Research reveals the hidden secret to business success? No, sadly this is pseudoscience – that will only convince the most gullible of minds.
Jim Stengel seems a nice guy, he wants us to be passionate about our business and to feel that there is a greater purpose than simply making money. Few would disagree. But he also claims to have discovered the secret to sustained super profits – based on a flawed study dressed up as science.
Stengel is a marketing consultant, a famous one because he was formerly Chief Marketing Officer of Procter & Gamble 2001-08 until he surprisingly ‘retired’ to consult (and write this book). During the decade that Jim mostly presided over marketing at P&G the company was pretty successful, at least in comparison to the 3 year period immediately before he became CMO of unsuccessful restructuring and CEO turnover. However the success of the 2000s has been exaggerated; the reality is that during Jim’s decade P&G’s stock price doubled, though that is a misleading overstatement due to the brief dramatic dip in 2000 (the reasons why are discussed here). Without that dip the year before Jim took over as CMO the stock price only improved 20% over the full decade. That’s less impressive than the previous decade (90s) when stock price had increased 5-fold (or 3 fold when the brief dip of 2000 is considered), similar gains were also made in the prior decade (80s). So P&G’s performance during Jim’s tenure should perhaps more accurately described as a mild turnaround, or partial restoration. This chart shows the full history of the stock price.
In all fairness though, Jim Stengel doesn’t ask us to believe his amazing discovery just because he was (like millions of others) a successful practitioner, his claims are based on what he calls an unprecedented 10-year empirical study of highly successful firms and the brands they own. But his study does have precedent, it joins a growing list of books that claim to have discovered a few simple rules for business that near guarantee profit performance that will beat all rivals. Each of these books are based on severely flawed research that ‘proves’ just what the author wanted to say in the first place (which is the opposite of a surprising discovery). “In Search of Excellence” was one of the first of these books, which was largely discredited when the excellent companies went on to make poor financial returns in the years after the book came out.
Professor Phil Rosenzweig exposes these flaws in his 2007 book “The Halo Effect: … and the Eight Other Business Delusions That Deceive Managers“.
I describe and critique “The Stengel Study”, which is the basis of Stengel’s book, here. A quick summary is that to detect factors that might cause financial success then Stengel should at least compared very carefully matched samples of both successful and unsuccessful firms, and developed hard objective measures of strategy – not relied almost entirely on interviews with experts. Also, to avoid confirmation bias, the researchers who described the firms and their strategies should not have been aware of which were the successful and unsuccessful ones. And finally, any resulting theories should be tested against the future performance of the firms. Otherwise what looks like science turns out to be simply a story.
Tellingly the ‘research’ takes up small portion of Stengel’s book, the rest is a story: anecdote and assertion. Jim tells us what to do, but experienced marketers looking for strategic advice won’t find much new or particularly helpful. It’s pretty much the standard sort of consultant fare such as “deliver a near-ideal customer experience”.
It’s well meaning though, Stengel wants us to all be passionate about our business and to feel that there is a greater purpose than simply making money (even if finding out how to make money was the motivation of his ‘research’). This is a nice sentiment, however, the success of brands (and the large corporations behind them) is far more complex than Stengel’s book and its predecessors claim.
Far too many seem desperate for a utopian vision of business – and that creates a market for books and consulting like this. But it seems to me that if companies deliver exceptional results by intent (instead of accident), we should instead be looking for things that make us uncomfortable – frustrate us. We should be looking for contradictions and those things that violate what we want to believe. Then, perhaps, we will find insight rather than a nice sales pitch for a new consulting firm.
Thanks for the two great articles. I’ll be passing them along.
I am very wary of practitioner advise. I don’t think even senior executives can explain what made certain products successful and how to replicate that success.
Look at Microsoft. 87% of their revenue still comes from products that existed 25 years ago, such programming languages, Windows and Office. Google is unable to successfully build another major product other than search and email, and it’s share in search is continuously being eroded by competitors.
I also believe that what makes these executives successful is critical thinking and good problem solving skills. To create a framework after the fact and claim that it was responsible for their success is simply false. If Stengel went back to P&G and tried to apply his framework only, he would be out of a job in no time.
I agree with you almost completely and have set a halo above my copy of The Halo Effect a long time ago.
However, I do think you are a bit unfair. This is the way all these books are! What makes Jim’s book more interesting is at least that he has a few sympathetic ideas.
How do see upon Jim Collins’s books by the way?
I’m pleased you were able to find something interesting in the book.
Am I being unfair ? I think not and here is why:
Jim asks us to buy and read his book because he has evidence of what delivers sustained superior financial performance – but he doesn’t have this evidence. So if his book was a P&G product they wouldn’t put it on the market, and if they did they would immediately get into trouble from consumer advocacy groups and the law.
