All narratives are wrong, but some are useful

The importance of finding the right story to inform your strategy

There is an oft-cited maxim in statistics attributed to George E. P. Box that states “all models are wrong, but some are useful”. This statement has a lot of validity and its wisdom has grown during the current Information Age. I believe there is a key corollary which states all narratives are wrong, but some are useful. (This is similar to the sentiment from Neil Kakkar that “all stories are wrong, but some are useful”.)

I prefer the term “narrative” here because I believe that “story” implies completeness - stories have a beginning, middle, and end. Narratives are similar to stories in that they use words to convey concepts, invoke images, and explain behaviors and phenomena, but they are fragments - that is, they are incomplete and subject to revision. Just as mathematical models help to explain and understand behaviors we observe in the real world, so do narratives.

There is a wide range of literature and other sources of information on the power of storytelling in our lives. Stories tend to stick with us; they are proven to be effective at encoding and transferring information from one person to another and facilitate learning. One challenge with the use of storytelling is that it blends information with emotion - stories often fall into familiar archetypes and ascribe motivations to characters: heroes and villains. They also inherently contain bias - conscious and unconscious - from the author’s perspective. (Consider the famous quote ascribed to Winston Churchill that “history is written by the victors”.) Stories are sticky: we tend to remember stories much better than facts and figures. Unfortunately, humans also tend to have confirmation bias where we remember certain evidence that supports our stories while ignoring evidence to the contrary.

Get your strategy right by getting the narrative right

When I deliver talks to corporate clients about innovation, I emphasize the need to view innovation as a discipline, not a side show. This begins with tying your innovation efforts directly to your corporate strategy rather than allowing each divisional head to develop his or her own innovation efforts which often end up as “pet projects” that are not sustainable and do not endure when the leader at the top is replaced. To maintain focus and discipline, innovation efforts must be directly tied to your strategy. Importantly, innovation efforts should go beyond achieving this year’s operational metrics by being future-oriented, answer key unknown questions, and test assumptions or hypotheses to de-risk “big swings” to significantly reduce costs in pursuing a particular course of action. The focus of innovation should be novel ideas, not simply new ideas.

While tying innovation to strategy is critical, it does no good if your strategy is not sound. A key part of getting your strategy right is to form a “worldview” that both explains current trends that are emerging and that foreshadow what the future holds. This is easy to say and hard to do. When we look at decisions in retrospect, we have he advantage of full information so hindsight bias often poisons our analysis of the actors and decision-making processes they used at the time given limited information.

For example, I recently read The Ugly Truth: Inside Facebook’s Battle For Domination which was quite critical of the company and in particular top executives such as Mark Zuckerberg and Sheryl Sandburg. Ironically, while I’m far from a Facebook apologist, I actually came away more sympathetic to the very leaders the book takes to task. The reason? The authors called Facebook “the most consequential social experiment of our times” and, seen as such, it was impossible to foresee all of the implications the company and its actions would have on the world.

Broaden the circle to refine the narrative

The authors’ biggest accusation against Facebook is that, whenever they were balancing competing priorities, they chose time and again to put profits over people. The challenge with this conclusion is that most top executives of publicly traded firms are unique responsible for the same problem: how to achieve sustainable growth for their business. Business leaders are not responsible for prioritizing the public interest over their own profits, no matter how enlightened this objective may be. Many of the thorniest social issues today have to do with the role of Big Tech and regulation and to what extent these entities can “self-regulate”.

My chief criticism of Facebook is different: their insular corporate culture never expanded and diversified over time as the company grew beyond its startup roots. Had Facebook hired people with more varied backgrounds in positions of authority and listened to their feedback, they might have anticipated many of the challenges they have faced and been proactive, rather than reactive, in their approach. For example, a more thoughtful consideration of the implications of rolling out Facebook in Myanmar, a country long known for repression that had loosened in the early 2010s, might have anticipated some of the subsequent problems that Facebook contributed to including the targeting the minority Rohingya Muslim population and military coup that occurred in 2021. However, Facebook was too late in recognizing that each country has a different and unique cultural, social, and political environment that should be taken into consideration; what works in the United States will not work everywhere else.

Narratives in my view are snippets of stories, inherently incomplete and ever forming. To see a fuller picture - to make the narrative more complete - it is critical to widen the circle of narrators who help shape the story. Without building a robust leadership team consisting of a diverse array of influential voices that are respected, Facebook has struggled to shape their narrative. Even seemingly “good news” stories such as providing support for the rollout of COVID-19 vaccines or helping local election officials in the United States purchase badly needed technology using “Zuck Bucks” ahead of the 2020 presidential election have become problematic ones for the company. A more diverse set of senior leaders would have helped in setting the strategic direction of Facebook, ensuring its implementation tactics are sound, and shaping the narrative to avoid backlash and subsequent continually backtracking.

Say what your strategy is and revise as needed

The narratives that you identify to explain trends and develop your worldview are a key input into formulating your long-term strategy. If you can weave these narratives into a coherent story, that is beneficial - but, more likely, you will inevitably have some loose ends or competing narratives where the picture gets fuzzy. To fill in the gaps, you generally need to make some assumptions about how things will play out. These gaps and assumptions are areas that are ripe for innovation; investments here can help answer key questions and allow you to de-risk efforts and move forward more confidently once you have answers. Innovation efforts should be directly tied to your strategic imperatives and be designed to provide a “return on learning objectives” or ROLO rather than traditional return on investment (ROI). That is, the ultimate goal of innovation is to learn something that’s useful. These learnings are often classified as “failures”, but I prefer the framing of Thomas Edison in his famous quote: “I have not failed. I have just found 10,000 ways that don’t work.”

A key part of forming your corporate strategy is simply “can you say what your strategy is?” which was the subject of one of the most impactful Harvard Business Review articles I’ve ever read. Too often corporate strategies quickly become about goals and metrics and ignore changes in the competitive landscape. More importantly, most corporate strategies tend to fly in the face of broader demographic, economic, societal and technological trends that greatly influence a company’s success or failure. By spending time crafting a narrative for your firm’s strategy that is clear and understandable to your leaders, employees, and key stakeholders (e.g., investors, partners, etc.), you are more likely to receive valuable feedback on where the perceived gaps are. This in turn allows you to reflect back on the strategy to ensure it is sound and iterate over times as new developments occur.

I recommended setting doing a full strategy reset every 3-5 years by revisiting it every 3-6 months to ask “what has changed?”, “what is new?”, “what unknowns or assumptions are now clearer?”, and finally, “does this same strategy still make sense?”. In my experience, the cycle of revisiting your corporate strategy occurs too infrequently, allowing firms to drift too far before they are able to course correct. It also leads to snap decisions based on the latest craze or FOMO and feeds into a very reactive model of operating. Too often efforts to formulate a strategy bog down in endless slide decks and wordsmithing where “perfect is the enemy of good enough”. By contrast, the formulation of an initial strategy narrative that is continually being revised to become a full story is preferable to pretending to have all of the answers when that is never possible.

Just as mathematical models are abstractions that don’t full represent reality in all of its complexity but are still useful, so are the development of narratives even if they never form a complete story. Using narratives both to formulate your strategy and to stress test your strategy by describing it in narrative form rather than metrics and objectives is essential when speed and scale are so important for achieving success.

What is the role of narratives and storytelling in your organization? Do you have a “chief storyteller”? How much focus is spent at your firm on identifying gaps, overlaps, and conflicts in different narratives that make up a fuller story? Are your innovation efforts targeted towards discovering answers to key unknowns and tied to learning objectives? Finally, are your innovation initiatives haphazard “pet projects” or do they tie directly to your strategy?