am wrong. That’s not a happy prospect to contemplate, especially if I have a big reputation or my words affect many jobs and big bucks.[3] In other words, it’s bad news for me, and it’s my turn to resist it. I’m not say­ing we’re right or wrong to blame the client instead of ourselves. I’m just saying we hu­mans have a built-in deflector shield. I’m suggesting that the insight we gain by tempo­rarily lowering the shield can make the pain worthwhile.

Next, Read Part Two: Distorted Markets

Click here to read part two in this series of four essays. That part is about the Distorted Markets theme.

Acknowledgements

The LinkedIn e-conversation, in the Corporate Planning & Global Industry Segmenta­tion group, contained wis­dom from James Andrus, Babette Bensoussan, Ben Gilad, August Jackson, Alan Michaels, Seena Sharp, and many others. People cited Benjamin Franklin, Daniel Kahneman, Friedrich Nietzsche, and Mi­chael Porter. We covered blind spots, business war games, the curse of success, hon­ing the craft, industry databases, News Radars, oligopolies, political influence, and strat­egy simulations. I have done my best to reflect that commentary in my essay. Blame mistakes on me, and credit wisdom to them. My thanks to Sean Campbell for sage advice.

By Mark Chussil

Introduction

With his heartfelt goodbye-cruel-world article “Peak Intel: How So-Called Strategic In­telligence Actually Makes Us Dumber” in The Atlantic, Eric Garland sparked an elec­tro­nic blaze on LinkedIn. His article fired up many people (see Acknowledgements), includ­ing me, in the fields of competitive strategy and competitive intelligence over a few days in April 2012.

The article and commentary hovered around three themes, which I’ll call Closed Minds, Distorted Markets, and Stormy World. Those themes are perennially old and current-events fresh.

I’m not saying the themes are wrong. I am saying I don’t think the evidence establishes they’re right. They might be right, but they aren’t right yet. Until they are right I believe it’s worth considering other perspectives.

This essay, Distorted Markets, is the second of four. It is my commentary on Mr. Gar­land’s article, and my commentary on the commentary on his article. See the others: Closed Minds, Stormy World, and Beyond The Themes.

Distorted Markets

Situation: Oligopolies are getting bigger and more powerful. Government is playing an ever-more active role in markets.

Observations: Oligopolies and government distort market forces. They cloud the future by subjecting it to the caprices of industry dominators and political lobbyists.

Outcome: It gets ever-harder to predict the future.

Conclusion: Traditional competitive and market analysis is increasingly irrelevant.

Needed: A Fundamental Market Rationality

Business analysis, education, and thinking assume a fundamental market rationality. When we draw up our strategies we assume the market is fair: customers can choose without coercion, regulations apply equally to all, and so on. A level playing field.

Without those assumptions, we’d find it very hard to plan; we might even find planning pointless. For example, if Abrams-tank incumbents could gang up on poor little Smart-Car us, we couldn’t enter their market. For another, if government could direct people to buy or not to buy from specific businesses, then we could find our fortunes rising or falling through no virtue or fault of our own.

The Distorted Markets theme says that oligopolies have tightened their influence of more markets, perhaps directly through market power, perhaps indirectly through lob­bying for favorable rules. It says that governments are growing more intru­sive by pick­ing winners and losers, supporting the former with subsidies, tax incentives, tariff pro­tection, or direct investment, penalizing the latter by withholding those advantages. Some of those effects take place within a national economy, others are part of maneuver­ing among countries. The theme calls those effects distortions and asserts that those distortions are increasing. (Of course, companies designated “winners” don’t think of those effects as distortions.)

Obviously these are highly charged political issues, and much as I want to join that bat­tle I will throttle myself. For the purposes of this essay, my job as author is to use neutral language and de­scribe points of view without judgment, no matter how desperately they need to be judged. In return for my restraint, your job as reader is to give me a break. I’m happy to talk about politics over a nice single malt. But here let’s focus on the Distorted Mar­kets theme, not on the legitimacy of the distortions.

Prevalent and Potent Distortions

The point of the Distorted Markets theme is that the distortions are so prevalent and potent that they make it difficult or impossible to strategize effectively.

I don’t think an­yone disputes whether market concentration and government policies have effects. (People do dispute whether those effects are good, which is the debate we’re not having now.) I think the important question for those of us in CI and competi­tive strategy is whether those distortions so confound our efforts to run our businesses that it’s reasonable to goodbye-cruel-world strategy analysis and focus instead on raw power.

The Distorted Markets theme might be right, but it isn’t yet, at least not for me. There’s still plenty of strategizing to be done.

A little historical perspective relevant to oligopolies.

• A few decades ago it was fashionable to vertically integrate. We want control over everything between raw materials and the customer: it’s profitable and helps us control our costs.[1]
• Then it became fashionable to outsource anything that wasn’t a company’s core com­petence. (Vertical disintegration?) Our suppliers have economies of scale, and we don’t have to manage operations we don’t know well.
• Now it’s fashionable to partner with companies (affinity programs), to join with them in networks (airline alliances), or simply to buy little companies if they show promise (pharmaceuticals). We take on less risk and we can move more quickly.
• On the day I wrote this part of the essay (April 30, 2012) Delta Air Lines an­nounced it would buy an oil refinery to reduce its fuel costs. Back to vertical integra­tion?

Companies have jockeyed for control and competitive advantage for a long, long time. They have experimented with different methods, and done so in a surprisingly herd-like way. The exact nature of the methods changes from time to time and from place to place, but there’s always something. And that’s the point: there’s always something. That’s why I can agree that today’s oligopolies have distorting effects while also saying that they’re not so different, in kind or in number, from the distortions of the past. (Note too that some oligopolies are shifting or shrinking, as in book publishing and consumer elec­tronics.) We can quibble and quarrel over matters of degree and over a nice single malt, but I don’t see a massive shift in the fir­mament. I could be wrong soon but I don’t think Distorted Mar­kets is right yet.

