INSEAD Library

Includes bibliographical references and index

Digitized

The Halo Effect ... and the Eight Other Business Delusions that Deceive Managers Contents Preface xiii Chapter One: How Little We Know 1 Why do some companies prosper while others fail? Despite great amounts of research, there's much we don't know. While some studies of company performance meet the standard of science, many are better described as pseudosciencethey follow the form of science but are better described as stories. Chapter Two: The Story of Cisco 18 Cisco Systems surged in the late 1990s with a brilliant strategy, a laserlike focus on its customers, and a masterful skill for acquisitions. When the bubble burst, Cisco was said to have bungled its strategy, neglected its customers, and made reckless acquisitions. History was rewritten in light of diminished performance. viii THE HALO EFFECT Chapter Three: Up and Down with ABB 35 While times were good, ABB was a New Age wonder with a great corporate culture, a futuristic organization, and a hero at the helm. When it collapsed, ABB was remembered as having a complacent culture, a chaotic organization, and an arrogant leader. ABB hadn't changed much--the difference was mainly in the eye of the beholder. Chapter Four: Halos All Around Us 50 A central problem that clouds so much of our thinking about business is The Halo Effect. Many things we commonly believe lead to company performance--corporate culture, leadership, and more--are often simply attributions based on company performance. Chapter Five: Research to the Rescue? 65 Can academic research about company performance overcome the Halo Effect? Only if it measures independent variables in a way that's truly independent of performance. Even then, many studies have other flaws, including The Delusion of Correlation and Causality and The Delusion of Single Explanations. Chapter Six: Searching for Stars, Finding Halos 83 Examining two well-known bestsellers, In Search of Excellence and Built to Last, we find strong evidence of the Halo Effect as well as other errors such as The Delusion of Connecting the Winning Dots, The Delusion of Rigorous Research, and The Delusion of Lasting Success. Chapter Seven: Delusions Piled High and Deep 106 Subsequent studies, including Good to Great, tried to be even more elaborate and ambitious but reveal still more mistakes in their thinking about company performance, including The Delusion of Absolute Performance, The Delusion of the Wrong End of the Stick, and The Delusion of Organizational Physics. Contents Chapter Eight: Stories, Science, and the Schizophrenic Tour de Force 127 Many popular business books are deeply flawed as science, but are appealing because they work well as stories. They inspire and comfort their readers. Yet they also focus attention on the wrong priorities and sometimes lead managers in dangerous directions. Chapter Nine: The Mother of All Business Questions, Take Two 142 So what does lead to high performance? One approach looks at just two elements: strategic choice and execution. Yet both are full of uncertainty, which explains why company performance can never be guaranteed and why efforts to isolate the secrets of success will always come up short. Chapter Ten: Managing Without Coconut Headsets 157 How can managers press onward without delusions? Consider a few managers who set aside wishful thinking and guide their companies with wisdom and clarity, recognizing the uncertain nature of business performance and working to improve their probability of success. In closing, a few words for wise managers. ix Appendix Notes Bibliography Acknowledgments Index 175 183 209 219 221