Having a purpose rooted in customer needs is a valid argument. It is fundamental to business. Not sure why you disagree. Unless diagree with the methods employed.
Jim collins book is also a good example.. what r ur views on that?
I’m afraid it’s all nonsense. This all explained in the book “The Halo Effect”, which I recommend for any student of management/strategy or marketing.
It’s great to have you as the guardian of Science in the world of marketing. Science is for sure the ultimate vehicle for truth and convincingness. However, it’s not a vehicle accessible to all and it’s such a restrictive vehicle that many prefer to hop on something more engaging. That’s where insights and stories succeed. There’s no science in Proust’s Remembrance of things past, however who wants to understand how memories influence emotions will learn more there than in a science paper. Between the inspiration of Proust and the sweat of the scientist, lies the practitioner, his anecdotes and benchmarking studies. The wise reader will read Stengel’s book as he would listen to an old uncle. By confronting what he/she has learned to the encyclopedia of other stories, he/she may be able to discover the pattern of his/her own truth. That’s what books have been doing to humanity since the ages of time and that’s the only thing that readers look for when reading books. I suspect this will continue even in times when science has disappeared.
Stengel’s book is not a bad book. It’s just a book. Not a science paper.
But it claims to be science.
Duncan Watts book “Everything is obvious” might change your mind that we can learn from “old uncles” like this. If something feels right it doesn’t mean it is right.
People used to sell medicines (that didn’t work) this way. Business needs to grow up.
I love your analogy with medicine. In one of your talks you give the example of Ignaz Semmelweis. Science made him right but he ended up sent to an asylum and died there after being beaten up. His opponents believed they were men of Science as well. I understand Semmelweis lacked the convincingness of a good story, which “old uncle” Pasteur brought with him the same year of Semmelweiss’ disturbing death and Medicine suddenly shifted its paradigm. Science would have saved many lives, would Semmelweis have learned how to tell a story.
I’m afraid we won’t stand a chance to defeat bad science written in good story books unless we learn to tell good science in good story books. In the heart of Humanity, good Science alone is no match to a good story.
I agree, in the short-term good stories with no basis beat good science.
But ultimately good science wins. It’s very unlikely that anyone will be reading Jim Stengel’s book (or even a mention of it) in 50 years time. It will be swept away by history.
Perhaps his next book will feature some substance ?
If I flip a coin eight times in a row, and it comes up heads every time, is that a sign of success? That I have a “method” that can be followed by others to have similar success? How much of this success is chance, or pure luck (something that I remember from the Rosenzweig book that has really stayed with me)?
Why not imagine good science fighting back in good story books ?
I liked the attempts of prof Richard Wiseman, like in 59 seconds. Good solid science made accessible to the masses through humor and storytelling. Or have I been mystified by Wiseman’s showmanship talents (he’s an ex-magician…) and his science is also just smoke and mirrors ?
Indeed. There are some great science educators, who tell great stories.
Pingback: Audio Books Business | All On Audio Books
Pingback: Time For The Credit Union Marketing Budget Extreme Makeover | Snarketing 2.0
I must confess your analysis has its own origin; Jim’s book to me is one that helps to bring another perspective for business leaders, especially your leaders to expand their thinking. Can you share what are some good elements in the book, as surely there must be some?
In a critical review, the intent is to help others understand the principle thinking and take the best, and supplement the gaps with further analysis to help augments the ideas/concepts/principles etc…
As I said, few would disagree that business leaders should think about more than profits. But Stengel’s book used flawed research to make claims about superior business performance (ironically, profits). This renders the book not worth reading. I recommend read Rosenzweig’s book instead – because it will help you extract value from much other business writing.
Interesting blog, was considering buying te book but wanted some decent reviews first. Could you perhaps provide an alternative to this book then?
Yes. The Halo Effect if you are interested in the general area of corporate success. If you are interested in marketing then I have to recommend “How Brands Grow” but I’m not a disinterested source.
Thanks, i already own the Halo Effect, and must admit its good. What’s your opinion on Good Strategy / Bad Strategy?
Sorry, I don’t know it.
Hi Byron, although Stengel may have flawed science I disagree with your assertion that Grow will be obsolete in a few years. He profiles what makes a company successful including why an organization’s culture enables it to nurture successful talent.
Regarding your analysis of marketing science, it’s very interesting and based on quantitative data but I’m afraid the traditional marketing methodologies you’re referencing will be the victims of progress and the intangible concepts of success and how we measure them will be based on campaigns, social media and calculating ROI based on new technologies. Companies will need to re-think spend and tactics in the next decade by continuing to appeal to the emotions of consumers but also leverage the communication tools in today’s society and will have more reliance on intangibles that marketing professionals might be better suited for.
Pingback: Amazon censorship?! | Marketing Science
Pingback: Time For The Credit Union Marketing Budget Extreme Makeover