We don’t necessarily need to know much about the something. It matters to us if we find ourselves competing with a company that has a cost advantage. What matters too is the size and importance of its cost advantage, the likelihood it will persist, and whether we can gain advantages of our own. It doesn’t matter so much whether its cost advantage comes from long-term contracts with suppli­ers, favorable tax rates, getting acquired by a sugar daddy that buys a new factory, or locating where labor costs are low. In other words, you can confront the same effect — a competitor with a cost advantage — that is or is not the result of a “distortion.”

Government “intrusion” ebbs and flows too, accompanied by political hysteria as an entertaining bonus. Regulations are relaxed, regulations are tightened. Lobby­ists are in­vited in, lobbyists are locked out. Retired politicians leverage their net­works. Perhaps the biggest government-intrusion change in the USA in recent years is the Citi­zens United case, which opened the door for big money to, uh, participate more enthusi­asti­cally in poli­tics. I think we should classify that as corporate intrusion affect­ing, ef­fecting, and in­fecting government intrusion, but the effect by any name would not smell sweet.

Citizens United may be a material change for industries rich enough to use it aggres­sively. It remains to be seen how effectively corporate money will be countered by forces such as social media and mass demonstrations. (I’m expressing ignorance, not skepti­cism.) Meanwhile, let’s enjoy our ride on the quadrennial Ameri­can election spasm.

Then we have local, state, provincial, national, and international taxes, tariffs, currency fluctuations and manipulations, sanctions, protectionism, state-backed industries, and so on. These things have been around a long time too, and to me fall into the category of there’s always something.

As I understand it, Distorted Markets doesn’t mention the effects of natural disasters, war, un­employment, mass migrations, or the near collapse of industries (housing in the USA) or national economies (Greece, Spain). Those effects can be large and sudden. If we’re wor­ried about our ability to plan and predict, why focus only on oligopolies and govern­ment? If the distortions are meaningful to a business, it seems irrelevant to me whether they are deliberate or fortuitous.

Looking Through Distorted Glass

The point of the Distorted Markets theme is that distortions make it hard to analyze and strategize. Perhaps I’m missing something, but in my experience markets can actually be analyzed well even with distortions. I know because I’ve done it, in dis­torted markets such as airlines, oil and gas, pharmaceuticals, and tele­communica­tions, on five conti­nents. You’ll get frustrated indeed with the cruel world if you analyze by, say, ex­trapo­lating the past into the future using trend lines or common statistical models. But if you apply what-if analysis using models designed for strategy simulation, you’ll get ac­tion­able insight. (See All About Models.)

We have to let go of the idea that we can predict the future. Predicting the future is not possible except for grindingly dull situations, and in those situations the successful pre­dictions are due not to the predictor’s brilliance but to the situations’ grinding dullness.

Instead, embrace three ideas:

1. Competitive advantage starts with exploring futures. That’s why people work with sce­narios, contingencies, competitive intelligence, business war games, and simula­tions.
2. We are not passive recipients of whatever a random-number generator doles out. Our positive actions make a difference.
3. Remember that our objective is to achieve good results, not to make good predic­tions. To do that we need good decisions, and good decisions require a lot more than predictions.

Next, Read Part Three: Stormy World

Click here to read part three in this series of four essays. Part three is about the Stormy World theme.

Acknowledgements

The LinkedIn e-conversation, in the Corporate Planning & Global Industry Segmenta­tion group, contained wis­dom from James Andrus, Babette Bensoussan, Ben Gilad, August Jackson, Alan Michaels, Seena Sharp,and many others. People cited Benjamin Franklin, Daniel Kahneman, Friedrich Nietzsche, and Mi­chael Porter. We covered blind spots, business war games, the curse of success, hon­ing the craft, industry databases, News Radars, oligopolies, political influence, and strat­egy simulations. I have done my best to reflect that commentary in my essay. Blame mistakes on me, and credit wisdom to them. My thanks to Sean Campbell for sage advice.

By Mark Chussil

Introduction

With his heartfelt goodbye-cruel-world article “Peak Intel: How So-Called Strategic In­telligence Actually Makes Us Dumber” in The Atlantic, Eric Garland sparked an elec­tro­nic blaze on LinkedIn. His article fired up many people (see Acknowledgements), includ­ing me, in the fields of competitive strategy and competitive intelligence over a few days in April 2012.

The article and commentary hovered around three themes, which I’ll call Closed Minds, Distorted Markets, and Stormy World. Those themes are perennially old and current-events fresh.

I’m not saying the themes are wrong. I am saying I don’t think the evidence establishes they’re right. They might be right, but they aren’t right yet. Until they are right I believe it’s worth considering other perspectives.

This essay, Stormy World, is the third of four. It is my commentary on Mr. Gar­land’s article, and my commentary on the commentary on his article. See the others: Closed Minds, Distorted Markets, and Beyond The Themes.

Stormy World

Situation: The world is changing rapidly and unpredictably, and change is accelerating.

Observation: Predictions are getting worse.

Outcome: Business decisions go awry more often.

Conclusions: As the future grows unpredictable, business decisions are increasingly problematic. No hope in sight.

The Good New Days

“How fortunate we are to be running a business in such placid times! Our competitors are kind and gentle, customers love us, and the win/win keeps pouring in. Decision-making is so much easier than it was in the indecipherable past. The world has reached a happy equilibrium and every­one is committed to cozy stability. Ah, these are the good new days.”

If you had a million dollars for every time you’ve heard an executive say that, you wouldn’t have a million dollars. No, we are living, and will always live, in times of un­predictable hyperultracompetition, so unlike the blissful wistful placid past.

Things are changing and the future is unpredictable. The Stormy World theme goes two subtle steps further: it says, with some anxiety, that today’s changes are qualitatively dif­ferent from yesterday’s and that what we learned in the past no longer applies. (See The Rules.) The theme might be right, but like the others I think it isn’t right yet. There are other perspectives to explore.

How You’ve Changed!

