Process improvers the world over rally around root cause analysis as if it were the Holy Grail of all things organizational. But is it?
Understanding the root cause of a problem certainly makes sense in the context of a present day situation carrying the potential for a correct answer or solution. In the process improvement world, problems center on reducing some form of excess, which comes in several traditional flavors…all of which center on something not working as well as it should be in a perfect world.
But the one critical place in business where root cause analysis has no real place is in strategy formulation.
I’m sure I’ll be taken to task on this by the lean/kaizen/six sigma crowd, but bear with me, because I’ve witnessed repeated attempts to apply root cause analysis to strategy, only to be met with derailment and eventual failure.
The difference between a fix for an existing process or pain point and a set of choices about the future is night and day. Process problems are generally focused inward on activities you presently control. Strategic problems are generally focused outward on the future, and forces you cannot control. In process improvement, you’re pursuing perfection. In strategy formulation, there’s no such thing as a perfect strategy, so you couldn’t pursue one even if you wanted to.
If I own a traditional taxi or limo company, for example, I don’t need to know specifically why Uber entered my market, only that they did, and that my market share is dwindling and my growth and profitability is eroding.
Looked at another way, all strategic problems boil down to a single root cause: customers are finding superior value elsewhere, from a competing offer.
This may seem blazingly obvious. But that doesn’t seem to deter organizations (and their consultants) from applying traditional problem solving to strategy development, spiraling ever downward in an endless series of “why?” questions. The result is an emphasis on drafting a perfect plan and a futile attempt to craft a detailed articulation of the perfect future for the company.
It’s unnecessary, mostly irrelevant, and doesn’t work.
DON’T SOLVE, REFRAME
Let’s remember what strategy is: a set of choices that enable an organization to win with its customers and against its competition. Those choices uniquely position the company to deliver a superior value equation relative to the other players in the space, and set the stage for effective action.
In strategy, there are no correct or absolute answers, because you’re dealing with the future. There’s simply no possible way to eliminate the myriad uncertainties around market forces, competitive reaction and customer response, no matter how much detailed planning and in-depth analysis you do.
Formulating a winning strategy is all about increasing your odds of success by making intelligent bets, in the form of integrated choices.
The most effective way to go about doing that is not to “root cause” the problem, but reframe it as a few mutually independent, high-level options that would make the problem go away. You then use those as the springboard to generate multiple possibilities for more specifically where you could play and how you could win. You select the most compelling possibilities, and develop them into robust set of choices supported by capabilities and systems.
Finally, you determine the conditions under which those choices would be good ones, teasing out the assumptions that could be barriers to success, crafting experiments to test the them, and analyzing the results. All in an effort to raise your level of confidence in your choices. (I’ve detailed this process here.)
In other words, analysis comes at the end, not the beginning. So, when it comes to strategy, right along with swatting your SWOT, you can boot your root (cause).