A 5-year research study by Transparency Lab among 3.500 teams shows that managers perform poorly in understanding the complex impact of their strategic decisions. In fact, feeding pattern recognition algorithms the same information these managers had makes better strategic decisions: the algorithms outperform their human counterparts by a factor 4.

But … what makes a strategic decision ‘better’?

In the study, researchers looked at 3.500 teams in 12 industries in 32 countries. In total, a whopping 50 million data points. Team size varied between 8 and 325 employees. Their management was surveying its team members about a wide variety of strategic topics. Hence, the impact of the strategic decision was broken down into three generic aspects, irrespective of the strategic issue at hand: alignment, effort and capacity.

Firstly, the research verified how much the rest of the team was aligned with the target management had in mind. Secondly, the research investigated how much effort the strategic decision required from the team. Thirdly, the research analyzed how much capacity (appetite for change and capability to change) there was within the team. Each of these three aspects was divided in 4 levels. For example, alignment could range from very high (employees aligned among each other and with the management’s target) to very low (employees aligned among each other in their rejection of the management’s target).

Three aspects with each 4 levels resulted in 64 different impact variations. Some variations could be typical Do’s. For example, a lot of effort is no problem when the team is aligned and capacity is plenty. Other variations where typical Dont’s, e.g. a medium improvement target without alignment nor capacity has very likely a remote chance of success.

Comparing the 64 variations, 25% of managers in the 3.500 teams chose one of the Do-variations while 75% chose a Don’t-variation. In fact, the 6 most popular variations accounted for 42% of all teams and were all Dont’s. The Transparency Lab algorithm was able for find a ‘Do’ for every team, thus, lifting the success rate from 25% to 100%. A fourfold improvement.

It probably will not end here ….!?

Exactly! If one would add more than the three factors investigated here (alignment, effort, capacity), the impact of management’s strategic decisions is even harder to fully grasp. This will likely lead to managers scoring even more Don’ts and less Do’s. If the algorithm keeps finding Do’s, the outperforming will increase from 4:1 to 10:1 or higher.

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