We marked our changes in our early years: we counted our new words[1], we completed grades in school, we wore black robes and black hats with helicopter landing pads and were told we’d completed our education.

And we keep changing, and the world keeps changing. When we perceive change, it’s hard to know how much is due to what we see and how much to how we see it.

For example, let’s think about experiences from the Closed Minds theme, where clients in­creasingly reject bad news, or at least seem to. It is possible that clients are increasingly rejecting bad news. That possibility is not mutually exclusive of others, such as:

• As your career has grown, you are now talking with tougher, more-senior audiences (or, as Eric’s article mentioned, bad-news-resistant “silver-haired alpha dogs”).
• As your skills have grown, you have taken on more-complex situations or you have learned to recognize more-serious bad news.
• As your fame has grown, you may be delivering bad news to companies that previ­ously wouldn’t have even let you in the door.

We all experience the broadening of our lives. There’s another change we all experience: the dimming of our pasts. Events recede. We edit and forget. The tough challenges we conquered seem retroactively easy as we gain skill and perspective. We hear and tell narratives of the past, and those narratives grow increasingly true, smooth, and inevita­ble. By con­trast, today looks, well, stormy.

The problem with predictions and the Stormy World theme may be not that the world is more stormy today, but rather the illusion that the world was more placid yesterday.

Fetch Me a Meteorologist

The world was plenty stormy yesterday and it is plenty stormy today. Who cares about the relative storminess? What we care about is decent forecasts to guide us through the storms. Right?

Unfortunately, there’s plenty of evidence that expert opinions and predictions are bad, even in areas much simpler than strategy. That might be due to distorted markets and a stormy world. It’s surely due also to a range of common human biases (overconfidence, confirmation bias, survivor bias, innumeracy, cognitive dissonance, and so on).

So then consider what we are asking of the client. The problem is not wholly that the cli­ent is in denial when he or she rejects bad news. The problem, in part, is that the client is being asked to buy a product that, according to both the Distorted Markets and Stormy World themes, doesn’t work.

So why doesn’t the product work? Not for lack of fine intelligence (both information and brainpower) to go into opinions and predictions. Rather, due to using the wrong meth­ods to transform intelligence into predictions.

Let’s say we liken business to chess. Would you use a trend line to predict what your chess opponent is going to do next? How about a benchmark or a spreadsheet? Of course not. Yet those are the tools people use in strategy, even though predicting the future and making strategy decisions are more like antici­pating chess moves than ex­trapolating a financial statement.

Think about meteorologists. They rarely give single-number forecasts. They say things like there’s an 80% chance of precipitation tomorrow. They give a range of outcomes.

And they are right. Research shows that meteorologists are “well-calibrated.” If they say, for example, there’s an 80% chance of precipitation, 80% of the time it precipitates.[2]

Notice, by the way, that meteorologists use structural models, not trend lines. They look at the conditions that cause rain and sun, not at averages or what happened yesterday. I meant a similar approach when I mentioned strategy models a couple of pages ago.

The meteorology equivalent for business decisions is to use structural models to explore multiple scenarios. There are two challenges here. First, in my experience companies rarely use structural models.[3] Second, there can be a lot of scenarios to explore. (See The How-Likely Case.) But structural models can be built and they can explore a lot of scenar­ios. Again, I know because I’ve done it, and so have others.

Next, Read Part Four: Beyond The Themes

Click here to read part four, the last in this series of essays. Part four is about going Beyond The Themes.

Acknowledgements

The LinkedIn e-conversation, in the Corporate Planning & Global Industry Segmenta­tion group, contained wis­dom from James Andrus, Babette Bensoussan, Ben Gilad, August Jackson, Alan Michaels, Seena Sharp, and many others. People cited Benjamin Franklin, Daniel Kahneman, Friedrich Nietzsche, and Mi­chael Porter. We covered blind spots, business war games, the curse of success, hon­ing the craft, industry databases, News Radars, oligopolies, political influence, and strat­egy simulations. I have done my best to reflect that commentary in my essay. Blame mistakes on me, and credit wisdom to them. Thanks also to Sean Campbell for sage advice.

[1] Given the average adult’s vocabulary, each of us learned something like 3-5 new words every day as a child. How many have you learned today? (Me too.) See The Oxford English Dictionary on the number of words in the English language.

[2] The Psychology of Judgment and Decision Making, Scott Plous, McGraw-Hill 1993, pp. 222-3.

[3] Possible sample-bias alert. Since I build simulators, I’m more likely to get called in by companies that don’t have good structural models than by companies that do have them.

By Mark Chussil

Introduction

With his heartfelt goodbye-cruel-world article “Peak Intel: How So-Called Strategic In­telligence Actually Makes Us Dumber” in The Atlantic, Eric Garland sparked an elec­tro­nic blaze on LinkedIn. His article fired up many people (see Acknowledgements), includ­ing me, in the fields of competitive strategy and competitive intelligence over a few days in April 2012.

The article and commentary hovered around three themes, which I’ll call Closed Minds, Distorted Markets, and Stormy World. Those themes are perennially old and current-events fresh.

I’m not saying the themes are wrong. I am saying I don’t think the evidence establishes they’re right. They might be right, but they aren’t right yet. Until they are right I believe it’s worth considering other perspectives.

This essay, Beyond The Themes, is the last of four. It is my commentary on Mr. Gar­land’s article, and my commentary on the commentary on his article. See the others: Closed Minds, Distorted Markets, and Stormy World.

Beyond The Themes

So far I’ve argued that the Closed Minds, Distorted Markets, and Stormy World themes have some truth to them although they do not, in my opinion, adequately explain the client resistance many people encounter.

I’ve also proposed alternate explanations for that resistance. When flipped around, many of those explanations imply antidotes. If you suspect communications problems, work on communicating better. If your audience will be hypersensitive to bad news, tread delicately or do a preview with the boss. If distortions interfere with your usual analysis, use other forms of analysis. If you’re not confident with point (single-number) forecasts, look at multiple futures and think like a meteorologist. If you get pushback, ask for feedback to build your skills. And so on.

