Listen carefully to the conversation among your colleagues when they discuss market research or business intelligence. You will hear four nouns used: data, information, knowledge and insight. They are four different words but they are almost always used interchangeably, as synonyms for each other, when they are in fact quite different things. This lack of precision in the use of language is important to more than just hair-splitting pedants. Just as an expert chemist would not interchange ‘ion’, ‘atom’ and ‘molecule’, a strategy expert understands that these four nouns have very different meanings and that differentiating them is the foundation of mastering knowledge.

The meanings of data, information, knowledge and insight are shown in figure 1, which figure also implies the relationship between the four things. Insight is that subset of knowledge that has the characteristics of an organisational strength, abbreviated to VRIO (see box 1). Knowledge, of which there are three ‘flavours’ (see box 2), is created by weaving together different sources of information, which can be qualitative or quantitative or sometimes hybrids of the two. Information is organised data and most data can be organised in different ways to make different information. Data is a record of transactions and phenomena and can be qualitative or quantitative.

The difference between competent strategists and strategy experts is visible in the words they use and the nuances they employ when managing knowledge. Differentiating between data, information, knowledge and insight and between the three ‘flavours’ of knowledge is essential in mastering knowledge. It is analogous to an expert musician’s ability to differentiate between tone and timbre or tempo and rhythm. This is perhaps especially true for biomedical strategy experts who have to master knowledge in three fields – medicine, their market and product technology – that interact in a very complex way. Without differentiation, this torrent of diverse knowledge overwhelms merely competent strategy professionals and they are forced to revert to the expedient but less effective ‘systems 1’ heuristics, as described in article 2 of this series.

Box 1: VRIO insight

All insight is knowledge but not all knowledge is insight. Knowledge can be considered insight if it passes four tests:

1. It is valuable, ie, it can be used to create value in some way.
2. It is rare, ie, it is not commonly known among market competitors.
3. It is inimitable, ie, it is hard to imitate or replace.
4. It is organisationally useful, ie, the company is in a position to make use of the knowledge.

Eavesdropping on the conversations of your colleagues will reveal more than their semantics. Two other themes will emerge: complexity and turbulence. In biomedical markets, complexity is exemplified in the scope of factors that influence strategy, ranging from sociological issues, such as politics and demographics, to technological trends, such as clinical developments and new product innovation.

Similarly, turbulence is the result of the speed of change of these factors. From epidemiological shifts to payer cooperation and from CRISPR to AI, the rate of change in the biomedical market environment is dizzying. This has fundamental implications for strategists, which is seen in the scanning behaviour of strategy experts.

Scanning is the continual, undirected observation of the market environment. All strategists practice it but there are three scanning practices that typify strategy experts and separate them from most other strategists. The first is their use of others to help them. Strategy experts mitigate the complexity and turbulence of the market environment by assembling and using scanning teams. Importantly, these teams are designed to be cognitively diverse. The best scanning is done by teams from varied disciplines and different ways of looking at the world. The second characteristic of strategy experts’ scanning is its breadth and depth. Most strategists compensate for the difficulty of environmental scanning by narrowing and shortening their focus. Typically, they scan within their ‘bubble’ of market factors that are immediately and directly relevant to their market. Strategy experts go the other way. They widen their scanning to include factors that might indirectly impact on their market. For example, the reduction in the cost of genomic profiling or political attitudes towards healthcare funding both fit this category. Experts also lengthen their focus to consider factors whose impact is years away. Trends such as demographics and internet connectivity are both examples of this. For strategy experts, the scanning mantra is ‘capture everything: sociological and technological, near and far’. The third characteristic scanning behaviour of strategy experts is their focus on synthesis over analysis. Most strategists revel in the dissection of data, encouraged by how easy modern technology makes this. ‘Slicing and dicing the data’ becomes, for some strategists, almost an end in itself rather than a means of understanding the market. Strategy experts choose instead to focus on weaving together rather than dissecting information. They do this by first drawing out the immediate ‘first order’ implications of each factor picked up in scanning. Epidemiological shifts, for example, might imply increased demand. Then, they look for how those first order implications interact with each other. Increased demand would, for example, combine with slowed economic growth to create a ‘second order’ implication of increased payer demand for demonstrable value.

The very best strategists have an impressive ability to synthesise the implications of a large number of market factors to identify second, third and fourth order implications.

