Playing To Win
Manipulation of Quantities & Appreciation of Qualities
After two very macro-themed Playing to Win/Practitioner Insights (PTW/PI) pieces — about the strategy function overall and about a widely-used strategy tool — I am going micro, diving into the mind of the individual strategist with my 30th PTW/PI on the two thinking skills every strategist must master: Manipulation of Quantities & Appreciation of Qualities. For the insights that inspired this piece, I thank my friend and collaborator, Hilary Austen. (Links for the rest of the PTW/PI series can be found here.)
Manipulation of Quantities
Because of the origins of the practice, the prototypical strategy person is an analytical wizard/geek. Institutions tend to shape themselves in the image of a seminal figure. Generations of pilots use a laconic drawl in cockpit communications because that is how seminal test pilot hero Chuck Yeager did it. The father of business strategy and founder of Boston Consulting Group (BCG), Bruce Henderson was a Vanderbilt mechanical engineer and Harvard MBA (though he famously dropped out weeks before graduation). [If you prefer to view Michael Porter as the father of strategy, he is a Princeton aeronautical engineer (yes literally a rocket scientist), Harvard MBA, and Harvard PhD in business economics.]
As BCG grew into the creator of the huge new industry of strategy consulting, it preferred to staff its ranks with Baker Scholars (top 5%) from HBS, with the absolute favorite being undergraduate engineers combined with a Harvard MBA — or later an MBA from one of the other great business schools. BCG’s ‘case interviews,’ which gave little analytical brainteasers, such as how many golf balls could you fit inside the Empire State Building, became the norm for screening entry into not only BCG but the entire industry. And the graduates of BCG, McKinsey, Bain, Monitor, etc. populate the strategy functions of today’s corporations. In a reinforcing loop, the desires of those consulting firms shape the curricula of business schools who want to place their graduates in these high-paying jobs.
The entire ethos of strategy as a practice centers on manipulation of quantities. To be very clear, I don’t mean manipulation in any bad way but rather in a literal way. I mean performing an operation of some sort on numerical variables to produce a useful output. Before you even get to kindergarten, you are likely to learn your first quantitative manipulation technique: counting. The technique enables you to know something important: how many of a given thing you have.
When you enter the formal educational system, you learn a succession of increasingly sophisticated quantitative manipulation techniques, starting with addition, then subtraction, then multiplication, then division, then algebra, trigonometry, and calculus. In most college disciplines, you will be taught statistics. Depending on your particular discipline, you might also learn fluid dynamics, electrical resistance, or heat transfer, etc. If you go to business school, you will learn about IRR, NPV, ROI, EBITDA, CAPM, Black-Scholes, EOQ, SPC and more.
In your strategy courses, you will learn about Nash Equilibria, relative market share, relative cost position, the learning curve and more. The dominant motif of strategy is the manipulation of quantities to produce a prescription for action. This motif dominates the strategy firms and the strategy function in corporations. Like the pilot acolytes of Yeager, these are the acolytes of Henderson.
Appreciation of Qualities
But many things in life are not quantifiable. And with respect to these them, the manipulation of quantities is useless. Think about going to a newly curated Impressionist show at the Musée d’Orsay. If all you had at your disposal were tools for manipulating quantities, you could say: “I saw 168 Impressionist paintings. Monet’s 57 pieces earned #1 market share of 34%. They were shown in 16 rooms or 10.5 paintings/room. The paintings covered 944 square feet or 5.6 sq ft/painting. The dominant color was blue with 147 square feet or a 11% market share of colors.” None of those outputs is of consequential value.
If you had a different skill set, you might come out of the show saying: “That was the most fascinating curation of an Impressionist show that I have attended. The show was organized by contemporaneous non-Impressionist influences. It became clear that at the same time the Impressionists were breaking radical new ground in painting, they were watching the evolution of more traditional painters and incorporating attributes of that work. I have seen shows by chronology, by painter, by theme, but never using this lens. I learned something new and exciting about the evolution of the Impressionist movement.” That is a useful output.