Now, I’d like to toss in a few other ideas that might help us open minds and navigate through distortions and storms.

A Cultural Shift

I think there’s an important change that ex­plains some of the resistance that frustrates CI and strategy professionals. It’s less like a stormy world and more like climate change: imperceptible increments that gradually poison the environment. It’s about our cul­ture. Is it a real shift? I don’t know. It rings true to me but perhaps only for me.

All the talk of clients becoming more resistant to bad news, first from Eric and then ech­oed by many others, makes me wonder: if it’s true that they have changed, why have they changed? They didn’t suddenly locate or jettison IQ points. They didn’t suddenly leave their jobs en masse, only to be replaced by similar but less-competent people. (Ste­ven Wright: “Someone broke into my apartment while I was away and replaced every­thing with an exact replica.”) They didn’t get infected with a virus that caused them to mutate into Eric’s silver-haired alpha dogs. So why have they changed?

My conjecture: a cultural shift toward what we might call severity.

It has become imperative to be successful this day and every day, to generate an eternal mono­tonically-positive trend line. We have zero tolerance for perceived failure. “You should have known.” “If you don’t get the job done, we’ll get someone who will.” And we don’t want to wait, either. We see this shift in how we talk about business leaders (and politicians).

The shift finds a natural home in large corporations, precisely where people claim to ob­serve cli­ents’ resistance to taking on challenges and accepting bad news. We are quick to elevate perceived heroes and quick to terminate perceived failures. Then add in cost-cutting, the business equivalent of austerity. Loyalty to our people down, disposability of our people up. If that doesn’t make people fear bad news, what will? For many peo­ple, contesting bad news is defending their financial lives.

The dynamic is quite different in upstarts and small compa­nies, which have qualita­tively different perspectives. They think “investment” instead of “budget.”

Prediction, Precision, Perfection

Let’s talk more about the bad predictions that clients don’t believe, due to the analytical horrors of the Distorted Markets and Stormy World themes. (Hmm. If the predictions are bad, maybe it’s just as well they don’t believe them.)

I agree that precise predictions aren’t going to happen. The thing is, unlike the themes, I don’t think that’s anything new. Fortunately, we can imagine alternatives, and because the need isn’t new the alternatives are already here. I’ve been working on my version for a long time, and others have worked on theirs.

There are many possible futures because there are many moving parts. People in your company make decisions about price, product features, innovation, marketing messages, make-or-buy, segments to enter or exit, and more. Your competitors do the same thing. Customer preferences evolve. Distribution chains convulse. Supply chains snake around the world with all the vagaries of treaties, protectionism, state support, transportation, and more. Toss in a presidential election where we believe one party will grow the economy and the other will make it implode, though we don’t agree on which party will have which effect. Many possible futures indeed.

And even if we don’t go so deeply into all the possible futures, companies still need to combat complacency and overcome overconfidence. Start by ditching spreadsheet thinking and extrapolations from the past. Replace them with business war games, con­tingency planning, scenario planning, or even just plain brainstorming about what could happen.

With so many possible futures, it is absurd to believe we can pick the most-likely one. Even if we could, it is absurd to believe that even the most-likely future is highly likely to come to pass.

Predictions “work” when the problem is simple: short-term forecasts in grindingly dull situations. They fail otherwise. Meteorologists know this, and that’s why they will tell you the likelihood of precipitation three days from now but not three months from now, unless you are a place with grindingly consistent weather.

The alternative is to explore multiple scenarios. You may not know which one will come to pass but you get to test or develop strategies under different conditions, which tells you a lot about the potential risks and rewards of your strategy options. Business war games are highly effective at exploring competitive dynamics. Monte Carlo simulations can look at environmental uncertainties. My company’s strategy decision tests simulate and analyze your options against your competitors’ options.

Can you achieve predictive precision or perfection with those tools? No, of course not. But that’s a useless standard. We don’t know everything but that doesn’t mean we know nothing. Remember that the objective is to make better strategy decisions. The question is not whether an analysis is perfect. (How would you know?) The question is whether you can make a better decision with an analysis than without it.

To gauge the value of an analysis, ask yourself whether benefit of the analysis — the better results you can expect with a higher-quality decision — is likely to be higher than the cost of the analysis. I’ve seen clients figure that their benefits were five thousand times their costs. Strategy decisions are high-leverage.

The Last Word

As with every­thing in life, we do the best that we can. That means clients, that means you, and that means me.

No matter what, decisions will be made. Our goal is to improve the odds of happy re­sults, which we do by improving the quality of those decisions. We won’t get perfection but we don’t need perfection. A few percentage points is enough separate the gambler from the casino.

One last point regarding the notion that strategic intelligence makes us dumber. Would we really prefer to have less of it?

And I’m sure that’s not the last word on these subjects.

Nobody ever gets the last word. — Jack Balkin

Acknowledgements

The LinkedIn e-conversation, in the Corporate Planning & Global Industry Segmenta­tion group, contained wis­dom from James Andrus, Babette Bensoussan, Ben Gilad, August Jackson, Alan Michaels, Seena Sharp, and many others. People cited Benjamin Franklin, Daniel Kahneman, Friedrich Nietzsche, and Mi­chael Porter. We covered blind spots, business war games, the curse of success, hon­ing the craft, industry databases, News Radars, oligopolies, political influence, and strat­egy simulations. I have done my best to reflect that commentary in my essay. Blame mistakes on me, and credit wisdom to them. Thanks also to Sean Campbell for sage advice.

[1] Fun facts! The summit of Mount Wai’ale’ale on Kaua’i is said to have between 335 and 360 days with rain per year. The Atacama Desert, in northern Chile, has river beds that some studies suggest have been dry for 120,000 years. Three months from now — remember, you heard it here — it’s going to rain on Mount Wai’ale’ale and it’s not going to rain in the Atacama Desert.

by Mark Chussil

Advanced Competitive Strategies was officially incorporated in February 1992. Please join me with a smile: it’s time to celebrate and reflect upon twenty years of ACS.

