Corporate Advisors as Bullshit Detectors
Evolution by natural selection explains how organisms evolve in response to their environment. This process occurs in three steps: variation, selection, and replication. In biology, variation happens at the genetic level, where random mutations generate a wide variety of specimens. Which specimen prevails is determined by the environment through selection. Those best adapted to their environment are selected. For example, a watery terrain may favor specimens with longer legs. Naturally, those fit for their environment perpetuate their genes, while others fade away.
In his brilliant book The Origin of Wealth, Eric Beinhocker posits that economics is also subject to evolution. He explains that variation occurs at the level of companies' business plans. Bits of the business bits of business plans developed and implemented by successful companies are replicated by others, and the cycle continues.
I believe that social systems in general, and economics in particular, differ from biology. In biology, phenotypes—the products of variation—are well-defined and observable. There's no debate about the longer beak of a surviving species. In business, however, it is far more difficult to pinpoint the exact factor that makes a company successful, despite what business success literature might claim. Assumptions and interpretations are often made about what makes a company thrive, creating another level of evolutionary force. You interpret what made a company successful, try to replicate that factor, and if it doesn’t work, you adapt and create new elements that might lead to success.
Consulting firms and corporate advisors play an important role in disseminating what they believe has worked for other companies in the past. With their extensive experience, they advise companies on developing business plans and strategies. However, much of this advice perpetuates conventional ideas, often derived from typical MBA courses or common management practices that may have contributed to their past success. In strategy design, for example, advisors help formulate vision and mission statements, analyse the current environment and company, and devise strategic options to achieve the desired vision. They may also assist in implementation, addressing organizational design, cultural alignment, and so on.
I have already expressed strong criticisms of conventional and popular business ideas in other articles. Chief among them is the fact that the business world is not a linear system with straightforward cause-and-effect relationships. It’s extremely difficult to untangle what worked in the past and identify the exact success factor—let alone replicate it. The complexity of business surpasses that of biology because, as noted earlier, phenotypes responsible for survival in nature are usually obvious. The human world introduces an additional layer of complexity because we think, we assume we know, and we act accordingly.
I am not necessarily criticizing the role of corporate advisors. I believe they can offer valuable external perspectives to companies. However, their role should not involve blindly applying conventional ideas, regardless of their popularity. In fact, I would go a step further and suggest that advisors should focus on determining which practices or advice not to follow or implement. In an increasingly complex world, it is more robust to avoid noise than to search for a signal. Corporate advisors should act as "bullshit detectors," challenging conventional practices and opening executives' eyes to the risks of replicating perceived successes.
