Strategy algorithms beat judgement

HBR explains how judgement underperforms simple algorithms for many issues – strategy algorithms exist, at least implicitly.

Recent decades have seen human intuition progressively replaced with proven rules, procedures or algorithms for increasingly complex tasks. Long ago, truck deliveries were scheduled by the logistics manager, and airline prices set by pricing staff – both are now automated. And this phenomenon now goes on to more subtle issues, such as bank credit scores, and marketing tactics driven by behavioural insights from big data. The HBR blog points out

Strategy implementation is merely the sum of many decisions, across many functions – marketing, pricing, hiring, capacity expansion, product-range (excluding the large, occasional choices to make big moves like acquisitions or new-market entry).  Since these too can be better chosen by following proven policies, or algorithms, we can effectively ‘automate’ much of strategic management. In fact, this is already implicitly the case, since leading companies do not work out from scratch how to do things, but follow procedures they have figured out, tested and proved over many years. See video class summaries on policies and capabilities.

Even for big moves, top firms follow procedures that have worked many times before. Cisco, for example, has been a ‘serial acquiror’ for many years, following well-established methods for taking stakes in small promising tech firms, nurturing their development, then acquiring those that best meet their needs.

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