We will do that here with accumulated facts, acquired wisdom, sincere thanks, and hopes for what’s yet to come.

Facts

It’s easy to catalog facts. Two hundred business war games on six continents for dozens of Fortune 500 companies and at numerous conferences and universities. Nearly 100 articles and essays. A couple of books. Many strategy simulators. Uncounted speeches and classrooms. Thousands of pages of computer-code gobbledygook. Colleagues and friends come and gone. I’ve spent more than half of my career running ACS.

Wisdom

It is tempting on ACS’ twentieth birthday to unveil the strategist’s equivalent of greatest hits. Behold wisdom! Deep thoughts ponderously expressed, just like this. I choose instead to talk about four favorite trivialities. Of course I don’t really think they are trivialities. It’s just that they may seem so in a world that wants definitive sound bites now.

1. Uniqueness isn’t so special

In Monty Python’s Life of Brian, Brian addresses a crowd.

Brian: You’re all individuals!
Crowd: Yes! We’re all individuals!
Brian: You’re all different!
Crowd: Yes, we are all different!
Man in crowd: I’m not…

Every person is unique. Still, the similarities among us vastly outweigh the differences. That’s why medicine works.

Every business is unique. Still, the similarities among them vastly outweigh the differences. There are far fewer business problems, and solutions, than there are businesses.

Teach yourself to look at businesses the way a doctor looks at people: the doctor appreciates and respects them as individuals, and also applies rigorous thinking and science. (Think of it this way: when I need health help, I don’t ask a friend who knows me well. I ask a doctor, a stranger who knows me better.) It’s the skill or habit that’s made it possible for my colleagues and me to help strategists time- and cost-effectively in dozens of industries.

Further reading: House, MBA.

2. It absolutely depends

One of the audience-involvement exercises I use in my workshops about strategic thinking involves this way of categorizing businesses in a market, called a value map:

I ask the audience this question: where’s the best position for a business?

They sputter and debate for a while, as it’s a surprisingly hard question. (“Surprisingly  hard” due to nuances and data into which we will not delve here.)

Eventually I change the question and ask, for each quadrant in turn, whether it’s possible to make money there. Yes, of course. As it turns out, the only absolute in the value map is that you maximize unit demand if you position yourself as the ultimate bargain. The ultimate bargain is perfection for free, and if you can do that, there’s no reason for a customer to buy from anyone else. But as soon as you back off from that maximize-unit-demand goal, the best-position answer is no longer absolute; it is it depends.

No one disagrees with advice to keep an open mind, which is what makes such advice a triviality. It’s quite another thing to experience that one’s mind is not so open and that it’s getting in the way. Really, seriously, keep an open mind. The worst that can happen from asking what-if or why or why-not is that you waste a few minutes. The best that can happen is that you achieve a breakthrough. Not to mention gaining a reputation for having an open mind.

Related: here’s one of the most-provocative questions I’ve come across. When you see someone doing something that looks terribly stupid, ask yourself why a smart person might do that seemingly stupid thing.

Further reading: The Rules.

3. It worked, unless it didn’t

We saw a problem and took action to solve it. We carefully tracked the results for years. We find that we performed much worse after we implemented the solution. We conclude that our solution didn’t work.

If we believe that line of reasoning, we should advise General Motors to resume making its less-reliable, lower-quality cars of a few decades ago. After all, that was when their success was at its peak, and they stalled after they improved their products.

Of course we wouldn’t advise GM to go back to that past. But the process is the important thing, and it’s important enough to elevate this story to one of the great trivialities.

When we say “I did X and the result was Y, therefore X worked (or didn’t),” we commit at least three serious errors. Here’s one: we assume that X caused Y all by itself. In other words, we assume we are in complete control of the situation and that no one else’s actions had any material effect. The only reason for Y is X.

Our decision is fully under our control. Our performance is only partly under our control. A great decision can be trashed by an unpleasant surprise. A bad decision can be rescued by an unpleasant surprise for someone else.

Being able to tell the difference — were we lucky or were we smart, were we unlucky or were we not-smart — sounds trivial but it is very hard. In medicine, we use clinical trials to see if a treatment works. We don’t use clinical trials in business. What we can use is simulation, which is why I think the most-exciting development in ACS’ twenty years is our patent-pending strategy decision test technology.

Further reading: Who Did Best.

4. Strategy matters more than precision

When a forecast goes awry (see also previous triviality), what do we do? As far as I can tell, one of two things. One: chuck the whole lot of models, computers, statisticians, and databases. The future is unknowable and anyone who pretends otherwise has got a microchip loose. The other: add a whole lot of models, computers, statisticians, and databases. The future is knowable but we need more better data faster. Tighten the microchips and show more digits to the right of the decimal point.

The former is like saying it’s impossible to know what my chess opponent is going to do so I’m going to concentrate only on my moves. The latter is like saying I’ll play better if I measure more-precisely where each piece stands within its square. Both, of course, are wrong.

Most of the business war games my colleagues and I have conducted used quantitative, computer-based simulation models. At the start of those war games the client company’s strategists grill us (not literally) about the model. How do we know it’s accurate?

Once the war game gets underway and they see simulated outcomes, questions about the model simply evaporate. Partly because the results show that the model is sensible. More importantly because the strategists see that the difference between strategy A and strategy B is not measured in cents. The difference is measured in millions of dollars, or tens of millions, even hundreds of millions. Strategy is not trivial. Strategy matters, and switching from one strategy to another simply swamps the inevitable, strategically trivial effects of imprecision. In other words, there’s a very high signal-to-noise ratio.

Incidentally, the question is never whether to use a model. We always, always use a model when we make decisions, even when we simply say “I think this strategy will work.” The question is only whether to use a so-called mental model or a computer-based model. And unless you know in a millisecond the answer to (163,948 x 992,580) ÷ (4,822 x 33,086 x 1,020), then you can surely applaud computers for helping us out.

