“Strategy is about the future. Evidence is from the past. Therefore, you can't use evidence in strategy.”
This argument sounds logical—but it's deeply flawed.
In a world obsessed with predicting what’s next, many leaders fall into the trap of disregarding the past. But history is not baggage—it's a resource. Rather than limiting innovation, historical evidence can serve as a powerful enabler of sound, future-oriented strategy.
The Value of Historical Data in Strategic Planning
Historical data serves as a foundation for identifying trends, understanding market behaviours, and making informed decisions. By analysing past events, businesses can uncover patterns that inform future strategies.
But how do you do it so that you come up with a strategy fit for the future and not wedded to the past? A strategy which is informed by past evidence, but not constrained by it?
Unlocking the Power of Historical Evidence
The key is to use historical data to build models of how the world works. But don't stop there. Once you have a model, you need to test how it could change.
- What factors could cause it to change?
- How likely are those to occur?
- What would be the impact if they did occur?
Models describe the relationships between things, rather than focusing on the things themselves. For example, the relationship between sales volume and, say, interest rates is more important than either the sales volume or the interest rates on their own.
Models can be used to describe multiple possible futures. For example, they allow us to have meaningful what-if conversations: if X happens, we expect that this could cause A, B or C. For example, we could look at the past behaviour and policies of politicians and political parties, and speculate what they might do if elected. We could also look at the impact that such policies have had in the past in our own or other countries, being careful to note how current circumstances might lead to different outcomes than past circumstances had. Note that these are not predictions - they are speculations about plausible outcomes.
Tesla used this to good effect when, in the late 2010s it noted a shift in the Chinese government's policy towards electric vehicles as it attempted to combat environmental pollution and reduce reliance on fossil fuels. Recognising the opportunity, Tesla negotiated with Chinese authorities to become the first foreign automaker allowed to establish a wholly-owned manufacturing facility in China, bypassing the traditional joint-venture requirement. In 2019, Tesla inaugurated its Gigafactory in Shanghai, significantly reducing production costs and avoiding import tariffs.
Avoiding spurious accuracy
Once you have a model, the data within it becomes probabilistic. Instead of forecasting future quantitative values with mathematical precision, use it to imagine outcomes within plausible ranges; showing the relationships between possible outcomes in terms of percentages, or, better yet, orders of magnitude.
One approach is to use numbers to tell stories with evidence rather than using them to build spreadsheets. Aswath Domodaran's "Talks at Google" provides a masterclass in the importance and method of doing this.
Spreadsheets, whilst enormously powerful, tend to lead towards simplistic mathematical relationships and spurious accuracy. Reality is infinitely more complex than this. And the future is infinitely more unpredictable than any spreadsheet can capture. So use them with caution.
A lesson I learned early on in my career is to avoid relying on numbers with more than 2 or 3 significant digits when doing strategy. That is, "1,234" is spuriously accurate; "about 1,200" is a better indicator and "about 1.2k" perhaps even better. Spuriously accurate numbers foster a sense of false confidence.
If not evidence from the past, then from where?
If we don't base our strategies on evidence from past, what will we base them on?
After all, the past is all we have. The future has not happened yet.
Intuition, creativity, imagination?
All of these things are built on our past experiences. They just may not be explicit.
Instead of being satisfied with these implicit processes built on evidence from the past, we should work to make them explicit through a process of introspection. We should go back to try and find the evidence on which our intuition, creativity and imagination is base, and then hold it up to scrutiny. This increases our probability of separating those implicit thoughts that are more likely to be useful from those that are not.
We should use our intuition, creativity and imagination to help us look for the right evidence from the past.
Go wide
That might lead us to look more broadly than we otherwise might.
Science fiction writer William Gibson said: "The future is already here – it's just not evenly distributed."
We should not limit ourselves to evidence from our own pasts, or even that of our organisation or industry. We should cast the net as wide as we can, looking at other organisations, markets and industries as well as in laboratories and even in science fiction.
The broader our evidence base, the more likely we are to find the connections that will lead to a powerful strategy. For this reason, curiosity may be a strategist's most powerful tool.
For example, Steve Jobs credited his inspiration for the typography used on the Mac to a caligraphy class he took after dropping out of Reed College. The most creative and innovative people tend to be those who cast their nets the widest. The development of the iPhone was similarly based on extensive evidence of how users interacted with existing mobile devices. Apple were able to contrast pain points such as the complex interfaces and limited functionality of existing devices against the relative simplicity and success of the iPod and the emerging technology of multi-touch screens..
In another example, we see how Netflix had taken note of improvements in broadband and internet speed, and reduced costs of bandwidth in the mid-2000s. It had also noted the increasing popularity of platforms like YouTube, despite the relatively lower quality of its content. Combining this external evidence with its own internal analysis of its customers' viewing preferences, it was able to pivot to its current on-demand streaming model.
Data versus evidence
Jim Barksdale famously said: "If we have data, let’s look at data. If all we have are opinions, let’s go with mine."
I wish he'd used the word evidence instead of data. People tend to think (incorrectly) of data as being a fairly limited form of quantitative data only. We should consider the widest possible range of evidence available.
But the point remains valid. Opinions, creativity, and intuition are all personal and subjective. They tend to lead to divergence instead of alignment. That is, everyone's opinions tend to be different, leading to disagreement. That's good, up to a point. But for organisations to collaborate to achieve meaningful outcomes, alignment must come at some point in the process.
Evidence provides a more objective way of sorting between divergent opinions to achieve alignment. Evidence-based strategies are more likely to lead to decisions that people can get behind, and which stick.
Ready to integrate historical evidence into your strategic planning?
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Try StratNavApp.com for free: www.StratNavApp.com. It provides a structured repository for the collaborative collection of evidence. And the inbuilt AI then helps to extract the underlying insight and turn that into actionable strategies.
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Schedule a demo: calendly.com/chriscfox/stratnavapp-com-demo
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Book a call: calendly.com/chriscfox/discuss-your-needs