It illustrates the second skill set, which is the appreciation of qualities. There is nothing quantitative in the latter interpretation. Numbers do not help. In this case, you need to understand the differences between the various Impressionist painters, how they differed from their contemporaries, and how the work of both groups evolved. The finer the qualitative distinctions of which you are capable, the more useful inferences you can make about the exhibition.
That is the appreciation of qualities: the knowledge of a domain (in this case Impressionist art) that enables you to make finer distinctions. If you are a Sommelier, you can make a distinction between a 1985 and 1986 Bordeaux in a blind tasting. If you a Cordon Bleu chef, you can tell the difference between medium and medium-rare from several feet away, not only after cutting into the steak as is the case for me!
Strategy and Qualitative Appreciation
Much of strategy is inherently qualitative. You need to gauge the emotional and psychological interests and desires of consumers. You need to intuit competitors’ intentions and make predictions as to their moves. You need to understand the hopes and dreams of employees, and how they vary from one employee to the next. You need to sense how technology is evolving and what it means to your business. You simply can’t be a useful strategist without sophistication on these qualitative fronts. No amount of quantitative manipulation can save you. It can and will help you. But to be a strategist, you need to have a fine appreciation of qualities alongside the capacity to manipulate quantities.
The Fundamental Problem
The primary training of strategists is wildly biased toward manipulation of quantities and not appreciation of qualities. The vast majority of MBAs hold an undergrad in either engineering, business, or economics. In the MBA, there is very little useful course material on appreciation of qualities. The business school culture holds that manipulation of quantities is business, leading to a belief in graduates that the existing imbalance is an inherently good thing.
It is not as though strategists have no appreciation of qualities. Like all human beings, they develop qualitative appreciation across their lives as a matter of course. But the development is informal and is typically given a low priority. University students do formally develop appreciation of qualities, but only in substantial parts of the humanities and tiny slivers of the social sciences. They may be schooled in the discipline of art appreciation or literary criticism or graphic design or ethnography. But undergraduates with formal education in the appreciation of qualities make up less than one-tenth of MBA students.
As a result, the field of business strategy is extremely unbalanced. It is as if Arnold Schwarzenegger never exercised his left arm. He could lift hundreds of pounds with his right arm and couldn’t lift a can of soup above his shoulder with his left.
If you are a strategist, stop worshipping at the altar of manipulation of quantities. Instead, seek balance. If you are weak on the appreciation of qualities: get to work on it. My advice is to go to a wine tasting or cooking or art appreciation course. Discover how one formally learns to appreciate — to make finer and finer qualitative distinctions. The way you develop qualitative appreciation is through practice with the medium in question combined with critique by masters of and peers in the medium. That is why your final exam in an art, design, or music class is not a multiple-choice quiz but rather a crit. It is because there aren’t any ‘right answers’ in qualitative appreciation. There are just more or less masterful interpretations. With guidance, practice, and critique, you will become more masterful.
And start treating strategy as a qualitative appreciation exercise as much as a quantitative manipulation process. Be conscious of your own qualitative assessments. Don’t be ashamed of them because they aren’t quantitatively based: that is an important feature, not a bug! Share them with masters and peers to sharpen your interpretation skills. Practice and practice strategy with a purpose.
CEOs frequently ask me for advice on unblocking the development of senior executives. The story is almost always the same. Though they don’t describe it in these terms, the CEO critique is that the executive is awesome at quantitative manipulation and dreadful at qualitative appreciation. Typically, the manifestation is ‘he is just tone-deaf with people’ or ‘she can’t innovate/embrace innovation’ or ‘customers fear him more than love him.’ They are shocked at my prescription. It is to send the individual to a Sommelier course or cooking school or an art appreciation course at the local museum. My reasoning is that it is doubtful that the executive has ever had a lick of formal training in the appreciation of qualities and needs to have that experience — which the executive can then port over into business (and if unable, it is prima facie evidence that the executive has already reached terminal position in the company).