Author's Blog

Consulting Pseudoscience: Mercer Delta's Study of "Growth Champions"

Faulty thinking and poor research methods show up in a number of studies by consulting companies, including one that I read recently by Mercer Delta, called "Growth Champions."

 

As with many such studies, it asks an important question—What distinguishes the most successful companies from the rest?  It then gathers lots of data and presents its findings in a glossy brochure with plenty of statistics.  But this study, like so many others, is little more than pseudoscience, and not at all what it claims to be.  In fact, it violates one of the most basic rules of research: the measure independent variables in a way that is truly independent of the thing they’re trying to explain.

Fortune's Smart Story about Apple

Fortune magazine takes quite a few hits in my book.  Whereas some of Fortune’s reporters are excellent—I am thinking of Carol Loomis’s dissection of HP’s finances in January 2005, and Bethany McLean’s penetrating examination of Enron at a time when most observers were blinded by its halo—on balance Fortune contains way too many puff pieces.  (Consider the coverage of Cisco, described in chapter 2 of my book, as well as the article elsewhere on this website, “Secrets of Success According to Fortune,” a text-book example of bad business journalism.)

So I was very interested to read Fortune’s article about Apple in its current issue with the feature about The World’s Most Admired Companies.  The article: “Simply Irresistable: Why Apple is the best retailer in America” by Jerry Useem.  Apple has become the best retailer?  Wow!  Can that really be?

Some Important Distinctions: Design and Data, Cause and Effect, Noise and Bias

Over the last few weeks, The Halo Effect has received attention on various blogs and in a few newspapers.  I’m delighted that the book is finding an audience, but it’s also interesting to read what various people are taking from the book—and what ideas seem to be a bit more elusive.  Some reviewers understand exactly what is most important in the book, while a few others like the book but focus on slightly secondary issues. In this blog, I’d like to clarify three distinctions that are very important.

1.  Design and Data

Some reviewers note that I criticize several popular business books—from In Search of Excellence to Good to Great—but miss the fact that they are criticized for very different reasons. In Search of Excellence had a basic problem of design—it looked at successful companies only, but did not compare

A Management Lesson from Chariots of Fire

       A terrific review of The Halo Effect was posted yesterday by Matt Stichnoth of Tom Brown’s Bankstocks.  Matt completely understands the arguments in my book—and I hope you’ll take a look at his review: "A Devlish Delusion".

       Matt begins by suggesting that the 1982 Academy Award for Best Costume Design went to Chariots of Fire largely because of a halo effect—it was a great film, so voters figured the costumes must be terrific, too.  By coincidence, I was watching Chariots of Fire earlier this week, because I had remembered a line that is very relevant to the ideas in The Halo Effect—it had nothing about costumes, but everything to do with the relative nature of performance.