Good (Luck) to Great

Clarke Ching mentioned a brief HBR article on one of the TOC mailing lists and he's also posted it to his blog.  Are great companies ... just lucky?  The essential idea reflects concerns of the Halo Effect, that exemplar companies are just those that have weathered the storms of chance better than others - not that they've done anything unique to survive.

This months HBR has a delightful article about whether some companies - those featured in books like Good to Great and In Search of Excellence - are just ... lucky.

Professor Rebecca Henderson at MIT's Sloan School shows how easily we succumb to the temptation to "explain" seemingly significant outcomes that are entirely random. "I begin my course in strategic management by asking all the students in the room to stand up," she says. "I then ask each of them to toss a coin. If the toss comes up tails, they are to sit down, but if it comes up heads, they are to remain standing. Since there are around 70 students in the class, after six or seven rounds there is only one student left standing. With the appropriate theatrics, I approach the student and say, 'How did you do that? Seven heads in a row! Can I interview you in Fortune? Is it the T-shirt? Is it the flick of the wrist? Can I write a case study about you?'"

When I mentioned this on Twitter, a couple people chimed in with more thoughts about random chance and those companies better prepared to manage through the risk.  While most companies are subject to both good and bad luck, maybe those companies that can deal with mistakes or "bad luck" better than others are the ones that survive over time.