Thursday, December 25, 2014

The Plan is Dead. The Future Is Real Time Data and Adaptive Strategies

"Strategy is so often based on lag indicators like last month’s sales figures" Geoff McGrath, vice-president of McLaren Applied Technologies. Despite talk of the need for flexibility and agility far too many businesses are stuck with a culture of planning that simply doesn't work in the current world.

The idea of making a 3 year plan and sticking to it has thankfully been consigned to the waste bin in most companies. These days strategic planners talk of adaptive plans such as making a plan, testing it and adapting it. However, even this doesn't go far enough as it is still based on the principal of static plans albeit reviewed regularly and adjusted.

Plans were originally military in origin and assumed that:

1) the recent past was a good indicator of the future
2) data was scarce and gathering data could provide insights for future decisions
3) the centre sets strategic direction which acts as guidelines for action

These assumptions no longer hold true on many industries. The future cannot be extrapolated from the past, even the recent past. Data is plentiful but actionable insights based on pattern recognition from real time data is critical. Adapting to the data requires real time adjustment at the local level.

How the world is changing - Constant feedback and adaptation

Traditionally an engine on a plane or a car would receive regular checks and maintenance. Every so many months there would be a review and parts serviced accordingly. Advances in technology mean that engines can be monitored in use such as plane in flight or an engine on a Formula 1 care as it is racing. The engine can not only be monitored but tuned and adjusted as it is operating.

Let us take a much more simple example of planning content for an article or site. The idea that you decide a title for an article on your site, publish it and then don't change it belongs in the dark ages. This thinking stems from the age of print and simply fails to understand the world of the internet. However, traditional newspapers still publish a single headline for an article. Compare this to sites such as BuzzFeed that start with as many as 20 headlines and split test the results. They monitor how people read and share the article on the first day they adapt and adjust the headline that works best. To get the content read and shared requires constant monitoring and adjustment.

In healthcare we might have regular medicals or check-ups, these may indicate say a high level of cholesterol or other health issue which requires an intervention or adjustment in lifestyle. In the future we are likely to be monitored continuously using wearable devices that monitor our health and predict any issues long before they become a problem. This constant monitoring will also allow constant adjustment to deal with issues before they arise.

Real Time Data and Adaptive Strategies

In the new world strategies need to allow for constant adjustment based on real time data. This means the agility to adapt to new data patterns as they happen. This requires:

1) real time data
2) pattern recognition
3) the ability to make adjustments based on new patterns

Incremental improvement through small adjustments can be as effective as big strategic decisions. As a case in point the British Olympic cycling team had a director of marginal improvement, their role was to make minor improvements through a detailed review of every element of riding a bike. These incremental improvements added up to a big overall performance advantage.

The same applies to say an ecommerce site. Marginal changes to the way products are presented, to price packages, the check-out process etc., can combined make a major impact on sales.

An adaptive strategy has to allow for constant feedback and ongoing change. The incremental changes can at times change the overall strategy as they layer upon each other. In much the same way as water continues to heat but qualitatively becomes something quite different at a certain point when it becomes steam. Thus an adaptive strategy is one which adjusts constantly to the point where the overall strategy becomes something distinct and different. For example, a company may start as a services company, a product company or an ecommerce company but find over time that its customers value its particular logistics skills or its data insights. Thus as it adjusts to what customers value it may become data company and generate value from its data rather than its services or products.