Viewing offline content

Limited functionality available

Dismiss
Deloitte South Africa
  • Services

    What's new

    • Deloitte Digital

    • Deloitte Africa Centre for Corporate Governance

      The Deloitte Africa Center for Corporate Governance offers a number of resources for executives, directors, and others who are active in governance.

    • Corporate Reporting Reform

      View our latest events on corporate reporting reform.

    • Audit & Assurance

      • Audit & Assurance Insights
      • Centre for Corporate Governance
    • Consulting

      • Strategy
      • Customer and Marketing
      • Core Business Operations
      • Human Capital
      • Enterprise Technology & Performance
      • Managed Services
      • Growth Platforms
    • Financial Advisory

      • Mergers & Acquisitions
      • Turnaround and Restructuring
      • Forensics
    • Risk Advisory

      • Internal Control & Assurance
      • Regulatory Risk
      • IT & Specialised Assurance
      • Cyber Risk
      • Analytics
    • Tax & Legal

      • Outsourced Tax Compliance
      • Tax Technology Consulting
      • Tax Advisory and Transactions
      • Mobility, Payroll, Immigration
      • Workforce, Analytics
      • Reward, Employment Tax
      • Legal Services
      • South African Budget
      • Tax News and Trends
    • Deloitte Private

  • Industries

    What's new

    • Deloitte perspectives

      Leadership perspectives from across the globe.

    • Future of Mobility

      Learn how this new reality is coming together and what it will mean for you and your industry.

    • Deloitte Africa Insights

      Access the latest thought leadership on industry insights, country reports and economic developments in Africa.

    • Consumer

      • Automotive
      • Consumer Products
      • Retail, Wholesale & Distribution
      • Transportation, Hospitality & Services
    • Energy & Resources

      • Energy & Chemicals
      • Mining & Metals
      • Power, Utilities & Renewables
      • Industrial Products & Construction
    • Financial Services

      • Insurance
      • Banking & Securities
      • Investment Management
      • Actuarial & Insurance Solutions
      • Real Estate
    • Life Sciences & Healthcare

      • Life Sciences
      • Health Care
      • The Africa Deloitte Health Equity Institute
    • Government and Public Services

      • Infrastructure, Transport & Regional Government
      • Central Government
      • Defence, Security & Justice
      • Health & Human Services
    • Technology, Media & Telecom

      • Technology
      • Media & Entertainment
      • Telecom, Media & Entertainment
      • Predictions
  • Insights

    Deloitte Insights

    What's new

    • Deloitte Insights Magazine

      Explore the latest issue now

    • Deloitte Insights app

      Go straight to smart with daily updates on your mobile device

    • Weekly economic update

      See what's happening this week and the impact on your business

    • Strategy

      • Business Strategy & Growth
      • Digital Transformation
      • Governance & Board
      • Innovation
      • Marketing & Sales
      • Private Enterprise
    • Economy & Society

      • Economy
      • Environmental, Social, & Governance
      • Health Equity
      • Trust
      • Mobility
    • Organization

      • Operations
      • Finance & Tax
      • Risk & Regulation
      • Supply Chain
      • Smart Manufacturing
    • People

      • Leadership
      • Talent & Work
      • Diversity, Equity, & Inclusion
    • Technology

      • Data & Analytics
      • Emerging Technologies
      • Technology Management
    • Industries

      • Consumer
      • Energy, Resources, & Industrials
      • Financial Services
      • Government & Public Services
      • Life Sciences & Health Care
      • Technology, Media, & Telecommunications
    • Spotlight

      • Deloitte Insights Magazine
      • Press Room Podcasts
      • Weekly Economic Update
      • COVID-19
      • Resilience
      • Top 10 reading guide
  • Careers

    What's new

    • Job search

    • Experienced Hires

    • Executives

    • Students

    • Life at Deloitte

    • Alumni

  • ZA-EN Location: South Africa-English  
  • ZA-EN Location: South Africa-English  
    • Dashboard
    • Saved items
    • Content feed
    • Profile/Interests
    • Account settings
    • Subscriptions

