February 26, 2021

Does Data Inhibit Strategic Thinking?

Data analysis is over-rated in nonprofit strategy development. The mere mention of a SWOT analysis makes me cringe. It’s not that I object to the idea behind it (which, in simple terms, is to make sure you know what is going on around you). The cringe is the result of my personal experience wading through mounds of data, trying to figure out how meta-changes in demographics or the potential change of political control at the Statehouse has any direct bearing on the strategy of this nonprofit. Equally disturbing is working through financial statements only to “discover” that our programs are not profitable on their own. Geez. Really?

The fact is that we have bought into the idea of data-driven strategy. With the data-driven approach, we gather as much information as we can in hopes that we will find answers the questions we haven’t asked yet. It is as if we think that our path forward will become clear if we just pay enough attention to what the data is trying to tell us.

Data informed strategy

Instead, I suggest we adopt the concept of data-informed strategy. This requires a shift in how we think about the role of data in strategy development. The logic of data-informed strategy is as follows:

• Conditions drive the questions.

• Questions drive the data.

• Data informs the strategy.

Data analysis does not play the lead role in strategy development. Instead, data plays a supportive role by providing the information needed to answer the most important questions facing your organization, such as:

• How do we remain relevant in light of changing community needs?

• How confident are we that our revenue mix is sustainable?

• How do we guard against straying from our core competencies and qualities?

• How do we differentiate ourselves in light of growing competition?

Knowing the strategic questions that are relevant to your organization at this time in its history. Clarity around your circumstances will leads to the information that you can use to test your assumptions and validate your aspirations. All of this is the prep work for addressing the most important strategic question: what do we do now?

Said another way, we should not look to the data to tell us what to do. Instead, our mission aspirations drive strategic growth. The purposeful use of data is to use it to validate and put boundaries around our that growth. A market analysis that reveals a growth opportunity, for example, should not on its own be the impetus for the development of a new program. If, in contrast, you believe you can enhance your mission impact by locating a satellite office in an underserved area, a careful analysis of the target neighborhood empowers to move forward with greater focus and commitment.

Strategic positioning is about creating the greatest mission impact in the most sustainable manner. No amount of data can tell us what we should do in this regard. However, the right data to inform the right questions is an essential piece of nonprofit strategy development. And must like actors in a film, everything works better when everyone understands their role.

Need Additional Assistance?

If you are interested in going deeper into your nonprofit strategy or if you wish to review your organizational strategy more broadly, click the link below to schedule a 30-minute phone or zoom consultation with Mike Stone.

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