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Those That Do Learn From History

THOSE THAT DO LEARN FROM HISTORY, …

by Paul Cormier, President, Cormier Strategy Advisors Inc.

March 2008

 

George Santayana said that “Those who fail to learn from history are doomed to repeat it.” What would we say about those who do learn from history?

I find it remarkable that as a people we spend years studying history in school, observing what happened in the past, reading books and watching television programs devoted to the past triumphs and failures of the human spirit, but that in spite of this so few of us take a systematic approach to studying the past for clues about the future.

I have found that the best predictor of the future is a careful, systematic study of the past. By observing what worked and did not work in the past, one can build the model to point to what might and might not work in the future. Using a statistical model is usually the best way of doing this.

I have advocated this theory for many years. About a decade ago, a client of ours (when I worked for my father’s public relations firm) believed that a key factor in bettering their corporate reputation would be to increase their philanthropic activity. They were convinced that if they gave more money away and to the right causes that the public would think the company was wonderful. They asked us to do some research on how to best spend their money. I thought that the premise needed to be examined first. Would giving away more money really help your image? Luckily I had some research data to work with. Opinion research had been conducted on seven factors that might contribute to corporate reputation for several companies operating in British Columbia. I ran both correlation and regression analysis to determine which factors were most highly correlated to an overall image proxy. Where did contributions to worthy causes fit among the seven factors? – Sixth. Other factors such as believability, the quality of management and good customer service had a much stronger influence on overall image than contributions to worthy causes.

I am not saying that contributing to worthy causes is a bad thing. It has many worthwhile effects: it can make a positive contribution in the community, can improve employee morale, it can foster important business contacts for company leaders. But is it the best way to improve corporate image? – No. If the goal is to improve corporate image and I had $5 million to do it and I had a straight choice between improving customer service and giving the money away, the analysis shows me that improving customer service is a much more effective way of improving the company image. I believe the data.

When faced with this evidence, and I have done such analysis for several companies, what do most companies do? They continue spending the exact same amount on sponsorships and continue ignoring the other areas where they get more bang for the buck. Why? It’s a corporate policy or goal. It’s easier or more enjoyable than the alternatives. Their area controls the sponsorship budget and they don’t want to give it up. Have they learned from history?

But can the past really predict the future? Things change. We have all heard the phrase, “But it’s different this time”. Usually when I hear this phrase, I cringe and know it is time to avoid buying whatever that person is selling. Sometimes circumstances do change and things really are different. For example, when I did the aforementioned sponsorship study care for the environment was seventh out of seven factors influencing corporate image. If I were to re-do this research today, environmental image would almost certainly be higher up the corporate image food chain. This does not tell me that studying the past is pointless; it tells me that you have to update research to incorporate new or modified factors as time goes on.

You might be thinking: that’s great. Why should we believe this guy? A sponsorship study – how does this affect my need? Well, I can tell you I have used this method as a way to predict stock market gyrations, electoral results and company sales results with great success. It is simply a matter of looking at and incorporating the right factors into the model.

But if you don’t believe me, I have a book for you to read. It is called Moneyball – The Art of Winning an Unfair Game by Michael Lewis. (By the way you don’t need to enjoy baseball whatsoever to enjoy this book. I do, but many people I know who read this book don’t and still loved the book.) The book is about the Oakland A’s “willingness to rethink baseball.” Oakland figured out how to field winning teams while paying less money by figuring out what factors in a player’s statistics really led to out-performance. While the rest of the league would pay more for players that could deliver home runs, runs batted in and batting average, Oakland would pay less for players with high on-base percentages, who would take more pitches and who would not strike out so much. These factors led to more runs, which led to more wins. Yet the baseball market was setting the price for such talent lower than for other less valuable attributes. And what is the truly crazy thing about this? Four years after this best selling book was written, essentially proving that this system of choosing players was far superior to the methods traditionally employed by the baseball establishment, virtually no teams in Major League Baseball use such analysis to structure their player rosters.

Many people simply don’t want to acknowledge history’s lessons.

So if you choose to learn from history and have the courage to act on it, what do you think will happen? My analysis of the past would tell me to place my bets on your success.

 

 

Paul Cormier is President of Cormier Strategy Advisors Inc., a firm which provides clients with strategic consulting, project management and short-term management services.

 

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