The difference between ordinarily competent strategists and strategy experts is visible in their scanning. Like a carpenter with wood or a tailor with cloth, they have a fluency and familiarity with their raw material, knowledge. Their ability to use teams to scan widely and to synthesise higher-order implications is very reminiscent of the way those craftsmen can read the grain of the wood or sense the weave of the fabric. The complexity and turbulence of biomedical markets makes this apparently innate talent even more important than in other sectors. I say ‘apparently innate’ because, despite seeming instinctive, strategy experts, when asked, describe how it only emerges after years of deliberate practice.

As important as scanning is, it usually only provides knowledge that is available to other strategy experts who scan broadly and deeply and then synthesise. Most effective strategies depend not just on knowledge but on that subset of knowledge, known as insight, that rivals do not possess. In biomedical markets, we see examples of insight when firms identify contextual segments from payer, patient and professional needs and when organisational strengths are identified in a firm’s implicit relationship with opinion leaders. True insight – knowledge that has the VRIO properties of an organisational strength – rarely if ever comes from scanning alone. Instead, it is crafted from information. That crafting of insight is the third skill, after differentiating and scanning, that separates strategy experts from their less expert colleagues.

Strategy experts have three ways of crafting insight, based on the three forms of reasoning that have been understood since the ancient Greeks. The first is deductive reasoning, which involves making and testing a hypothesis or ‘if/then’ statement. For example: If the market is price sensitive, then we would expect to see low-cost brands to have the largest share and if not, then not. Deductive reasoning sharpens existing ideas or even disproves them. Either is a form of knowledge creation and, if that knowledge is VRIO, it is insight creation. The second way of crafting insight is inductive reasoning, which involves drawing out generalisations from specific observations.
For example, interviews with prescribers about their use of practice guidelines might reveal the general insight that, in fact, prescribers are independent and idiosyncratic in their prescribing behaviour. Again, if the generalisation that emerges is VRIO, the inductive process has created insight. The third approach to crafting insight is abductive, a method that lies somewhere between induction and deduction. Abduction begins by identifying a number of alternative explanations for an interesting phenomenon and then seeing which is best supported by the data. For example, the slowness in uptake of a new product could be attributed to its costs, unfamiliarity with its mode of action or lack of sales and marketing effort. In this example, numerous data sets – market shares, trial and uptake behaviour, formulary attitudes – could all be gathered together to supply greater or lesser support for each theory. If the outcome is strong support for explanation one and refutation of the others – and if that knowledge is VRIO – then again insight has been created, this time abductively.

Strategy experts are distinguished from ordinary strategists in the methods they use to craft insight and the deliberateness of how they use those methods. Most strategists will either confuse insight with ordinary, non-VRIO knowledge or ‘guess’ at it, using the heuristic, ‘system 1’ thinking, with all the cognitive flaws that accompany that way of thinking. By contrast, when I observe genuine strategy experts, I can almost ‘hear’ their purposeful thinking processes grinding within their heads.
Depending on the situation and the information available from scanning, they choose to use inductive, deductive or abductive reasoning, or sometimes a combination of the three.

In any case, they direct that reasoning towards creating causal, declarative or procedural knowledge (see box 2) and then use the VRIO criteria to ‘test’ whether that knowledge is genuine insight.

Box 2: The three flavours of knowledge

1. Declarative knowledge involves knowing what something is. For example, ‘we know that there are 500,000 patients treated for this condition each year’.
2. Causal knowledge involves knowing what causes an event to happen. For example, ‘we know that poor glycaemic control is the main reason for referral to a diabetes specialist’.
3. Procedural knowledge involves knowing how something is done. For example, ‘we know that acceptance onto formulary requires successful completion of steps X, Y and Z’.

For ordinary strategists, what stands between them and mastery of knowledge are external factors. They don’t have enough data or information, or they have too much, or it is not of the right quality or type. This can sometimes be true but, in practice, the strategists of big companies can rarely blame these things. Even when true, these things can be fixed relatively easily with good research. By contrast, when I observe strategy experts in action it reveals that the real barriers to mastering knowledge are in the head of the strategist. What really prevents an ordinary strategist using knowledge as effectively as an expert is the lack of the three skills described in this article. Differentiating, Scanning and Crafting are three hard-learned abilities that mark out the genuine strategy expert.

In this article, I’ve built on the first of Kneebone’s masteries – mastering oneself – with the second, mastering knowledge. This takes us two-thirds of the way to becoming a strategy expert. In the next article, I will cover rest of the journey by discussing Kneebone’s third concept, mastering relationships, in the context of a biomedical company.