Strategy is a Hypothesis

April 23rd, 2008 Sean Murphy

I caught this tweet on the VentureHacks Twitter feed but in checking with Mr. Google I discovered it was part of the Balanced Scorecard methodology. An excerpt from Dr. David Norton’s “Measuring Value Creation with the Balanced Scorecard” a summary is available here.

“Strategy is a hypothesis. Strategy implies the movement of an organization from it’s present position to a desirable but uncertain future position. Since the organization has never been to this future position, the pathway of how it intends to get there involves a series of linked hypotheses.”

And some excerpts from a presentation “Using Balanced Scorecard to Build a Project Focused IT Organization” by Glen Alleman:

Strategy is a hypothesis. Metrics are the data for testing the hypothesis.

Strategy is making a hypothesis about a desired outcome, constructing the measures to test the hypothesis, deploying the experiment to test the hypothesis, then making adjustments based on the metrics.

The concept of strategy as a hypothesis and the experiments to test the hypothesis may be new to many. But this approach puts strategy in a different light. Strategy is not something you do then go off to execute the plan. It is a continuous feedback process. Always testing the strategy with metrics derived from projects.

The take away for startups is to understand how you are going to keep score, measuring both progress and distance to goal. Whatever strategy or mix of strategies you adopt, for each you should define up front and in simple terms how you will track impact on the key outcomes you are trying to achieve (e.g. revenue, profit).

Entry Filed under: Blogging,skmurphy,Startups