Good to Great, or Just Good?

http://business.unr.edu/faculty/simmonsb/badm720/ampgoodtogreat2.pdf

In this lengthy and dry report two University of Wisconsin Oshkosh associate professors, Bruce Niendorf and Kristine Beck, illustrate how Jim Collins’ book, Good to Great (2001), is statistically incorrect by naming 5 common principles the responsible factors in making 11 companies stand out as great companies amongst thousands of good companies.

The report argues that there are no evidence that applying these 5 management principles will make any start-up and/or developed companies become anything other than average.  They show how couple of logical fallacies and statistical errors resulted in misinterpreting the patterns in Collins’ study.

The two errors pointed out are data mining and mistaking association for causation.   Collins mistake in using data mining was that although he was able to study his sample data for patterns and formulate an explanation for these patterns, he failed to properly test the patterns against sample companies outside of the companies in his study in different time periods.

He also made a fundamental error when he mistakenly took association for causation.    He failed to consider the other alternatives and use hypothesis testing to come to his conclusion.   He failed to take into account that outside factors such as unidentified environmental factors could have  had something to do with his 11 companies success.

What Collins should have done is that he should have put in place a hypothesis theory and through sample testing either prove or disprove his hypothesis to come to a conclusion.  I think Collins bias to come with a conclusion for his book to be able to sell a new idea prevented him from doing so.  What companies desire is a system they can plug their company into to magically achieve greatness.  Although achieving greatness is possible by making systematic changes, I find it difficult to believe that there is one system that would work for every company.  With that said, I have to mention that I actually like Collins 5 principles to achieve greatness, I just don’t think that they would guarantee greatness for a company.  They’re merely fundamentals that every company should build their own system on.

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~ by aliahmadian on March 27, 2010.

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