French philosopher and absurdist Albert Camus once wrote: “You will never be happy if you continue to search for what happiness consists of. You will never live, if you are looking for the meaning of life.”
In a similar vein, you are unlikely to be successful in business if you attempt to find the keys to guaranteed success.
Every corporate executive, of course, will be on a perpetual quest to unlock the secrets to superior performance. Shareholder pressure, whether real or perceived, means they are unlikely to stop. As a result, marketers are either explicitly or implicitly asked to do the same. Most CMOs have been asked by their CEO or CFO what the outcome of an input will be, and anyone who has ever been involved in an agency pitch knows the power of a promised return.
Unfortunately, it remains impossible to predict the future. The only data that is available is historical data. Rather unsurprisingly, many therefore look to successful companies in the hope of deducing what drove their performance and, ultimately, replicating it. And this leads to what are called ‘halo effects’.
First identified by US psychologist Edward L Thorndike in the 1920s, and documented in numerous experimental studies since, a halo effect is a cognitive bias that leads us to make specific inferences on the basis of general impressions to reduce cognitive dissonance.
Or to put it more colloquially: we judge books by their covers. Being exposed to a single positive or negative trait, such as a physical appearance, causes us to immediately form a positive or negative impression (the latter sometimes being referred to as a ‘horn effect’) of the person in question. Once we have, confirmation biases kick in and we interpret other traits accordingly.
The nature of business is full of factors out of our control and thus impossible to precisely predict, attribute or evaluate.
In business, there is nothing more attractive than a good result. Companies that are doing well, with ever-increasing market share, profits and stock price, are often said to have sound strategies, visionary leaders, an inspiring corporate culture, great marketing and so on. Once performance inevitably declines, the very same attributes are considered lacking.
When times are good, brands are ‘true to their heritage’, ‘customer-oriented’ and’ focusing on their core products’. When times are bad, the same brands are ‘not moving with the times’, ‘neglecting their customers’ and ‘failing to innovate’. Winners are confident, losers…