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Business Exposed2
We are hugely affected in our decision-making and behavior by
our notion of what others are doing, although we usually don’t
quite realize it (and deny it vigorously!). We might think that we
don’t care what others are doing but the reality is: we do. It is
only human.
Even top managers can be almost human (or at least some of
them). For example, there is a lot of research on what inuences
managers’ strategic decisions (e.g., whether
to choose strategic option A or B). And guess
what, it’s imitation.
There is research on where rms choose to
locate their new plants, whether or not they
enter a particular market, adopt a new type
of organizational structure, a governance
instrument, etc, etc. Consistently, results
show that managers are led by one simple
question: “What are my competitors doing?” And then they just
do the same thing.
The problem is, sometimes what your competitors are doing
is stupid. For example, research has indicated that (in certain
industries) ISO 9000 quality norms are counter-productive. Yet,
throughout the 1990s rms imitated each other anyway and
adopted the system.
And it gets worse. Sometimes, if you’re the only one that
does not adopt the new practice, you start to look “illegit-
imate”. Analysts, shareholders, customers, and so on start asking
questions: “Everybody else is doing it; shouldn’t you?” “Surely,
everybody else cannot be wrong”. But they can!
In this case – because customers start to shun them, investors
criticize them, analysts downgrade them, etc. – rms may
actually start to suffer from not having adopted the silly practice.
This places pressure on the rm to also act stupid, just to t in,
and be accepted. It takes a brave rm to stop such a vicious cycle
of imitation.
‘‘
Even top
managers can be
almost human (or
at least some of
them).
’’