When Enron, which Fortune named “America’s Most Innovative Company” for six consecutive years, collapsed in 2001, there was no shortage of blame to go around. Many blamed corruption and greed, others hubris, and still others incompetence. But Nobel laureate Paul Krugman offered a different explanation.

In his New York Times column, Death By Guru, he identified the culprit as trendy management theories. He argued, essentially, that consultants selling compelling narratives persuade gullible CEOs to abandon fact-based analysis and good sense. Inevitably, reality catches up, and there is a price to be paid.

Yet there is a deeper problem. When a big consulting company sells a story, it’s not merely giving advice, but presenting its assertions as being backed by “research.” When they use the term, however, they rarely, if ever, mean that they have used the scientific method and employed appropriate controls for error and bias. These are the tricks of the trade. 

Organizations are often inscrutable and hard to research. That’s why consultants tend to rely heavily on case study interviews. These purport to leverage consultants’ rare access to insiders in order to glean insight others cannot. These can sometimes be helpful, but they also have severe limitations that are often overlooked. 

First, with shareholders and customers to please, managers are seldom eager to talk about failures. So we usually only hear about successes. Those, of course, are important but also subject to survivorship bias . For example, if a risky strategy results in 1% of the firms being wildly successful and 99% going out of business, then we’ll tend to hear glowing accounts of that lucky 1% and we’ll miss the vast majority that flamed out.

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