In business we have a sad tendency to copy success blindly.
I remember the first time I read about this I didn’t even understand what I was reading:
“Nothing in business is so remarkable as the conflicting variety of success formulas offered by its numerous practitioners and professors. And if, in the case of practitioners they’re not exactly “formulas,” they are explanations of “how we did it” implying with firm control over any fleeting tendencies toward modesty that “that’s how you ought to do it.” Practitioners filled with pride and money turn themselves into prescriptive philosophers, filled mostly with hot air.”
Through blind luck, I’d had the good fortune that Theodore Levitt’s The Marketing Imagination (1983) was the very first book I read on marketing. That paragraph — the opening paragraph of the book — stuck with me in some odd way, but it would be years before I truly appreciated what it said.
I was business-educated in the In Search of Excellence (1982) era and, while I suppose the same approach had been happening for years, In Search of Excellence was about as unscientific as they come. The authors, Tom Peters and Bob Waterman, started out with a list of 62 companies identified by asking their McKinsey partners and friends “who’s doing cool work,” cut the list rather arbitrarily to 43 (excluding, for example, GE — but retaining Wang, Atari, and Xerox), and then “derived” eight themes which they thought were responsible for their success.
That was the mentality of the time. Arbitrarily identify a set of companies you deem “cool” and then arbitrarily come up with things they have in common. (And that’s not to mention the allegations of “faked data.”)
So I was happy when Jim Collins came along in 2001 arguing that he was bringing a more scientific approach in Good to Great. Arguing that seeking only common traits could you lead to discoveries such as “all great companies have buildings,” Collins strove to differentiate good companies from great ones. Starting with 1,435 companies and examining their performance over 40 years, Collins’ team identified 11 companies that became great along with 11 comparison companies in the same markets that did not.
While Collins’ thinking may have been clearer than Peters’, his luck was no better. Seven years after the book was published, several “great” companies like Circuit City were in deep trouble, Fannie Mae required a Federal bailout, and only only one of the eleven companies, Nucor, had dramatically outperformed the stock market. Amazingly, despite the poor to lackluster performance of the “great” companies, it remains a best-seller to this day, ranking #5 on Amazon in management at last check.
Even when trying to avoid it, fake science and, in particular, survivor bias had struck again. Thank goodness Phil Rosenzweig came along in 2009 with The Halo Effect, describing it and eight other business delusions from which managers suffer. Here’s a nice excerpt:
On the way up to a stock market value of half a trillion dollars, everything about Cisco seemed perfect. It had a perfect CEO. It could close its books in a day and make perfect financial forecasts. It was an acquisition machine, ingesting companies and their technologies with great aplomb. It was the leader of the new economy, selling gear to new-world telecom companies that would use it to supplant old-world carriers and make their old-world suppliers irrelevant. Over the past year, every one of those characterizations has proved to be false.
As I often said about running analyst relations at Business Objects: “when the stock was going up everything I said was genius, when we missed a quarter, everything I said was suspect.” This is, in my estimation, the real reason why some bad-egg companies such as bubble-era MicroStrategy, Fast Search & Transfer, or Autonomy (not yet settled) are tempted to inflate results. I think it’s less about inflating valuation, and more about inflating the company’s perception of success in order to “validate” their strategy going forward.
But, to Levitt’s point at the start of this post, we are swimming in advice from successful practitioners.
We have advice from Sequoia billionaire Mike Moritz who says the best advice he ever received was to “follow his instincts” which, as it turns out, works swimmingly well if you happen to have his instincts. (And perhaps less so well, if you don’t.)
We have advice from billionaire Peter Thiel, who sounds vaguely like Timothy Leary with the drop-out part of turn on, tune in, drop out.
We have advice from Steve Blank, one of the more reasonable and thoughtful sources out there, and someone, in my opinion, to be admired for his commitment to giving back intellectually to Silicon Valley.
We have a plethora of advice from Marc Benioff, for example, the 111 “plays” in Beyond the Cloud, including “make your own metaphors” and “cultivate select journalists.”
Who knows, maybe “beware of billionaires bearing business advice” may become the new “beware of Greeks bearing gifts.”
Finally, we also have advice from, dare I say, Kellblog who, while not a billionaire (yet), has opinions as tempered by experience and as firmly held as any of the above — and often as unscientific.
Given this sea of advice, how do I recommend processing it? In the end, as Rosenzweig reminds us, in the absence of real silver bullets and magic formulae, we need to think for ourselves. So every time I hear a successful businessperson bearing business advice I remind myself of one key fact — the plural of anecdote is not data — and ask myself two key questions:
- Do I believe that he/she was successful because of, in spite of, or completely independent of this advice?
- If Marc Benioff carried a rabbit’s foot, would I?