A founder posts the seven things that took the brand to $50 million. Every item is plausible. Some may even be true. But the post is built from two biased samples at once: it describes a winner, and it describes the winner as seen by someone who already knows it won.

The halo effect

Phil Rosenzweig’s The Halo Effect (2007) takes apart the most popular business research. The halo effect is “the tendency to make specific inferences on the basis of a general impression” Published. When a company is doing well, observers describe its strategy as clear, its culture as strong and its leaders as decisive. When the same company does badly, the same observers find confusion, arrogance and drift. His example is Cisco, praised for its strategy in the late 1990s and criticized by many of the same observers when the bubble burst, though the company hadn’t fundamentally changed. The data behind much of the popular research comes from “retrospective interviews, articles from the business press, and business school case studies,” all colored by the outcome Published.

Rosenzweig’s test is one question: if I didn’t know how the company was performing, what would I think of its culture, its execution and its customer focus? Published

The missing failures

Jerker Denrell showed why learning from successful firms goes wrong even without the halo. Failed firms disappear from view, so the sample you learn from is survivors. His 2003 paper shows how a risky practice with no link to performance across all firms can seem positively related to performance among the survivors Published. A bold strategy produces big winners and big losers. Look only at the survivors and it looks like a strategy for winning.

DTC is full of these. Raise big, spend big on brand, open stores, launch a second category. Some brands did those things and thrived. More did them and closed, and nobody writes the thread about them.

First isn’t a strategy

Peter Golder and Gerard Tellis tested the belief that pioneers win. Earlier studies had relied on databases of surviving firms. Using historical records for about 500 brands in 50 categories, they found that 47% of market pioneers failed, their mean market share was 10%, and only 11% were still category leaders. Earlier studies had put pioneers’ share near 30% and found almost half of them leading. The leaders they found entered on average 13 years after the pioneer Published. The pioneers who survived long enough to be studied made first-mover advantage look real.

The advice comes from the survivors. The evidence is with the ones who didn’t make it.

Questions before you copy

Jeffrey Pfeffer and Robert Sutton made the case for evidence-based management in Harvard Business Review and in Hard Facts, Dangerous Half-Truths and Total Nonsense (both 2006): as medicine learned to do, managers should decide from the best evidence about what actually works Published. The questions below are mine, not theirs. They’re what I’d ask before copying anything from another brand:

1. Did the practice cause the success, or come with it?Successful brands do many things. Which of them mattered is rarely known, even to the founder.
2. Who did the same thing and failed?If you can’t name any, you haven’t looked, not proven they don’t exist.
3. Would I rate this practice the same if the brand were struggling?Rosenzweig’s question, applied to one tactic.
4. What conditions made it work there?Margin, price point, category, customer, timing, the team. List the ones you don’t share.
5. What would it cost to find out on a small scale?A holdout, a single market, one SKU. If the test is cheap, run it instead of arguing.
6. What’s the downside if it’s wrong?Copying a subject-line style risks little. Copying a store rollout risks the company.

Do this

• Take the last tactic you copied and answer the six questions in writing. Then pick one tactic you’re considering now and answer them before the meeting where it gets decided.