Strategy and product development: logic vs. intuition

While the irrational seems to be increasingly taking over in general social life, I have the feeling that in business, people want to focus as much as possible on data. While I highly value objective discussions and decisions, I experience a “data chic” in everyday business life that is usually nothing more than “interpretation free jazz”.

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Good data – bad data

You may be familiar with the situation: Manager XY tries to make a decision palatable to his committee. He lays out his argument and at some point a sentence along the lines of “…our data shows that…” inevitably comes up. This is the match point in the discussion, so to speak. Yes, if our data shows that, how can we argue against our data?

As you are no doubt familiar with, far too often too little attention is paid to what data is actually involved. How it was collected, what the context of this data looks like and how statistically reliable the data is. In my opinion, most of the data used in German companies does not stand up to closer scrutiny. In other words, the conclusions that are drawn from the data.

Time and again, I have also noticed that data is used one-sidedly. When data is used for argumentation, it is the holy, groundbreaking beacon in the general foggy business situation. If not, the data is, forgive the expression, “shit”. That’s the original tone.

Funnily enough, such behavior is usually not deliberately manipulative. In fact, people often just think like that. Handling data is key today, especially in strategy development.

Logic in the strategy

Intuition and logic often get mixed up in business. Every week I receive letters from start-up founders who present their business to me. The sobering realization is that most of them make exactly one mistake: they don’t know where to use logic and where to use intuition.

It’s actually quite simple: when developing the corporate strategy, the business model, you should proceed as logically as possible. I am a big fan of first-principle thinking and am convinced that new companies should always be based on such underlying first principles.

These are usually macro developments or physical principles that you should not work against with a business. It’s like stroking a cat against the grain. It usually doesn’t come out well and if it does, it still doesn’t feel good.

The question is always: which developments are logical and foreseeable based on these first principles (if you study them intensively), but are not (yet) obvious in the wider social perception? If you develop a business model in this situation and bring it into reality that can benefit from precisely these developments, you can, to put it bluntly, only mess it up in execution.

However, if your business model runs counter to such first principles, you can be as good as you like at execution. Sooner or later, you are guaranteed to lose.

When developing a strategy or business model, you always need to make decisions as logically as possible. Whether you can reconcile your strategic considerations with the current, general assessments of feasibility is irrelevant. On the contrary. If you limit yourself to the “realistic” in this process, you will never be able to create something really fundamentally new. Incidentally, this mental “angle of attack” usually also determines the risk and potential profit of your venture.

When we started Accounto, various players in the market told us that our vision of a fully autonomous robo-accounting engine would never be possible. However, our prototypes and calculations show that it will indeed be possible. Even if it is a long and complicated road. From an intuitive point of view, I even agree with my industry colleague. It actually feels as if it will never be possible. But that is due to the fact that I am “programmed” accordingly by the past. I have a wealth of experience that does not yet include the new possibilities we are working on.

This is why logic is so important in the development of business strategies and models.

Intuitive products

The trick now is to build products based on these strategic principles to which the customer can develop intuitive access. This is much more difficult than developing a logical strategy based on first principles.

The product must feel intuitively right for the customer. They must feel “at home” with it after a short time.

Frankly, I always struggle with this. I think I have my strengths in the strategic area, in analysis and logical reasoning. Many people in a technical and scientific environment think like that.

And are then always a little surprised that the logically stringent customer doesn’t actually exist. Our first product, for example, the digital tax consultant full-service provider Accounto, is logically and soberly a no-brainer: for practically every company with 2 to 20 employees, it is the best and most cost-effective solution in terms of economy and process for organizing accounting.

After around 50 to 80 interested parties saw it that way every day during our pre-launch phase and signed up, the actual daily new customer additions are far lower. It took me quite a long time to understand that our product – the comprehensive full service – was not intuitive for many potential customers. And that this outweighed the cost savings of around 70% compared to the combination of independent bookkeeping/tax consultant. Fortunately, however, there are still many new customers who see the advantages and are prepared to take a fairly radical step.

More than enough to enable rapid growth in small Switzerland. And sooner or later, all tax advisors will become “digital tax advisors” anyway. But I had a different idea. It was a stupid mistake. One of our reactions to this is that we are building a much more intuitive product with the same technology, which can be rolled out in the market in a completely different way. From my point of view, this is a step backwards, but the first pilot customers and partners simply love the concept. Quite simply because it suits them intuitively.

Being good at both is difficult

If you now look at these two elements, logic in strategy development and the development of intuitive products, it is striking that all large, successful companies that use technology have mastered both disciplines quite well. This success is no accident.

So make a conscious effort in business to distinguish between logical and “intuitive” thinking and not to mix them up in strategy and product development. Your customers will thank you for it. With turnover.