Are Great Companies Just Lucky

Are Great Companies Just Lucky - S tudies that examine...

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Studies that examine high-performing companies to unearth the secrets of their success have a critical flaw: Very few of those companies are truly remarkable. Data analysis reveals that most owe their success to luck, not smart practices. That puts the prescriptions of success studies in a whole new light. Studies that examine high-performing companies to uncover the reasons for their success are both popular and influential. They’re the basis of the insights behind best sellers like In Search of Excellence and Good to Great . But there’s a problem: The “great” companies from which these studies draw their conclusions are mostly just lucky. We’re not the first to challenge success studies, but so far the criticism has focused on data collection and analysis. Our concerns go much deeper. Many of the “great” companies cited are, in fact, nothing special; consequently, the researchers are simply imposing patterns on random data. That’s not science—it’s astrology. Professor Rebecca Henderson at MIT’s Sloan School shows how easily we succumb to the temptation to “explain” seemingly significant outcomes that are entirely random. “I begin my course in strategic management by asking all the students in the room to stand up,” she says. “I then ask each of them to toss a coin. If the toss comes up tails, they are to sit down, but if it comes up heads, they are to remain standing. Since there are around 70 students in the class, after six or seven rounds there is only one student left standing. With the appropriate theatrics, I approach the student and say, ‘How did
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Are Great Companies Just Lucky - S tudies that examine...

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