Welcome back

Still not a member? Join My Deloitte

Explanations vs. predictions

by Michael Raynor
  • Save for later
  • Share
    • Share on Facebook
    • Share on Twitter
    • Share on Linkedin
    • Share by email
Deloitte Insights
  • Strategy
    Strategy
    Strategy
    • Business Strategy & Growth
    • Digital Transformation
    • Governance & Board
    • Innovation
    • Marketing & Sales
    • Private Enterprise
  • Economy & Society
    Economy & Society
    Economy & Society
    • Economy
    • Environmental, Social, & Governance
    • Health Equity
    • Trust
    • Mobility
  • Organization
    Organization
    Organization
    • Operations
    • Finance & Tax
    • Risk & Regulation
    • Supply Chain
    • Smart Manufacturing
  • People
    People
    People
    • Leadership
    • Talent & Work
    • Diversity, Equity, & Inclusion
  • Technology
    Technology
    Technology
    • Data & Analytics
    • Emerging Technologies
    • Technology Management
  • Industries
    Industries
    Industries
    • Consumer
    • Energy, Resources, & Industrials
    • Financial Services
    • Government & Public Services
    • Life Sciences & Health Care
    • Tech, Media, & Telecom
  • Spotlight
    Spotlight
    Spotlight
    • Deloitte Insights Magazine
    • Press Room Podcasts
    • Weekly Economic Update
    • COVID-19
    • Resilience
    • Top 10 reading guide
    • ZA-EN Location: South Africa-English  
      • Dashboard
      • Saved items
      • Content feed
      • Profile/Interests
      • Account settings
      • Subscriptions
    30 January 2013

    Explanations vs. predictions

    31 January 2013
    • Michael Raynor United States
    • Save for later
    • Share
      • Share on Facebook
      • Share on Twitter
      • Share on Linkedin
      • Share by email

    If curiosity did, in fact, kill the cat, then felines are likely the only creatures for which that particular psychological trait is a bad thing.

    If curiosity did, in fact, kill the cat, then felines are likely the only creatures for which that particular psychological trait is a bad thing. Certainly, being unable to resist the urge to find out what’s over the next hill, down the next river, or in the next galaxy is a big part of why—for better or for worse—we are the planet’s dominant species.

    Our curiosity can usefully be seen as inquiries into two sorts of questions: Why/how did that happen? And, what will happen next? The former captures our desire to explain events; the latter addresses our need to predict them.

    Different scientific disciplines address these two questions to varying degrees. As ever, physics is the gold-standard science that scratches both itches especially well. The Large Hadron Collider in Europe seeks to provide an explanation for pesky phenomena such as mass by nailing down the details of the Higgs boson. That will be tremendously satisfying and essentially complete the standard quantum model. We will know—really know—what matter is. And the predictive power of the explanations that physics provides manifests itself through practical application in fields such as engineering.

    Medicine probably falls on the “prediction” end of the spectrum. Although certainly built upon an attempt to explain why disease strikes and how it behaves in order to better combat it, the need for effective countermeasures is so great that we settle for effective interventions even if we don’t fully understand them. In other words, we accept useful predictions despite the lack of correct explanations. If a drug works in 40 percent of cases like yours but no one can explain why or how or if it will work for you, if that’s the best we have, you’ll probably take the drug.

    So where does management science fall in the explanation/prediction space?

    Here’s how I’ve seen it play out with the Disruption theory of innovation. Disruption posits that new innovations have the best chance of success when they have materially different performance profiles, appeal to customers of relatively little interest to dominant incumbents, and, when launched by an established firm, enjoy substantial strategic and operational autonomy from the mainstream business. In contrast, attempts to enter markets dominated by successful incumbents—no matter how well-resourced—will typically fail.

    This is precisely the kind of statement that managers need, because it prescribes what they should do. And it turns out to have at least some predictive power. In a series of experiments at Harvard Business School, MIT Sloan, the Ivey Business School in London, Canada, MBA students using Disruption theory were nearly 50 percent better at picking winners than were seasoned  venture capitalists using their own idiosyncratic approaches. Specifically, the VC folks had a success rate of about 10 percent, while the disruption- savvy MBA candidates enjoyed a success rate of about 15 percent.