Further reading: All About Models.

Thanks

Thank you, my friends, colleagues, and clients, for twenty years of ACS. Special thanks to Adrian Cruz, Bruce Hamilton, David Reibstein, Dennis Damore, Don Heaney, Don Swire, Joanne Kahn, Joaquim Branco, Joe Hull, Julie Baugh, Ken Paillé, Mindy Clark, Rika Warner, and Ruth Newman for the vital roles you played in ACS and my career. Most-special thanks to Sidney Schoeffler, who saw I had more than fingers to offer.

The best is yet to come: The next 20 years

With ever-fewer career years ahead and ever-more behind, such optimism hums slightly with defiance. Still, it is true. As a younger man I could not have imagined the perspective and (I hope) wisdom that comes from a mind forever voyaging.

And that’s why one more not-really-a-triviality is something that sounds like a cliché: the best is yet to come. We observe. We analyze. We create. We keep our unique minds open and the insights keep getting better.

Here’s to the next twenty years.

All the best,

Mark Chussil

You can view, and download, this essay here.

By Mark Chussil

“Even a Giant Can Learn to Run,” reported The New York Times on January 2, 2012. IBM is that running giant, and its CEO, Samuel Palmisano, is departing. He leaves behind a remarkable legacy of performance, which he attributes (to the extent one can sum up a decade running IBM in a brief newspaper article) to a guiding framework containing four questions. They are:

1. “Why would someone spend their money with you — so what is unique about you?”
2. “Why would somebody work for you?”
3. “Why would society allow you to operate in their defined geography — their country?”
4. “Why would somebody invest their money with you?”

Those who read my essays know that I am not often impressed by the mere accumulation of happy numbers, since happy numbers alone do not prove good strategic thinking. Mr. Palmisano asks good questions, but, with all due respect, those questions are not unique.

What I infer made them unique in Mr. Palmisano’s hands is that he evidently saw to it that they were answered honestly and thoughtfully, and that action was taken consistent with those answers.

In a business culture that venerates growth and size above all else, Mr. Palmisano’s IBM chose margins. He allowed IBM to fall to be the world’s second-largest information-technology company, after HP. He even sold solid businesses that no longer fit with IBM’s core, such as IBM’s personal computer operation, a business with nearly $20 billion in annual revenue, reasoning that it would get the best price when it’s performing well . This is MBA 101 in theory, but how often do you see that theory in practice? The thing is, it’s a good theory.

And that’s why I congratulate Mr. Palmisano and IBM. There are as many ways to accumulate happy numbers as there are ways to be lucky, which is to say there are a lot of ways. But applying the diligence and discipline not only to ask good questions but also to answer them well, and to act on the answers, makes those happy numbers well-deserved.

By Mark Chussil

I get around a bit. I conduct business war games for companies in different industries and different countries; I speak at conferences; I teach classes. I’ve noticed a few things. This isn’t the grand unifying theory of strategy that we all crave. It’s just a few observations as we lurch, slide, dive, bound, stagger, drag, and hop(e) from 2011 to 2012.

Budgets versus investments

A classic difference between an established company and an upstart is that the former sees budgets and the latter sees investment. That seems true of countries too. Of course there’s nothing that forces established companies or countries to see budgets instead of investments; it’s a decision, an attitude, and some do focus on investments. The point is that upstarts always see investments, and when budgets confront investments, investments win. (See also Do Not Overtighten and Answering Four Questions Well.) I suspect there’s a link between a budgets culture and lack of agility. It’s unclear to me which is cause and which is effect.

Take my risks, please

I spoke a few weeks ago in New York City at a conference of chief strategy officers sponsored by The IE Group. Many speakers spoke of the need to encourage risk-taking, yet outside such conferences we see little patience or tolerance for the hiccups that come with risks. Take Netflix. People have written scorching articles about CEO Reed Hastings, based on a couple of ambiguous short-term metrics, when he’s clearly making a long-term shift to avoid copying Blockbuster’s implosion. I’m not saying Hastings is right, nor am I saying he’s wrong. What I am saying is that it’s wrong to judge the quality of a long-term strategy on the basis of ambiguous short-term metrics. (See also Netflix Gone Vile: Fourteen Reasons Why Netflix Was Wrong, Or Not.) And I am also saying that, in an intolerant you-should-have-known culture that demands eternal and infallible accountability, how can we expect even a successful CEO to accept necessary risks?

I’m still confused

The last observation for now is that much of the public discourse around debt and austerity confuses me. I don’t particularly mind confusion, especially because I’m used to it. I envy people who glow with the comfort of certainty even if I don’t admire them. Anyway, it seems to me that when supply exceeds demand there is no reason to increase supply, so until demand grows we’re not likely to hire or build much. The movie Field of Dreams had a catchy line but it’s backward. It’s not “if you build it, they will come.” It’s “if they come, you will build it.” We all — companies, countries, citizens — need to demand demand.

Thank you, and best wishes for 2012

Thank you for being here with me. Best wishes for you and your family to enjoy a safe, peaceful, joyous, and prosperous 2012.

by Mark Chussil

A few weeks ago Netflix raised its prices enough for people to notice. (It also split its DVD-rental and streaming-video services into two companies, Qwikster and Netflix, but it abandoned that move.) They lost 800,000 subscribers, they gained outrage and uproar, and their stock price fell sharply.

Assessment of their pricing strategy: Wrong. Or not. Let’s take a look. Then we’ll find we’ve answered the wrong question, which will lead us to the right one.

Disclaimers. I subscribe to Netflix. I don’t have special knowledge of the company and I haven’t talked to its strategists. I haven’t formally analyzed their strategy. On the other hand, we’re merely going to speculate, so we can relax our standards. Moreover, I have analyzed many other strategies, and one learns a thing or two. End of disclaimers.

Netflix raised their prices. Bad move.

