The Basic Idea
Strategic investment at a company might look like:
- An acquisition or merger with a company’s competitor
- Getting into a new market (i.e., expanding from cell phone batteries to tablet batteries)
- Adopting a new technology system
- The utilization of novel raw materials for the production process
- Creating an innovative service through financial investment in research and development1
An example: Coca Cola invested $5.5 billion USD in development in Africa between 2006 and 2016 with the intention of building brand loyalty. As the continent continues to develop and the population acquires more disposable income, they will choose to spend it on Coca Cola products.2 While the company has had a presence in Africa since 1928,3 it’s betting big on high growth: by 2025, McKinsey estimates that African business opportunities will be worth $5.6 trillion USD.4
This example highlights the premise of strategic investment: while the costs might be high at the start, there is a sense of faith (working in tandem with data and analytics) that the return investment will ultimately pay off.
Theory, meet practice
TDL is an applied research consultancy. In our work, we leverage the insights of diverse fields—from psychology and economics to machine learning and behavioral data science—to sculpt targeted solutions to nuanced problems.
Over the last few years, digital currency has taken off in popularity. Coming in three forms, cryptocurrency, stablecoins, and central bank digital currencies5 digital currency is only available electronically.6
Part of their growth in popularity is because they allow for:
- Quicker payments - Unlike wire transfers, which can take days to process
- 24/7 access - Traditional transfers often lag outside of business hours and on weekends since banks aren’t open to confirm those transfers. Digital currencies allow for transactions to occur at a consistent speed, 24/7
- Less costly international transfers - While international transactions often incur high costs, digital currencies avoid these fees
While digital currencies have become more mainstream among individuals, they’re also starting to work their way into strategic investments: Fidelity, the leading provider of 401ks in the United States, announced in 2022 that it would allow participants to invest retirement money in Bitcoin.7,8
The Behavioral Science
An intriguing facet of strategic investment is that decision-makers manage to avoid hyperbolic discounting - the valuing of present gains over future gains.
Hyperbolic discounting often gets us in trouble, like when we spend our tax refund on the coolest new gadget instead of saving it. Our desire for immediate gratification can get in the way of making wise decisions for our future.
Savvy investors, however, are future-oriented thinkers, able to see the ramifications of their decisions on a larger scale. Needless to say, the ordinary person doesn’t have $5.5 billion to invest like Coca Cola, so even if we do fall prey to hyperbolic discounting, our impulsive decisions usually have significantly smaller consequences.
In 2020, Canada’s National Research Council (NRC) conducted an extensive review of its 150+ research institutions. NRC approached The Decision Lab to find a way to process the findings from the reviews so they could plan strategically with stakeholders.
We designed an instrument that assessed stakeholders’ varying strategic priorities through data collection. In enabling NRC to more effectively assess its priorities, we helped the company better identify opportunities for strategic investment that will ultimately assist in its future growth.
If you would like to read more about the project, you can find a link to the case study here.
1. Strategic investments—Definition, what it is and concept. (2019, January 19). Tips to Take Care of Your Money Every Day. https://www.takecareofmoney.com/strategic-investments/
2. Nurse, E. (2016, January 21). The secret behind Coca-Cola’s success in Africa. CNN. https://www.cnn.com/2016/01/21/africa/coca-cola-africa-mpa-feat/index.html
3. Byala, S. (2018, March 8). Water, Waste, Energy: Lessons from Coca-Cola in Africa. Kleinman Center for Energy Policy. https://kleinmanenergy.upenn.edu/research/publications/water-waste-energy-lessons-from-coca-cola-in-africa/
4. Coleman, C. (2020, February 11). This region will be worth $5.6 trillion within 5 years—But only if it accelerates its policy reforms. World Economic Forum. https://www.weforum.org/agenda/2020/02/africa-global-growth-economics-worldwide-gdp/
5. Rodeck, D., & Adams, M. (2022, October 13). What Is Digital Currency? – Forbes Advisor. Forbes Advisor. https://www.forbes.com/advisor/investing/cryptocurrency/digital-currency/
6. Rodeck, D., & Larke, R. (2022, August 16). Digital Currency: The Future Of Your Money. Forbes Advisor Canada. https://www.forbes.com/advisor/ca/investing/digital-currency/
7. Bernard, T. S. (2022, April 26). Fidelity’s New 401(k) Offering Will Invest in Bitcoin. The New York Times. https://www.nytimes.com/2022/04/26/business/crypto-401k-fidelity.html
8. Frankenfield, J. (2022, October 14). What is Bitcoin? How to Mine, Buy, and Use It. Investopedia. https://www.investopedia.com/terms/b/bitcoin.asp