News & Announcements

By Kevin Clancy and Peter Krieg, April 2008

New York Times Magazine columnist Rob Walker recently wrote in a piece for Fast Company, “From Captain Kirk to Indiana Jones to Rambo to Tony Soprano to the hero of every Western ever made, we’re drawn to the character who follows a hunch and wins.”  In business too, Walker continued, “The most widely celebrated heroes of capitalism are the Steve Jobs, Richard Branson, or Mark Cuban-types—the ones who scorn what the focus groups and the gurus say and follow their superior instincts into the highest possible tax bracket.”  Though it’s gotten a lot of attention recently thanks to the widespread popularity of the book Blink: The Power of Thinking Without Thinking and the rock-star status of its author Malcolm Gladwell, this reverence for go-with-the-gut corporate heroes is not something new.

Indeed, “The decade of the 1980s may well become known as that benchmark period in management history when intuition finally gained acceptance as a powerful brain-skill for guiding executive decision-making,” wrote author and consultant Weston H. Agor more than twenty years ago.  The bible for many managers in the go-go 80s and early 90s, Thomas Peters and Robert Waterman’s In Search of Excellence, highlighted a key attribute of the ten best run companies in America: encouraging management to draw on their intuitions.  Futurist John Naisbitt noted in 1983, “another shift I see that really impresses me is a new respectability for intuition in corporate settings.” 

Because people in business make gigantic, multi-million—sometimes even billion—dollar decisions every day based on little more than a hunch, there’s no lack of opportunity to follow in the footsteps of our corporate heroes.  But should we?  The real issue is how many times do pure hunches alone lead to legendary success.  The answer upon closer inspection: pretty rarely. 

Intuition Doesn’t Spell Success
Take the case of Home Depot. When it first opened, it won over a steady stream of do-it-yourselfers with its superior service. Customers didn't feel they had to trade the expert help they got at their local hardware stores in order to save on tools and supplies. The chain grew, "largely on the strength of its skilled workers, many of whom were former plumbers, electricians, and carpenters who were eager to impart their knowledge to do-it-yourselfers," explained the Wall Street Journal in a recent profile of the retailer.  The experienced service was featured in advertising, store promotions, and was a central element of the chain's positioning. Customer satisfaction soared and business boomed.,

But when growth began to slow, competition increased, and profits were squeezed, CEO Bob Nardelli directed company management to start cutting costs. Labor is one of the biggest company expenses, so it was an obvious area to look for places to shave.  Obvious, that is, if you’re NOT thinking.

Part-time workers are cheaper, so the company started hiring more and imposed a salary cap. The seasoned workers who might actually know what a Philips-head screw driver and Allen wrench are—the very attribute the company had built the brand on—left, and those that stayed behind were embittered.  A third of the workforce was redeployed from the store floor to (presumably less expensive) overnight stocking positions, making help an even scarcer commodity. As the Journal put it, "It left customers searching in vain for someone on an orange apron to ask about picking out the proper power tool.”   Home Depot continues to struggle to get back on track.

Or consider the ballyhooed story of the Dodge Viper.  Bob Lutz, then Chrysler’s president, became absolutely convinced the company had to develop “a muscular, outrageous sports car that would turn heads and stop traffic,” he recounted in the Harvard Business Review.   As might be expected at a firm known for trucks and a popular minivan, the “naysayers were many.”  Nevertheless, our corporate hero persevered, “pushing the project forward with unwavering commitment.”  The article notes, “Amazingly, he had no market research to support him, just gut instinct.” [As an aside, the company did build a concept car to preview at the Detroit auto show where it got rave reviews.  Scientific merits aside, there was at least a modicum of research done to test out the idea.]  Lo and behold, “The Dodge Viper became a smashing success.”  The article contends, the Viper, “single-handedly changed the public’s perception of Chrysler,” lifted employee morale, and sparked the 1990s renaissance of the firm.”  Hallelujah!

Now let’s delve beneath the spin.  True, the car generated—and continues to generate—buzz among auto enthusiasts and it routinely graces race tracks and magazine covers.  Yet to quote an important question posed by Driving Today, did it create the promised “halo” effect “that would send a warm glow of sportiness over the entire Chrysler line”? The answer to that is don’t bet on it.  Recall that sales of sports utility vehicles, trucks, and inherently non-sporty minivans lead Chrysler’s “dramatic turnaround” in the mid-1990s.  It’s a bit of a stretch to conclude vast numbers of truck and minivan buyers made the jump from the introduction of the Viper (if they even knew about it) to an implied sign of improved “sportiness” through all Dodge makes and models.  Who really knows if these buyers [uniformly] cared that much about sportiness when making a purchase decision in the first place?  More importantly, “aside from its ability to capture magazine covers—an attribute creator Bob Lutz insisted was worth the cost of developing and building it—the Viper’s a money loser,” explained Edmund’s Auto Observer.  The company only makes a few thousand Vipers a year at the most and it has never been an important profit generator. 

The Grass Isn’t Always Greener: It’s Not Just a Numbers Game
There are, of course, as many criticisms of relying purely on research and reason to make a decision as there are of just counting on intuition to be your guide.  We’re the first to admit that there’s quite a bit of suspect data and quickie analysis of said data that sometimes offers misleading or even inaccurate information. 

Take America’s most popular research tool: focus groups.  Focus groups were originally intended as a tool for generating hypotheses and learning the language of buyers in a product category or for bringing the findings of quantitative research to life—seeing, hearing, and engaging in conversation actual members of market segments.  Too often, however, they’re the only form of research a company does and used to make decisions way beyond their intended scope.  Focus groups are to serious research what bumper stickers are to Cartesian philosophy.  No matter how many of them are done, the resulting data does not reliably predict buyer behavior.  You get verbatims, not facts.  Because of misuse, “exasperation with focus groups, while not universal, is growing,” as Businessweek recently reported, and research gets dragged through the mud in the process. 

So much of the research that gets done today ends up gathering dust on a bookshelf because so much of it is just not actionable—executives complain they can’t apply it, can’t do anything with it.  Having research, data and information is very different than having good research, data and information —and by “good” we mean, at the very least, representative, thoughtfully analyzed, and relevant to decision-making.  Just as the argument that intuition is good, except when it’s not holds for gut decision making, so too does research is good, except when it’s not for more fact-based decision making.  Neither alone is the perfect solution.

The Balance is Key
For all the hype and attention, “the power of intuition” to transform a business from a bit player, to an industry leader, to grow sales and profits beyond a board of directors wildest dreams is the biggest myth in American business today.  For more than twenty years, intuition has been in the ascendancy at the highest level of corporate management, and its track record has been poor.  Peel away the onion a bit and the heroic tales of going on gut feeling alone turn out to be much less the stuff of business legend than they first appear—reports of terrific performance are more often than not greatly exaggerated just as the role of research, business experience, and the market knowledge of the individual are often minimized. 

When it comes to making business decisions, nothing beats a balance of personal judgment and seasoned experience with careful analysis of unimpeachable data.  Judgment and experience allow you to see what should be present but is not.  Though we’d never say research is uniformly perfect, it is infinitely easier to meet the criteria required for unimpeachable data than it is to improve intuitive capabilities—only time and professional experience supposedly improve business instinct and even that’s often hard to prove.  The balance is the key.

Back to News Room Index