By Dr. Ben Gilad, ACI Faculty

I led a webinar last week for the Association of Strategic Planners (ASP) on the topic of competitive intelligence. One of the participants asked “how do you change management’s deeply held beliefs?”

My short answer was, you don’t. But it is an interesting topic. Hub beliefs are typically un-moveable. Cognitive dissonance (the gap between reality and the belief) must be so high to make a leader change his or her core beliefs, and denying reality is so much easier, that one doesn’t need to be an intelligence analyst to understand that almost always changing hub beliefs is the number one obstacle to changing strategy.

Hub beliefs often lead to utter distortion of reality. Nowhere is this more obvious than in the way leaders use analogies and adjacencies with poor reasoning, as long as they fit their hub beliefs.

Executives’ analogies

Analogies are very important in business and fuel many innovations. It is a pity then that hub beliefs cause some leaders to use bad analogies to make their case. Giovanni Gaveti and Jan Rivkin, two of the most widely respected authorities on strategic thinking suggest “it is extremely easy to reason poorly through analogies, and strategists rarely consider how to use them well.” (“How strategists really think”, HBR, April 2005).

Google and Uber  Disruptive is the hottest term thrown around these days. Uber, oh, Uber. The number of pieces I’ve seen on Uber exceeds the number of Uber’s drivers. Everyone is in love with the term “disruption.”

The latest I’ve seen was a piece hailing Google car as having a major disruption potential like… Uber. Raise your hand if you believe Google will be successful in the business of manufacturing cars just because it is an innovative company. The piece I read by a popular tech columnist suggested that Google is about to disrupt the auto industry like Uber disrupted the transportation service industry. Disruption is hugely popular among vendors wishing to scare potential clients into buying something. Alas, the analogy between Google and Uber as a “disruptor” in the transportation space is totally false. Uber never faced tough competitors. The Taxi companies, mostly local cartels with little incentives to compete and inbred inclination of running to regulators for help, could not actually mount any defense. What could they do- develop an app to tell customers there is no available cab anywhere for the next 15 minutes? Auto manufacturers, on the other hand, can and will defend vigorously against anyone coming into their space.  Google’s poor record in many areas outside search and advertising suggests GM – bad ignition switch notwithstanding- is much more likely to succeed in making a self-driving car (if anyone ever comes to adopt a self-driving car model, which I highly doubt). And if you respond by saying look at Tesla, coming out of nowhere and now being a car manufacturer, take a second look. Tesla is not a true competitor to car companies, just like Stutz Motor, Tucker or Pierce-Arrow were never major players despite advanced technology. Moreover, take away the government handouts and see how long it takes Tesla to fold. Tesla is not Ford, and never will be.

Video is video False analogies and false adjacencies (the belief that you can succeed in a different field just because it is somewhat similar to yours) are much more prevalent in executive thinking that one may think. Even the best ran companies in the world do not escape the trap. Cisco bought Pure Digital (maker of Flip camcorders) because of its video technology. Cisco is in the video-conferencing business and it assumed that expanding into the consumer visual space will be a natural. It wasn’t. The consumer and IT decision makers are rather different. The two markets have very different structures and attractiveness. When the analogy proved false, Cisco shuttered Flip and lost its $590 investment (though it may have gained some technology of unspecified value). The quick action was testament of Chambers’ willingness to face reality. He is quite alone in that.

HP is the new IBM Many other powerful executives are not as good as Chambers. Apoteker at HP bought Autonomy, a software company with one pony trick- searching unstructured databases –  for a price that reflected not Autonomy’s record, but his analogy- look at how IBM transformed itself from a seller of hardware to a seller of software and services. Only IBM always sold to high level IT executives (its mainframes), and jettisoned its consumer business back in 2004. HP has been selling printers and PCs to consumers, and deriving most of its cash from that business, which dominates its management hierarchy. The two markets are so different that under Whitman, HP is splitting its business!

Apoteker’s Autonomy transaction became infamous for accounting irregularities, but the real problem was not Autonomy’s hugely inflated revenue, it was Apoteker’s inflated evaluation based on the false analogy that HP can do what IBM did. Hub beliefs drive false analogies and disastrous ventures.

Obama and the gun control’s crowd  Nowhere is the poor distorted reasoning in using analogies clearer than Obama’ misguided and dangerous campaign for gun control. In an emotional appeal (since rational appeal doesn’t hold water), he asked the US to be more like Australia and Canada, where he claims gun control worked wonders. This is a classic case of what the HBR article calls superficial similarities – ask yourself where the similarity among the nations is. Canada and Australia are sparsely populated with huge territories, no major urban crime and a homogenous culture.  Their only similarity to USA? They speak English… Obama, of course, conveniently forgot to make better analogies with Mexico and Brazil, to which many will agree we have now a closer cultural affinity and where strict gun control laws have no effect whatsoever on homicides, and/or even Russia where taking guns away from law abiding citizens resulted in an enormous jump in gun violence (non-progressive criminals, shame on them, forgot to comply). He also forgot, naturally, to make an analogy with Israel (where more people are armed than anywhere but Baltimore, Detroit and Chicago), where ordinary, law abiding citizens have been averting massacres by shooting Islamic terrorist attackers long before law enforcement arrives on the scene.

What to do?

Hub beliefs give rise to poor analogies which give rise to disastrous actions. What can you do? In the case of management, get out while you can. You’re not going to change their poor reasoning. In the case of politicians, see through the demagogy and vote them out as soon as you can. You can actually change bad government (at least until President Sanders’ Workers Party declares martial law in the name of freedom.)