The Troubling Truth about Successful Entrepreneurship and Innovation

by Krishna on January 12, 2009

One of the most interesting business books I ever read was “Good to Great” by Jim Collins. It was well-written and was based on enormous effort by Collins’s team. I recommended it to my friends. Over the years though, I have read much criticism about Collins’s methods and research results, and the sheen wore off. Freakonomics recently had a post about the “Good to Great” companies, three of whom hit real trouble in the 2008 financial crisis. The turning point for me was the excellent “The Halo Effect” by Phil Rosenzweig. It illustrates how many of today’s business gurus confuse causes with effects in the business world.

Bob Sutton piles on with more information from articles from an academic journal. He has this to say (emphasis & redactions mine):

  1. As March implies, there are no magical leadership or organizational practices that will quickly propel your organization to the top of the heap. Even the greatest organizations struggle to stay at the top and are led by fallible people who make many mistakes.
  2. There is no such thing as a single breakthrough study. The best and most valid conclusions and advice are based on a series of studies that have survived the brutal peer review process and that result in a consistent set of findings. […]
  3. My main objection, in the end, isn’t to the research Collins did — the stories are interesting and I believe that nearly all of the practices that he suggests would make a manager more effective — indeed many if not most are bolstered by more rigorous studies (albeit, even as his research now implies, as signs of competence or even ordinary greatness). My objection is — to use Jim March’s words — the hubris and ignorance about the claims about the rigor of the research and the originality of the ideas. There are lots of management books, or parts of management books, that are incredibly useful and inspiring, but don’t claim to draw on research. […] [and] don’t make excessive claims […].

Sutton also links to an article on entrepreneurship which he wrote about 2 years ago, where he suggests that the real truth about successful innovation may be the most troubling one:

Step 1: Decide to Do Something That Will Probably Fail

Step 2: Then Convince Yourself and Everyone Else That Success is Certain

The reason being that, historically, most startup companies are destined to fail. But assuming that you will fail means that you will not spend enough effort on getting the startup to work, creating a self-fulfilling prophecy. So instead, you just have to blindly work really hard and take it for granted that you will be successful. Which of course, does mean that you cannot trust the victors to provide you any truth on how to replicate their success, because they just happen to be the lucky part of the success statistics.

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