Huge success in business is largely based on luck - new research
Bestselling business books promise to teach you the winning formula and reveal the secrets of success. But the inconvenient truth is that exceptional successes in business are largely based on luck. No rule exists for achieving exceptional performance because it usually requires doing something different or novel and there can be no recipe for such innovation.
However, selling the problematic idea of learning from the most successful continues to prosper. For example, many business bestsellers, such as In Search of Excellence, the most widely owned book in the US between 1986 and 2006, share a formula. First, select a few successful firms that beat the odds and achieve excellence. Then analyse the shared practices of these firms from when they moved from “good to great” and frame these practices as the principles for others that aspire to become great. An overlooked caveat is that the exceptional performances featured in these bestsellers typically do not last. Take the 50 firms featured in the three most popular business bestsellers: In Search of Excellence, Good to Great and Built to Last. My research shows that the significant improvements of these firms (good to great) before being featured were followed by systematic disappointments. Of the 50, 16 failed within five years after the books were published and 23 became mediocre as they under-performed in the S&P 500 index (which represents the average performance expectation of the 500 largest public companies in the US). Only five out of the remaining 11 firms maintained a similar level of excellence compared to when they were featured in the books. What happened after becoming great is clearly not enduring greatness but, instead, strong regression to the average.
Management research and education should focus on prescriptive theories that can help business practitioners move from “incompetent to OK”, rather than focusing on those that address how to move from “good to great”