Which of these statements do you agree with?
“People get more happiness or positive emotions from experiences than from things.”
“Humans don’t need to be aware of the event that caused their mood or feelings in order to be affected by it.”
“When you eat a cookie, you feel good, therefore I’m going to throw harder.” *
Each one is a theory, and for brevity, I’ll stop at three, because the list is endless. Marketing runs on theories, which Webster defines as “a formulation of apparent relationships or underlying principles of certain observed phenomena, which has been verified to some degree.” Phew! That’s a lot! Let’s just say that for every theory, you can probably find a convincing contra.
It’s hard to wake up and not get hit with a theory about something. But there’s confusion. Many aren’t provable. And some are really lists that masquerade as theories. Add The in front of a list of almost anything, and you’ve made it sound like a theory, like the three types of business buyers. Twenty years in B2B sales, and I didn’t know that one until it popped up in a search!
Theories drive strategic business decision-making. If you assess risks and opportunities, you rely on theories. So effective risk management requires knowing what makes a theory valid and valuable. The question stirs great passion, as anyone who has followed the story about Intelligent Design knows. Is it really a theory—or an idea? Ask a scientist, and he or she will share why it is so important to apply rigor to answering this question. Ignoring it runs the risk of diluting our understanding of the world around us.
Questions to ask:
1) Does the theory reflect the real world?
2) Is the theory supported by compelling evidence?
3) Does the theory have explanatory power for past events?
4) Can the theory predict future outcomes?
5) Can the theory integrate new research and data?
6) Does the theory simplify complex conditions?
According to Professor Malcolm Watson, Professor of Psychology, and Chair of the Social Science School Council at Brandeis University, “no theory provides a perfect explanation or model of reality, but without theories, we do not make progress in our understanding and cannot use the facts we have gleaned.”
But adherence to theories involves risks. First, theories can bias outlooks and cause people to be less receptive to additional facts or competing ideas, and second, theories can oversimplify reality. In other words, there’s more than one correct answer to a question, and more than one question that should be asked. History has proven that theories have limited shelf life.
Further reading:
Theories and Models in Social Marketing,, Lefebvre, R. C.
How Emotions are Evoked in a Customer Experience, Colin Shaw
Customer Experience, Emotions, and the Recession, John Todor
Theories of Everything, Roz Chast
* according to Heath Bell, pitcher for the San Diego Padres
Hi Andy
A long time ago I studied for a science PhD. We had the Three Rs of scientific theory testing banged into our heads during those heady postgraduate days.
The Three Rs are:
Applying scientific methods to management theories is much harder than it is to most science theories. They are fiendishly hard to reduce to testable parts, control groups are hard to find and you just can’t repeat experiments like you can in science.How would you test a theory of major organisational change? You can hardly set up an experiment with a statistically significant sample size and a control group when there is only a handful of firms in the entire population.
Management theories have real problems. Just look at popular but with hindsight INCORRECT theories that underlies best-sellers like Tom Peters’ ‘In Search of Excellence’ and Jim Collins ‘Good to Great’ Or Fred Reicheld’s earlier work work on Loyalty and more recent work on NPS. These have all been invalidated by the Halo Effect. As probably would many other management theories if they were tested with the Three Rs.
Graham Hill
Customer-centric Innovator
Follow me on Twitter
Interested in Customer Driven Innovation? Join the Customer Driven Innovation groups on LinkedIn or Facebook to learn more.
Further Reading:
Graham Hill, From Good to Great… to Mediocre
Thanks, Graham. The Three R’s are an excellent way to test theories. As you point out, testing some management theories can be akin to picking up a raw egg with a fork. But social scientists and behavioral economists can conduct experiments with the same standards that physical scientists use. Throughout the book Predictably Irrational, behavioral economist Dan Ariely describes experimental methods he used to answer some questions that at first glance appear impossible to answer with clarity.
Not all theories are created equal. Some exist solely to promote a company’s products or services, and not to develop new understandings throughout the management science community. Using the Three R’s and/or the six questions listed above will help distinguish sound theories from those that are completely self-serving.
Great post, Andy! Thank you!
Rick Brooks has a meme in “The Mythical Man Month” that since reality is too complex to understand, we make models. A model is a simplified version of reality. Use your model as long as it gives good results. When it doesn’t, rebuild your model. And don’t confuse your model with reality.
Good thinking in this business climate.
This is a great discussion! Andy, thanks for posting your thoughts.
Business is complicated, and theories/models help make some sense of the chaos. Even TLAs serve a purpose.
I would add a few other points:
1. The fact that a theory has not be proven to work doesn’t mean it can’t work. We need to keep an open mind. Innovation doesn’t wait for scientific proof.
2. The fact that a theory has been shown to work in certain situations doesn’t mean it will work everywhere. Consultants and software vendors are famous for extrapolating from a few cases.
3. The fact that a model is “proven” to work at one point in time is no guarantee that it will work in the future. Something that works is widely adopted and then ceases to be a differentiator later on.
As Graham points out, management theories are very difficult to validate or refute. So what are business leaders to do?
My observation is that the real industry leaders tend to develop and try new theories before they are widely accepted (much less proven). They don’t wait for the gurus or academics to endorse what they are doing. There is risk to be sure, but also the reward if they get out in front of the next fad.
I’m all for research and validation. However, as someone who has run a business for the past 15 years, and sizable business units before that, if I waited for proof on every good idea/theory, nothing would ever get done.
Bob Thompson, CustomerThink Corp.
Blog: Unconventional Wisdom
Dick Lee: Andy – you did a phenomenal job on theories. Could we entice you into tackling assumptions, next?
Bob
Excellent points. My thoughts on the three points:
1. Theories are just that, theories. The burden of prove in business is heavy. Business should do what they believe is correct in a way appropriate to their level of confidence in their belief. And they should be prepared to change their mind if the expected results are not forthcoming.
2. In a neat twist, this rather refutes the validity of using ‘benchmarking’ to slavishly copy what other companies do. Business performance is the result of bundles of complementary capabilities developed by the business over time. Even if you could understand the workings of a company in detail (and you probably can’t) that doesn’t make them right for another business with different capabilities.
3. Whatever ‘secret sauce’ their is is soon found out and plastered all over the Internet. Companies need to continously innovate so that they can keep ahead of their fast-follower competitors. Customer-centric innovation, of course!
Fortunately, even a company faced with a new and unkbown situation can use real-options thinking to run a series of small experiements, each one a ‘real-option’ investment in the future. The experiments have the advantage of trying out a range of stuff that is likely to work, developing experience in the stuff that does work and perhaps most importantly, gathering information with which to make better decisions when looking at what to do next. As Alan Kay said, ‘the best way to predict the future is to invent it’. One real-option at a time.
Graham Hill
Customer-centric Innovator
Follow me on Twitter
Interested in Customer Driven Innovation? Join the Customer Driven Innovation groups on LinkedIn or Facebook to learn more.
Bob: Maybe a definition for “winging it” is “taking action without a theory.” We’ve all done it at some point. Sometimes we’re lucky and things work out.
Theories, uncertainty, assumptions, and risk are all intertwined. At least with a theory, one can feel that he has a modicum of control over an outcome. For that reason, theories are nice to have, even though, as Graham says, they’re “fiendishly hard to reduce to testable parts.”
Dick: Thanks for the idea about assumptions! In December, 2008, I posted a blog, Will This Year’s Sales Assumptions Work in 2009?, but you’ve inspired me to keep it current . . . Sirius Satellite Radio provides a great case study!I’ll have a blog about it posted next week!