Feedback Loops in Strategy.
The more I read and learn about strategy, the more nuance I find. It feels that it is a topic that is frustratingly simple yet complex at the same time.
One area that I have not yet fully understood is precisely what the core components of strategy are. At a high level, strategy is an attempt to find the “best” way to achieve a set of goals, but it is also about defining what “best” means (is it the fastest, themes humanitarian, the least damaging, etc…) and also the goals themselves.
But, once you get started implementing a strategy, there must be a constant feedback loop to take the data that reality is providing you once you start to interact with the world, and adjust the strategy based on that.
However, this needs to be a careful balancing act. If you act too quickly on the data that you receive, your strategy will be constantly changing and it will be fickle. Each time there is a small wind, your strategic house of cards will topple to the ground. Conversely, if you are too slow to react, your strategy runs the risk of being outdated or simply unrepresentative of the reality on the ground. It is disconnected from what happens in the real world. This often happens when those who set the strategy suffer no consequences for being wrong.
This is where one needs to learn the ability to differentiate between noise and actual useful signals. Even when everything is going well, you’re going to have some level of noise in the feedback you receive back from reality. Perhaps you’re building a product. You’re not going to be able to keep everyone happy all the time. You should expect complaints, and then you need to critically analyse the complaints and decide if they are worth acting on them.
For this, we need to evaluate the source of the signal, and then understand how strong the signal is. One customer complaint can be ignored, one thousand cannot.
This brings us towards the topic of failure. Obviously, nobody wants their strategy to fail, but failure is not all bad. If you have gone and done something, failing is still a signal — any it is useful data that you can use to improve.
I find that both on a personal and organisational level, many people are scared of even trying things. They prefer to keep ideas and strategies in the hypothetical realm instead of having a true battle with reality. This is because failure can never become tangible. You didn’t fail because you tried and you were not good enough, you failed purely out of inaction. This makes us feel better because it somehow feels like we could succeed if we wanted to, but we just didn’t want to try. It is like the student that does not study for the exam, so he has a good excuse when he fails. Or the job seeker that does not put a real effort into finding and applying for many positions, so she does not have to feel the sting of rejection.
This is perhaps even more common in organisations. Learning from failures is an essential component of any feedback loop. When organisations fail to achieve their desired outcomes, it is critical to analyse what went wrong, identify the root cause of the problem, and make necessary adjustments to the strategy. By doing so, organisations can learn from their mistakes and improve the effectiveness of their feedback loops.
To effectively learn from failures, organisations need to create a culture of experimentation and learning. This involves encouraging employees to take risks, rewarding innovative ideas, and fostering an environment where failures are seen as opportunities for learning and growth. When employees feel empowered to experiment and take calculated risks, they are more likely to identify potential weaknesses in the strategy, enabling the organisation to make necessary adjustments to the feedback loop.
Organisations can also learn from failures by conducting post-mortem analyses of failed projects. This involves reviewing the project and identifying what went wrong, what could have been done differently, and what can be improved in future projects. By conducting post-mortem analyses, organisations can identify patterns of failure and make necessary adjustments to the feedback loop to prevent similar failures from happening in the future. That said, this requires the ability to view your own behaviour and past decisions in an objective manner, almost as if you were dissecting a case study from another organisation. This is easier said than done, and it requires a significant cultural shift is most organisations that do not like to discuss failure.
Incorporating the knowledge gained from failures into the feedback loop is critical to the continuous improvement of the strategy. Organisations need to create mechanisms to ensure that insights from failures are incorporated into the feedback loop. This involves documenting the lessons learned, sharing the insights with relevant stakeholders, and using that knowledge to refine the feedback loop. By doing so, organizations can create a continuous learning process that enables them to adapt to changing circumstances and improve the effectiveness of their feedback loop over time.