    Whether or not this is enough of an improvement in predictive power to make a difference is a topic for another day—I happen to think it’s pretty significant. Still, it’s a long way from perfect. Take the iPhone, for example. This was Apple’s attempt to succeed in the phone business by offering a better product than that of successful incumbents (Nokia and BlackBerry, to name only two). Disruption theory would have predicted failure. Yet the iPhone has been a huge hit.  This leads me to think that Disruption theory is more like medicine than physics: material but imperfect predictive power based on incomplete explanations of causal mechanisms still poorly understood.

    Unfortunately, creators of management theory typically respond to the inevitable imperfections of other theories by addressing the wrong problem: seeking to improve explanatory power, adding additional variables, new frameworks, and often impenetrable jargon.  Improving the explanatory power of theories solves the wrong problem, because what we really need is better predictive power. This often means settling for relatively limited advances, but so long as we remember that “better” can often be enough, we exhibit the lesser-known second half of the inquisitive cat aphorism, the “satisfaction that brought him back.”

    Credits

    Written by: Michael Raynor

    Topics in this article

    Disruptive innovation

    Deloitte Consulting

    Learn more
    Download Subscribe

    Related

    img Trending

    Interactive 3 days ago

    Michael Raynor

    Michael Raynor

    Managing Director | Deloitte Services LP

    Michael is a managing director with Deloitte Services LP. His research and client work is focused on strategy and innovation in a wide variety of industries. He is the author or coauthor of four best-selling and critically-acclaimed books, including The Innovator’s Solution. His most recent work is The Three Rules: How Exceptional Companies Think, co-authored with Mumtaz Ahmed. He lives in Mississauga, Ontario, Canada.

    • mraynor@deloitte.com
    • +1 617 437 2830

    Share article highlights

    See something interesting? Simply select text and choose how to share it:

    Email a customized link that shows your highlighted text.
    Copy a customized link that shows your highlighted text.
    Copy your highlighted text.

    Explanations vs. predictions has been saved

    Explanations vs. predictions has been removed

    An Article Titled Explanations vs. predictions already exists in Saved items

    Invalid special characters found 
    Forgot password

    To stay logged in, change your functional cookie settings.

    OR

    Social login not available on Microsoft Edge browser at this time.

    Connect Accounts

    Connect your social accounts

    This is the first time you have logged in with a social network.

    You have previously logged in with a different account. To link your accounts, please re-authenticate.

    Log in with an existing social network:

    To connect with your existing account, please enter your password:

    OR

    Log in with an existing site account:

    To connect with your existing account, please enter your password:

    Forgot password

    Subscribe

    to receive more business insights, analysis, and perspectives from Deloitte Insights
    ✓ Link copied to clipboard
    • Contact Us
    • Submit RFP
    • Media enquiries
    Follow Deloitte Insights:
    Global office directory Office locations
    ZA-EN Location: South Africa-English  
    About Deloitte
    • Home
    • Newsroom
    • Code of Conduct
    • Report unethical conduct
    • Office locator
    • Global Office Directory
    • Press releases
    • Submit RFP
    • Contact us
    • Deloitte Insights Blog
    • Social Media
    • About Deloitte in Malawi
    • About Deloitte in Zimbabwe
    • About Deloitte in Mozambique
    • About Deloitte in Botswana
    • About Deloitte in Zambia
    • https://sacoronavirus.co.za
    Services
    • Audit & Assurance
    • Consulting
    • Financial Advisory
    • Risk Advisory
    • Tax & Legal
    • Deloitte Private
    Industries
    • Consumer
    • Energy & Resources
    • Financial Services
    • Life Sciences & Healthcare
    • Government and Public Services
    • Technology, Media & Telecom
    Careers
    • Job search
    • Experienced Hires
    • Executives
    • Students
    • Life at Deloitte
    • Alumni
    • About Deloitte
    • Terms of use
    • Privacy
    • Cookies
    • PAIA Manual
    • About Deloitte Africa
    • Avature Privacy
    • Standard terms for the provision of goods and services to Deloitte & Touche

    © 2023. See Terms of Use for more information.

    Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities.  Please see www.deloitte.com/about for a detailed description of DTTL and its member firms.