Why is evidence so important in business strategy?
Making decisions in business strategy is like navigating a ship through unknown waters. Without clear evidence to guide you, it’s easy to drift off course or fall into avoidable traps. Whether you're entering a new market, launching a product, or restructuring your organisation, the types of evidence you rely on can shape outcomes significantly. But not all evidence is equal, and understanding the different types—and how to combine them—can give you a major advantage.
Types of evidence
In this article, we’ll explore the key types of evidence and how they relate specifically to business strategy.
Empirical Evidence: Grounding Strategy in Data
Empirical evidence is the cornerstone of strategy development, providing the data needed to make informed decisions. This category includes:
- Quantitative Evidence: Hard numbers like sales figures, market share, and revenue growth rates. For example, using market trend data to project demand in a new region.
- Qualitative Evidence: Customer interviews or stakeholder feedback. These offer insights into why certain trends occur or how stakeholders perceive your organisation.
Why it matters: Empirical evidence ensures your strategy isn’t built on assumptions. Combining quantitative data with qualitative insights provides both breadth and depth to your analysis.
Anecdotal Evidence: Stories That Drive Strategy
Anecdotal evidence comes from personal accounts, case studies, or testimonials. For example, a startup founder might base their go-to-market strategy on a particularly successful product launch story.
Why it matters: While not statistically robust, anecdotes can inspire bold strategies or highlight new opportunities. The key is to validate them with more robust evidence.
Experimental Evidence: Testing Assumptions
Business strategies often hinge on critical assumptions. Experimental evidence allows you to test these assumptions before committing significant resources.
- Examples include A/B testing marketing campaigns or piloting a product in a specific region before a full-scale launch.
Why it matters: Experiments provide a controlled way to evaluate risks and refine strategies. It’s a practical approach to minimising uncertainty.
Self-Reported Evidence: Listening to Stakeholders
Surveys, interviews, and feedback forms are classic examples of self-reported evidence. Whether it’s employees sharing their thoughts on a new initiative or customers filling out satisfaction surveys, this evidence captures subjective perspectives.
Why it matters: Self-reported evidence can uncover hidden opportunities or challenges, but it’s essential to cross-check with behavioural or observational data to account for bias.
Behavioural Evidence: Actions Speak Louder Than Words
What people do often differs from what they say they’ll do. Behavioural evidence, such as purchase patterns or employee productivity data, provides a reality check.
Example: A company might track customer buying behaviour through their website analytics to inform pricing strategies or product placement.
Why it matters: Behavioural evidence reveals the truth of how stakeholders act, helping you design strategies that align with real-world behaviours.
Historical Evidence: Learning from the Past
Looking back at past strategies, market conditions, or competitor actions can provide a wealth of insights. Historical data can help forecast trends, avoid repeating mistakes, or replicate successful tactics.
Example: Analysing the outcomes of previous mergers in your industry before embarking on one.
Why it matters: History doesn’t repeat itself exactly, but patterns often emerge that can guide future decisions.
Theoretical Evidence: Frameworks and Models
Theoretical evidence comes from established frameworks, like Porter’s Five Forces or the Balanced Scorecard. These tools offer a structured way to approach complex strategic questions.
Why it matters: Theoretical evidence provides a foundation for decision-making, especially when empirical data is limited or when venturing into uncharted territory.
Expert Evidence: Insights from the Frontlines
Consultants, industry analysts, and internal subject-matter experts offer invaluable advice based on experience. For example, an expert might recommend a strategy based on trends they’ve observed across multiple organisations.
Why it matters: Experts often synthesise multiple types of evidence, making their input especially valuable in high-stakes decisions.
Big Data and AI: Strategy at Scale
Modern tools enable businesses to analyse massive datasets, revealing patterns and predictions impossible to detect manually. AI can assist in tasks like demand forecasting or customer segmentation.
Example: An AI model might analyse customer behaviour to recommend pricing strategies or identify new market opportunities.
Why it matters: Big data and AI can enhance your strategic agility by uncovering opportunities or risks at a granular level.
Triangulated Evidence: A Holistic Approach
Triangulation involves combining multiple evidence types to validate findings and reduce bias. For example, you might combine:
- Market trends (quantitative evidence).
- Customer testimonials (anecdotal evidence).
- Expert analysis.
Why it matters: This approach provides a well-rounded basis for strategy decisions, increasing confidence and credibility.
Relationships Between Evidence Types
- Complementary: Different types of evidence fill different gaps. Quantitative data might reveal what’s happening, while qualitative data explains why.
- Hierarchical: Some types, like experimental evidence, are more robust for proving causation, while anecdotal evidence is better for illustration or inspiration.
- Context-Dependent: The right mix of evidence depends on your strategic question. Entering a new market may rely on historical, quantitative, and behavioural evidence, while launching an innovative product might lean on expert, anecdotal, and experimental evidence.
Building Evidence-Based Business Strategies
To develop stronger strategies:
- Start with a clear question. What decision are you trying to make?
- Gather diverse evidence. Include a mix of quantitative, qualitative, and anecdotal sources.
- Validate and triangulate. Cross-check data to ensure reliability and reduce bias.
- Adapt dynamically. Stay open to new evidence as situations evolve.
Conclusion
Evidence isn’t just about avoiding mistakes—it’s about seizing opportunities with confidence. By combining multiple types of evidence, you can craft business strategies that are not only ambitious but also grounded in reality.