Why post-rationalised strategies are better

OK, here’s an obvious thing that you should have picked up in my writing by now:

Leverage comes from doing things differently.

Basic right?  And who could disagree with that.  But we should ask the follow up question – do you really believe it?  Because although your mouth may say yes, your actions and your heart say no.  And a case in point can be found in how you – and most companies – develop strategy.

You see it’s easy to say that a company’s strategy should be different from its competitors.  But have you considered that this also means that the way you develop that strategy should also be different?

That’s what I want to write about today, specifically on the topic of “post-rationalising” a strategy – something which sounds like a bad idea, and not what any sensible company would do…

…and therefore is probably just what you should do.

Yes, I believe that for the most part post-rationalised strategies are better, and that post-rationalisation is a more effective way of coming up with strategies than the more logical approach.

Here’s why.

Let’s start with the anatomy of a great strategy, which we’ve talked about many times before:

1. Sell something people want
2. …but that they cannot get elsewhere.

Now when you think about it, each of these “clauses” concerns your relationship with a different external party:

1. Concerns the consumer
2. Concerns your competitors

In the first instance you are focusing on the wants and needs of your target market.  And in the second you’re simply concerned with whether any of your competitors are doing this thing too.

All straightforward so far.

Now the tricky bit here is that you can’t really focus on both parts of this equation at the same time.  You have to start with one, and then pull through to the other.  And the order in which most brands think about this is very sensible:

1. First we will identify consumer needs we can solve
2. And later we will worry about how to outmanoeuvre our competitors with this

This is what many would call a “customer-centric approach”, and it is seen as a “Good Thing”.  And to be fair, in many ways it is.  A value-focused strategy is indeed customer-centric, because it’s focused on giving them something they want.  And we’re all here to serve the customer are we not?  So yes, it’s a noble approach.

There’s only one problem:

It’s what everyone else is doing too.

Everyone – or at least everyone with any sense – is worrying about their customers, talking to them, researching them, and trying to uncover ever more needs to solve.  And this means, generally, that everyone is looking in the same place, and thus finding the same things.

I sense that perhaps in the past this wasn’t true, and that many brands were sleeping on their customers – so this may have been a radical approach.  But I don’t think that’s the case any more.  I think it has become that dreaded thing: “best practice”.

(I should hasten to add it’s not like you can NEVER find uncharted territory by looking into consumer needs – I’m working on a project right now where we found a gaping open goal through this approach – but if you do find such a thing you must have some pretty dozy competitors…)

So, what’s the alternative here?

Well, taking the the opposite, “backwards”, approach of course:

1. First we identify areas of difference with our competitors
2. And then later we ask whether these differences actually give consumers any value

This might be done through identifying differences we already have, but haven’t really explored (e.g. accentuating our weaknesses).  Or it might be done though more blue sky exploration of new weird value offerings in the category.  Either way you are worrying about the competition first, and the consumer second.

Now, there are two reasons this is so much more effective.

First, because you are asking random pattern-breaking questions others aren’t asking, and thus are uncovering new answers.  And second because the sheer volume of ideas you can create this way is at least 5x higher than being customer-centric.

This is why Rory Sutherland famously said “there are more good ideas you can post-rationalise than pre-rationalise”.  He wasn’t talking about strategy but it’s all the same stuff so he may as well have been.

You may wonder – I certainly do – whether the great strategies of business history were created this way, or if they were arrived at in a linear consumer insight fashion.

I cannot say for sure, but my understanding is that the majority were post-rationalised (though presented as pre-rationalised in the textbooks).  They started with someone having a “cool”, but slightly random idea, which, on closer inspection, actually turned out to have far more leverage than they initially realised.

All of this then, is why I don’t talk about consumer-led insight much.

Not because I don’t think it’s important – it is, and you should do it – but because I think it’s foundational work, as opposed to being the work where breakthroughs occur.  This is why so many of my thought experiments and exercises focus on your competitor relationships – because difference is actually more primary than value, weird as that sounds.

So, the chances are that the next big idea in your category doesn’t exist yet – not in your mind, not in your competitors’ minds, and not in your customers’ minds either.  It cannot be “found”.  It cannot be pulled from the data.  You cannot unearth it.

It can only be brought into being as a by-product of unpredictable thought.

So, my suggestion, is to start there.