Why Companies Fall For Myths

Financial Times has a wonderful article (trial reg. required) about why corporations fall for myths. It begins by looking at the "Mozart for babies" craze.

Where did the classical music and babies story come from? In 1993, the journal Nature published a study which showed that college students (not babies) who listened to a Mozart sonata for 10 minutes increased their performance on a subsequent spatial intelligence test. This became known as the "Mozart effect". Subsequent studies produced mixed results. In 1999, an analysis of 16 such studies, published once again in Nature, concluded that the overall effect of playing music on spatial intelligence was negligible. In a fascinating article entitled The Mozart Effect: Tracking the Evolution of a Scientific Legend, Adrian Bangerter and Chip Heath of Stanford University analysed both why people projected what had originally been a study of students on to infants, and why the story achieved such wide currency. (In surveys the researchers conducted in California and Arizona, 80 per cent of respondents had heard of the Mozart effect.)

The article goes on to explain how that applies to businesses as well.

Reading about the rise and fall of the Mozart effect reminded me of several other frenzies, involving companies rather than children: re-engineering the company, the dash to go online and, now, locating the organisation's core competence and outsourcing the rest.

Re-engineering is particularly apposite because, like the Mozart effect, it began with a founding text. When Michael Hammer and James Champey's Re-engineering the Corporation was published in 1993, it caught US and western business at a low ebb, very scared of what appeared to be frighteningly efficient Japanese companies selling high-quality goods at low prices.

Western companies were desperate to cut costs – and re-engineering appeared to show them how. The Hammer and Champey book, they believed, told them to re-examine every business process as if they were setting it up from scratch. Did they really need all those people, for example? Companies slashed their workforces; middle managers, deemed worthless and superfluous, were dispatched with particular vigour.
In fact, Re-engineering the Corporation was not as simple- inded as that. It advocated looking at each encounter from the customers' point of view and designing processes to ensure they were best served. This might well have involved merging departments that were previously separate, but it required taking employees' abilities more, rather than less, seriously. The book advocated giving workers more authority and autonomy and even involving trade unions in the process.

All that was drowned out in the stampede to downsize. When it was over, companies were left to rue the experience and expertise they had lost. All the factors that lay behind the Mozart effect were there: anxiety, weakness and misinterpretation of the original writing.

Simple, narrow thinking is a business killer. Yet, for some reason, such thinking still thrives. I blame our educational system, in part, for not ever teaching students how to think clearly, how to evaluate arguments, how to spot fallacies, and how to embrace the subtle complexity of issues that arise in real decision making.

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I'm one of those people that believes decisions are rarely black and white, but rather are a tangled web of possibilities, opportunities, and consequences. Forcing complex decisions into a simplistic model is why we get such a broad spectrum of opinions and success rates on various strategies. Take outsourcing to India as an example. It's a great move for some companies and a horrible move for others, but people rarely have a "situation dependent" view of it. They think it's either great for the economy because it saves money and everyone should do it, or they think it's wrong to send jobs overseas no matter what. The truth is that there are tradeoffs and you have to consider the cost savings up against the quality of work you will get (there are good and bad firms in India, just like anywhere else) and your own ability to manage a project remotely. Whether or not you outsource depends on the particular situation your company is in.

How can you be sure this won't happen to you and your company? The best way is to remember the old saying if it's too good to be true, it problemably is. If a solution seems perfect for your company, you have problemably missed something.