1. They suffered a non-trivial loss of revenue. It amounts to something on the order of $20 or $30 million per quarter. That could sap profits precisely when they need the money to invest in wave-of-the-future streaming.
2. They lost customers that could have migrated to streaming. Those customers now become happy hunting for salivating competitors.
3. They made themselves vulnerable in their bread-and-butter business. As of this writing, Blockbuster’s website launches with an unsubtle ad specifically targeting disgruntled Netflix rental customers. (For more on Blockbuster and mistakes, see It’s Working!)
4. It was an awfully big price boost. Don’t they know there’s a bad economy out there and their customers are hurting? Netflix looks cold and out of touch.
5. The negative publicity might dissuade new customers from giving Netflix a try. They lose not only the 800,000 but also some portion of the people who would otherwise have signed up in the future.
6. Loyalty is essential in subscription-based markets, especially when switching costs are low. It’s generally cheaper to keep a customer than to get a customer, and a customer who leaves in a huff may not soon return.
7. That Qwikster thing was not customer-friendly; people with both DVD and streaming services would have to manage two accounts. If Netflix was tone-deaf enough to propose that, did they really know what they were doing with their prices?

Upstanding strategists, a question

Those are some pretty strong arguments, if I did say so myself. It doesn’t look good for Netflix. But we, being upstanding strategists, know we must consider scenarios and decisions from all angles before we judge.

So, let’s ask a question that I have found ranks among the best an upstanding strategist can ask in his or her career of critical thinking and rigorous decision-making. Let’s ask why a smart person would have done what initially appears not-smart. After all, the folks at Netflix are smart and they want to succeed. They set out to do something smart, not something not-smart.

Netflix raised their prices. Good move.

1. Companies often boost prices when costs go up. Netflix’s costs are going up. Their streaming service requires lots of licensed “content” (movies and TV shows). Those licenses cost more and more as content owners see subscribers growing and realize the value of their content.
2. 800,000 customers sounds like a lot. (Well, it is.) Still, it’s only 3.25% of Netflix’s 24.6 million customers in the USA, as of Q2 2011, and each quarter Netflix adds more than twice as many as the 800,000 they lost. (Key data here came from Business Insider.)
3. Netflix was realistic and had done its homework. They expected to lose some subscribers when they raised their prices. They even took pains to explain their price move to subscribers; how many other companies do that?
4. Pretty much by definition, many or most customers who leave after a price increase are those most sensitive to price and most likely to buy the least-expensive subscription plan. The increase in profits from higher prices could outweigh what those lost customers would cost.
5. Netflix may want or need to amass cash for the major investments it faces. Its strategists know well that much of their market will switch to streaming, and they surely fear a visit from the ghost of slow-to-adapt Blockbuster.
6. Netflix made clear that it is committed to streaming and to the long-term health of its company. Those are important signals to competitors and to investors.
7. It is arguably more important to be a clear market leader in streaming video than it is in DVD rentals. Netflix may want to incent its DVD customers to move to streaming so that Netflix stays in front. (See also Room for One.)

The wrong question

Did you notice the wrongness of the question we implicitly asked? We debated as though Netflix’s strategy had been to lose 800,000 subscribers. But losing subscribers wasn’t their strategy; it was a consequence of their strategy. Perhaps an intended consequence, perhaps unintended; perhaps expected, perhaps a surprise; but not their strategy.

That leads us to the questions we should ask: what did Netflix’s leaders want to accomplish, and, given that objective, did they choose a good strategy?

The right answers

It seems that Netflix wants to be strong in streaming without exiting rentals. Both markets are viable, and it makes sense to me that Netflix would want to be in both. Why forgo the wave of the future? Why turn their back on a prosperous business that can thrive for years to come? I’m willing to accept be-strong-and-prosper as their objective.

My short answer to the second question, did Netflix choose a good strategy, is not just refreshingly brief; it is also admirably accurate. It is this: I don’t know. As I said, I haven’t been inside the company and I haven’t spoken with their strategists.

This is brief and accurate too: whether they chose a good strategy is knowable.

It is not knowable by citing their loss of 800,000 subscribers and a great deal of market valuation. Those are outcomes, and even good strategies get bad outcomes from time to time. Plus, many strategies require more than a few weeks to achieve their desired effects. (See also Who Did Best?)

Whether Netflix chose a good strategy is knowable because it is analyzable. I know it is because I’ve performed such analyses on other businesses, and because other people have too.

Such an analysis for Netflix would not look like gap analysis or financial analysis (too narrow) or like trend analysis or benchmarks (little or no relevant past). It would not rely on anecdotes or arbitrary performance targets. (See also All About Models.)

Rather, it would delve into exactly the points, all of them, raised by the fourteen reasons why Netflix was wrong, or not.

Judgment

Dear reader, if you are a pundit or guru who wants to pronounce lurid and/or definitive judgment on Netflix’s goodness and smartness, then you must be sorely disappointed in this essay. I’m afraid it’s not going to get any better for you. But if you are not such a pundit or guru then you will, I hope, join me in three conclusions.

First, we cannot, and therefore should not, gauge the rightness or wrongness of a strategy merely by noticing whether we feel joy at its outcomes at this very moment. We should gauge the quality of the strategists’ decision and decision-making.

Second, it is useful to debate the rightness or wrongness of a strategy. Debate surfaces and clarifies important issues to analyze.

And finally, whether Netflix has gone vile or smile (sorry, my best rhyme at this time), they deserve kudos for their efforts to avoid the pitfalls of those who came before. Think about this: Blockbuster could have been Netflix if only they’d strategized differently.

Update, February 21, 2012. “Comcast to start ‘Streampix’ Video Service,” in The New York Times.

Update, January 26, 2012. Netflix reported 4th quarter 2011 results. Profits beat “expectations,” despite dropping 13.5%. Its subscriber base grew and sales went up 47%. Its stock surged, but perhaps for reasons not related to its strategy.  See CNNMoney, “What’s behind Netflix’s 20% spike?” So, with the passage of a near eternity — oh, six months or so — did Netflix go vile?

