Thursday, April 15, 2010

Business without Delusions: Critical Thinking for Executives

On March 9th, IMD organised a business forum at BT in London. Paul Ringham, Commercial Director of BT Global Services and IMD Professor Phil Rosenzweig led the discussion.

Video from the business forum in London is accessible by clicking here

The event was graciously hosted by BT in their wonderful auditorium. Paul Ringham opened the event by greeting the many participants from all areas of business. With refreshing transparency, he shared with the audience the recent difficult experiences at BT Global services and outlined that some of the reasons for these were linked to management delusions generated by previous success. He then went on to describe some of the projects the group has been working on recently that seem to be improving the situation. His presentation served as a very good introduction to Phil Rosenzsweig’s talk on the importance of critical thinking.

IMD director, Lynn Verdina-Henchoz, then warmly thanked the partners of the event and introduced Professor Phil Rosenzweig and the topic of the evening. Phil Rosenzweig has had a very rich career, both in business and academia. He worked at HP before becoming assistant professor at Harvard and then joining IMD. At IMD he is a professor of Strategy and International business and is also program director for IMD’s Executive MBA. He has consulted with many firms around the world and has published extensively on the management of international firms, including his much acclaimed book “The Halo Effect and the Eight Other business Delusions that Deceive Managers”.

Much of our business thinking is shaped by delusions – errors of logic and misconceptions that distort our understanding of the real reasons for a company’s performance. During his one-hour thought-provoking presentation, Prof Rosenzweig unmasked with considerable humour many of these common errors and drew on examples from leading companies and from politics to show how errors in judgment are widespread. The Halo effect (or the Horn effect for its negative side) is prevalent in the business press when journalists explain good or bad business results with the benefit of hindsight based on subjective and often unrelated reasons. He demonstrated how many business surveys and books about company high or low performance are based on questionable data corrupted by the Halo Effect. This backward direction of causality does not show what drives company success, but how success is described. We should be extremely wary about the data we are shown – more data does not necessarily mean good data.

Phil Rosenzweig also discussed how executives can develop their critical thinking skills when reading articles or books, when receiving advice from consultants and when making business decisions in order to increase their individual and company performances.

The evening ended with a pleasant cocktail organised by BT and discussions went on late into the evening. As one participant wrote the next day “Professor Rosenzweig’s presentation was very interesting ad gave plenty of food for thought”.

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