Iceland, Lava and Loyalty

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A speaking engagement recently took me to Iceland and some of the most captivating, natural beauty I’ve ever seen. While visiting the “Golden Circle” sights around Reykjavik, my amazing host Glyfi Skarphedinsson, pointed to volcanic rock, dubbed “Christianity Lava”, and shared this memorable story:

Around the year 1000, Iceland was in a religious transition. Some wanted the worship of Nordic gods to continue as the country’s official religion while others supported the move to Christianity. During this time, two Icelanders were fervently debating which religion made more sense. The “Nordic gods” advocate pointed to a distant, erupting volcano and declared to his Christian-leaning countryman, “That lava flow is headed directly toward your land. What’s that say about your god and his power to protect you?” Undaunted, the Christianity advocate cried, “You foolish man! Your entire land IS a lava field, and has been for many, many years. What’s that say about your gods’ superiority?”

Back in my Austin office, reflecting on that story, I am reminded of a new book by Phil Rosenzweig, entitled, The Halo Effect and Eight Other Business Delusions That Deceive Managers. First identified in 1920 by U.S. psychologist Edward Thorndike, the halo effect describes the tendency to make specific inferences on the basis of a general impression. Rosenzweig points to Cisco Systems as a case in point, and how, in the late 1990’s, the firm was lauded for its “brilliant” strategy, “masterful” acquisitions management and “superb” customer focus. Then the tech bubble burst and suddenly journalist and researchers found that Cisco had “flawed” strategy, “haphazard” acquisitions management and “poor” customer focus. Writes Rosenzweig, “Cisco really had not changed much—a decline in performance led people to see the company differently.”

Loyalty Lesson: Beware of the halo effect when examining your customer loyalty landscape. When sales are rising, profits are high and stock prices are advancing, it’s easy to believe that your loyalty strategy is sound, your leaders are visionary and your customer orientation is sharp and focused. Yet, when performance factors slide, these same elements can suddenly look all ‘wrong’. That’s the very time to tread carefully, take a deep breath, and prudently examine your “Loyalty Lava.” Perception is not always reality.

2 COMMENTS

  1. Jill

    The Halo Effect is everywhere around us, particularly in management books that identify the most successful companies, then identify what they do differently compared to not so successful companies and then pronounce that the differences obviously must explain the companies’ success! Without some kind of robust control group and an understanding of industry dynamics, it is hard to avoid the Halo Effect.

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  2. It’s so important to guard against the bogus ’cause and effect’ conclusions that surround us in business today. A hefty bit of skepticism is a very good thing. Yes…. to robust control groups ….and, above all, to a firm’s relentless thirst for understanding ‘why’. Thanks, Graham, for the email.

    JILL

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