In his book, The Halo Effect, author Phil Rosenzweig asserts that business strategists derive universal truths by synergizing a collection of facts, data, and scenarios, regardless of how related or unrelated they may be.
In particular he targets those who establish business trends through their work in business books, magazines, and newspapers, arguing that their storytelling is not business strategy.
He claims that, despite the availability of hard facts and data, business strategists see a “halo,” which is comprised of a series of case studies, customer data sets, and historical transactions that are synthesized into a strategy that is supposedly applicable to business.
Instead of considering historical data and consumer behaviors separately and in relation to the business, industry, and times, strategists incorporate them into a single, generalized story. The direction in which a business should be moving – or the measurement of success it subscribes to – is really based on the act of storytelling instead of a proper understanding of the physics behind the data.
Mr. Roesenzweig published his book in 2007 and took aim at a series of books such as In Search of Excellence, Good to Great, and Built to Last; however, his criticisms might very well be as valid today, and not just with the modern-day business books. The proliferation of web-based publications such as whitepapers, e-books, and blogs has created an even greater “synthesizing” of strategy. In fact, “storytelling” is the Internet marketer’s mantra these days.
Sam McNerney, a science journalist at Scientific American, reports in Big Think that such books are “founded on the idea that every company has a core identity,” that those strategists try to glean from interviews and published case studies in order to establish “timeless universals.”
In so doing, authors create a “heavy dose of halos that spawn the illusion of understanding.” The strategies proposed aren’t truly based on the complexities of business as the writing suggests; even if they were, no two companies are alike, nor should they be.
Crossroads: Big Data and Social Business
Today’s Big Data, the collection of data sets that are too large and too complex to be adequately translated into useful business insights using current database management tools or traditional data processing applications, has compounded the challenges reported by Roesenzweig.
The modern social economy has introduced too many unknown and unpredictable variables for generalized business books – or a set of business rules based on other firms’ experiences – to be universally useful. One could even argue that such whitewashed strategies are harmful because they encourage the business strategist to focus on today’s trends, limiting the manager’s ability to re-invent the playing field. Instead, they train managers to be the best players at the current game.
The internet has changed everything. “Location, location, location” no longer holds the strategic business weight it used to. Crowdsourcing has introduced an extremely volatile and disruptive influence in the communication paths between businesses and consumers.
The basic laws of economics are being challenged every day as government economists, politicians, and business leaders try in vain to adapt to the current speed of change.
The Delusions of Businesses Strategists
The Halo Effect outlines a series of “delusions,” which Roesenzweig believes are “mistakes of reasoning” that undermine the principles for business success that this genre of business books and strategic thinking purport. He uses Timothy D. Wilson’s work in the Journal of Social Psychology to explain that the perception of one quality is contaminated by a more readily available quality (for example good-looking people are rated as more intelligent).
For example, the judgements consumers make about a company’s customer-focus and other attributes are contaminated by other business indicators and performance, such as its share price or the status of its social-celebrity spokespeople. Correlations become meaningless, because success was the basis for the perceived customer focus, not specific customer engagements.
Below, I’ve listed Roesenzwieg’s “delusions;” how many of these criticisms are still valid in today’s crop of business books and strategies offered by professional speakers and business school professors?
- Correction and Causality – erroneously believing that correlation is causation.
- Single Explanations – thinking that one factor X improves performance by 20% and Factor Y improves it by another 20%, totalling a 40% performance boost, when factor X might in fact improve performance by causing Y.
- Connecting the Winning Dots – not including the data of companies who failed to succeed using the same strategies.
- Rigorous Research – establishing “best practices” on the volume of research conducted by the author as though that alone makes the strategies outlined statistically valid.
- Lasting Success – suggesting that success is infinite if the model outlined in the book is embraced and religiously adhered to within the company.
- Absolute Performance – failing to recognize that external factors can disrupt a business that “does everything right.”
- The Wrong End of the Stick – mixing up cause and effect; for example, does a business that invests in corporate social responsibility become successful or does a successful business have the money to spend on corporate social responsibility programs?
- Organizational Physics – the belief that universal rules of business success are rigid and not affected or created by unknown or random events.
Sensei Debates: Do general business books still hold strategic value for business leaders today? Share your thoughts below. Also, please join us tonight on Twitter where business leaders will debate this issue between 8 and 9 P.M. Eastern, using the #bizforum hashtag.
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Image Credit Dom Bower, via Creative Commons