Update, January 26, 2012. See also “Netflix Will Rebound Faster than You Think,” by Annika Olson and Eddie Yoon of The Cambridge Group, writing in the HBR Blog Network.

Update, December 25, 2011. Netflix CEO Reed Hastings, speaking about the Qwikster move, was quoted by CNN. “‘We berate ourselves tremendously for that lack of insight because it didn’t need to be that way,’” CEO Reed Hastings admitted recently at a conference. “But you know, in three or five years, we aren’t going to remember it. It’s going to be, `’Did we succeed at streaming?”‘” Worth noting too: CNN pronounced Netflix’s move “dumb” purely on the basis of the short-term loss of subscribers and value in the stock price. Hastings may yet turn out to be wrong, but he’s obviously playing for the long term. For more on judging strategies, which isn’t such an easy business, see Who Did Best?.

Update, November 22, 2011. For more on the financial and competitive maze Netflix has to navigate, see “Netflix warns of losses for all of 2012.”

by Mark Chussil

I remember where I was when JFK was assassinated, when Neil Armstrong walked on the moon, when the Challenger exploded, and on 9/11.

Today, when Steve Jobs died, I was on vacation in Napa Valley. Even in a winery’s tasting room, someone thought the news important enough to burst into the room and make an announcement.

Steve Jobs was a complex man, a thinking man. http://bit.ly/qvAJsl He pushed others hard and he pushed himself hard. We find that motivating. No one is driven to achieve easy things; we are driven to achieve hard things.

When’s the last time we mourned the passing of a business leader? What other business leader would we mourn?

What do the answers to those questions mean?

I’m thinking about those questions and I want to take my answers to heart. I know that no one will burst into a room to announce my demise. Still, when my time’s up I want to be able to look back and honestly say I am satisfied with the decisions I made. Not in some revisionist or perfectionist way, but rather that I made thoughtful decisions with what I knew and believed at the time I made them. That applies to my personal life and my business life, because in truth there is no separation; there is only my life.

Farewell, Steve Jobs. Thank you for what you did for us, for your dedication to excellence, and for living consciously.

“I didn’t say it would be easy. I said it would be worth it.”
Heard from Dan Gibbons, one of my teachers.

“How we spend our days is, of course, how we spend our lives.”
Annie Dillard

“Don’t get called out on strikes.”
Leo Durocher (?)

“Do not pray for easy lives. Pray to be stronger men.”
John F. Kennedy

“May you live all the days of your life.”
Jonathan Swift

by Mark Chussil

Who did best? I’m not talking about the Democrats and Republicans. Not the New York Yankees and the Boston Red Sox. Not even the Beatles and the Rolling Stones.

I mean something BIG.

I mean Safeway and Supervalu, the huge supermarket chains.

If you’re still here you must be one of my faithful readers, and my faithful readers may remember an essay called House, MBA. In that essay, written with the American economy reeling, we saw that Safeway CEO Steve Burd wished he’d done what Supervalu CEO Craig Herkert did on prices, while Supervalu CEO Craig Herkert wished he’d done what Safeway CEO Steve Burd did on prices. (As they must say in an old proverb, the produce is greener in the other store.) We further explored what nasty, brilliant, truth-seeking, fictitious Dr. Gregory House would do to resolve the dispute.

Here’s how Safeway and Supervalu were doing at the end of 2008.

The Numbers are In!

A couple of years have passed since the House essay, since Mr. Burd and Mr. Herkert ranked #50 and #51 on the Fortune 500 list, and since they took their respective actions.

Think about where they started. Think about what they said in The Wall Street Journal of October 16, 2009, in “Safeway Shifts Tactics in Grocery Price War.” Safeway’s Burd said, “Had the chain moved quicker to lower prices, it would be ‘doing a bit better than we are now.’” Supervalu’s Herkert said, “Increased use of promotions ‘destroyed our gross margin… More items really cheap don’t bring in more people.’”

What would you expect to happen? What actually happened? Whose strategy worked? Here are their 2010 numbers, from the 2011 Fortune 500:

And the Winner is…

Pretty clear who did best, right? Not so much. Actually, not at all.

If you value, say, 10-year total return to shareholders, then Supervalu is doing better. If you value, say, return on equity, then Safeway is doing better. There is not a definitive, objective reality of one outperforming the other until you subjectively define success. You pick the metric, you pick the winner.

Plus, we don’t know what metrics Burd and Herkert wanted. We don’t know if they think they succeeded.

It gets less clear. Many things were in motion at the same time as their price moves. Changes in the economy, decisions about everything from advertising to sourcing to employment, Supervalu’s adjustment to a new CEO (Jeffrey Noddle left in 2009), and so on. Not to mention that companies’ cultures and capabilities differ. (See What You Pay For.) Not to mention randomness, uncertainty, and luck. (See Marvelous Techniques.)

It gets still less clear. Even if we knew exactly what each had done on price, how could we reasonably single out price as the driving force, the “reason” for one or the other to win? It just doesn’t make sense to do so.

What I think we’ve seen is that “who did best” is a difficult, complex question. It is not objective; it requires that we make value judgments. It is not clear who or what is responsible for “best” performance.

So what should we believe? How do we know who did best?

What Works Best

It seems to me that “who did best” is of limited value as a question and of even more limited value as a way to figure out which or whose strategy “worked.” It tells us what happened. It doesn’t tell us why it happened.

What I think is of far greater value is to change the question from “who did best” to “what works best.”

Treat that inquiry as a scientist would, looking for cause and effect. Treat it as a systems thinker or engineer would, balancing multiple moving parts and knowing everything is connected. Treat it as a chess master or military commander would, recognizing that it’s not only your moves that matter. Treat it as a statistician would, checking what’s random and what’s real. Treat it as a psychologist would, aware of human creativity, biases, and determination to succeed. It’s possible,* and it’s worth it.

* I like what Barney Pell said about a problem that needs only for people to think big and muster the will to take it on: “It’s only rocket science.”