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You Need To Be Skeptical Of Advice From Business Pundits And Gurus. Here’s Why:

2023 December 3
by Greg Satell

In 2005 W. Chan Kim and Renée published Blue Ocean Strategy, which found  that “blue ocean” launches, those in new categories without competition, far outperformed the shark-infested “red ocean” line extensions that are the norm in the corporate world. It was an immediate hit, selling over 3.5 million copies.

Bain consultants Chris Zook and James Allen’ published, Profit from the Core, around the same time. They found that firms that focused on their ”core” far outperformed those who strayed. For example, they warned that Amazon was putting itself from peril for expanding its business beyond books and predicted dire results.

Clearly, none of this makes sense. How can you both “focus on your core” and seek out “blue oceans?” It betrays logic that both strategies could outperform one another. Today, Amazon makes most of its money outside of books. Yes, new markets lack competitors, but they also lack customers. The truth is that most business research is surprisingly shoddy.

Cargo Cult Science

When Richard Feynman took the podium to give the commencement speech at CalTech in 1974, he told the strange story of cargo cults. In certain islands in the South Pacific, he explained, tribal societies had seen troops build airfields during World War and were impressed with the valuable cargo that arrived at the bases.

After the troops left, the island societies built their own airfields, complete with mock radios, aircraft and mimicked military drills in the hopes of attracting cargo themselves. It seems more than a little silly, and of course, no cargo ever came. Yet these tribal societies persisted in their strange behaviors.

Feynman’s point was that we can’t merely mimic behaviors and expect to get results. To illustrate what he meant, he told a story about going to a new-age resort where people were learning reflexology. A man was sitting in a hot tub rubbing a woman’s big toe and asking the instructor, “Is this the pituitary?” Unable to contain himself, the great physicist blurted out, “You’re a hell of a long way from the pituitary, man.”

What makes science real is not fancy sounding words or slick charts with numbers on them. Business gurus often boast of their “research” that consists of hundreds of case study interviews and large databases containing data on thousands of firms, but without the proper methods and controls, those things are meaningless.

The Problem With Case Studies

Organizations are often inscrutable and hard to research. That’s why the preferred mode of analysis is case studies in which insiders are interviewed and a particular situation is interpreted by investigators. These can be helpful, but they also have severe limitations.

First, with shareholders and customers to please, managers are rarely eager to talk about failures. So we usually only hear about successes. Those, of course, are important but also subject to survivorship bias. For example, if a risky strategy results in 1% of the firms being wildly successful and 99% going out of business, then we’ll tend to hear glowing accounts of that lucky 1% and we’ll miss the vast majority that flamed out.

Another issue with the case study method is that it is necessarily limited. When researchers did a case study on company I used to run, to take just one example, they interviewed insiders (including me) and did their best to interpret what they heard and what they could glean from background information regarding the market.

While I don’t think anything was inaccurate, it wasn’t exactly the truth either. Only a handful of people were interviewed, almost all of them were concentrated in a single part of the business and none of them, besides me, were involved in making decisions. The issues presented in the case study simply weren’t the ones we were actually wrestling with.

The problem with case studies is that they offer little to no documentation. In more rigorous fields like, say, sociology or psychology, researchers are expected to share their data so that others can interpret it. Unfortunately, that’s rarely true in business research.

Working Around The Glitches In Our Brains’ Machinery

We tend to imagine that our minds are some sort of machines, recording what we see and hear, then storing those experiences away to be retrieved at a later time, but that’s not how our brains work at all. Humans have a need to build narratives. We like things to fit into neat patterns and fill in the gaps in our knowledge so that everything makes sense.

Psychologists often point to a halo effect, the tendency for an impression created in one area to influence opinion in another. For example, when someone is physically attractive, we tend to infer other good qualities and when a company is successful, we tend to think other good things about it.

The truth is that our thinking is riddled with subtle yet predictable biases. We are apt to be influenced not by the most rigorous information, but what we can most readily access. We make confounding errors that confuse correlation with causality and then look for information that confirms our judgments while discounting evidence to the contrary.

Unfortunately, so many of the popular management ideas today come from people who never actually operated a business, such as business school professors and consultants. These are often people who’ve never failed. They’ve been told that they’re smart all their lives and expect others to be impressed by their ideas, not to examine them thoroughly.

That’s why it’s so important to not to believe everything you think, there are simply too many ways to get things wrong and so few ways to get things right.

It’s More Important To Be Careful Than Smart

When I lived in Poland, a common aphorism advised that “life is cruel, and full of traps.” From an American perspective, the aphorism can be a bit of a culture shock. We tend to believe in the power of positivity, the American dream and the can-do spirit. Negativity can be seen as something worse than a weakness, both an indulgence and a privation at the same time.

Over the years, however, I came to respect the Poles’ innate suspicion. The truth is that we are far too easily fooled and taken in by those prey on the glitches in our cognitive machinery. Often business gurus have fooled themselves. They believe they have special powers of insight and get taken in by the glitches we all have in our mental machinery.

We get taken in because we want their claims to be true. We’d like to think that there is a secret we’re missing, that there’s a black magic that we’re not privy to and, if we prove our worth and obtain access to a few simple truths, we’ll capture the success that eludes us. Things can seem simple in a PowerPoint deck, but the truth is that the world is a messy place.

That’s why we need to train ourselves to ask the tough questions. What are we not seeing? What data is missing? What are alternative interpretations for the evidence being presented? It’s more important to be careful than smart. We can only make decisions on higher or lower levels of confidence. In the real world, there are no “sure things.”

 

Greg Satell is Co-Founder of ChangeOS, a transformation & change advisory, an international keynote speaker, and bestselling author of Cascades: How to Create a Movement that Drives Transformational Change. His previous effort, Mapping Innovation, was selected as one of the best business books of 2017. You can learn more about Greg on his website, GregSatell.com and follow him on Twitter @DigitalTonto and on LinkedIn.

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2 Responses leave one →
  1. Ben Royal permalink
    December 3, 2023

    One approach to qualitative research is the concept of “thick description.” I don’t know if this is covered in MBA programs.

    If you have time you might check out this paper:

    Brief Note on the Origins, Evolution, and Meaning of the
    Qualitative Research Concept “Thick Description”
    Joseph G. Ponterotto

  2. December 3, 2023

    Thanks so much! I’ll take a look.

    Gref

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