In leadership team meetings, the conversation almost always (and naturally so) revolves around the capabilities of a busienss. Do we have the technology? Do we have the talent? Do we have the capital?
As Jérôme Barthélemy highlights in his excellent book Myths of Strategy, while capabilities matter, they are rarely the true cause of a business’s failure. The real risk sits deeper, in the invisible architecture of the organisation: its beliefs. At Lighthouse Advisory, we see that In today’s environment, this risk is amplified by AI. Leaders can be constrained not just by genuine disruption, but by assumptions about AI that are misunderstood, overstated, or in some cases entirely misplaced.
Paradoxically, the very beliefs that drive a firm’s initial success are often the same ones that orchestrate its downfall.
The Polaroid Paradox
The collapse of Polaroid is frequently cited as a failure of capability, a classic case of an analogue giant missing the digital boat. It is a concept often discussed in management theory and sharply illustrated by researchers Giovanni Gavetti and Mary Tripsas: the very beliefs that drive success. However, the problem was not technical competence.
Polaroid had actually developed robust digital capabilities by the late 1980s. They had a digital camera project (Printer in the Field) and a digital radiography system (Helios) ready to go.
The problem was a rigid adherence to two core beliefs held by executive managers:
Success relies on heavy Research and Development.
The business model must be “razor/blade” (selling hardware cheaply to make money on high-margin consumables).
While the “razor/blade” model made them a fortune in instant film, it was fundamentally incompatible with digital photography, which has no “film” to sell. Polaroid had the future in its hands, but its management refused to release it because it did not fit their belief of how money should be made.
The Ghost of 1712
Sometimes, industry beliefs are so deeply ingrained that we forget they are based on obsolete constraints.
Consider the “broadsheet” newspaper. For centuries, quality journalism was associated with large-format paper, while smaller “tabloid” formats were synonymous with sensationalism. Executives at quality papers believed customers simply would not accept a smaller size.
In reality, the large format originated not from customer preference, but from a tax introduced in England in 1712 based on the number of pages printed. Publishers made pages massive to reduce the tax bill. That tax was abolished in 1855, yet the format, and the belief attached to it—persisted for nearly 150 years until the Metro proved in 1999 that a quality paper could be compact.
The “Regular Partner” Illusion
These false beliefs are difficult to spot because data often seems to support them.
In the film industry, distributors firmly believe it is safer to work with regular production partners than new ones. Superficially, the numbers agree; films made by regular partners generate four times as much revenue.
However, this is a self-fulfilling prophecy. Because distributors believe these partners are better, they give them higher budgets, more screens and better release dates. When researchers controlled for these advantages, they found two shocking truths:
The revenue gap is entirely due to the extra marketing and support.
When advantages are equal, regular partners actually perform worse than occasional partners.
How to Bulletproof Your Strategy
If false beliefs are invisible and self-reinforcing, how can a leader at Lighthouse Advisory, or any firm, identify them?
The answer lies in how you test your hypotheses. Most people try to prove they are right. To find the truth, you must try to disprove yourself.
Consider a technique used by Paul Schoemaker. Imagine you are given the number sequence 2, 4, 6 and asked to guess the rule behind it. You can propose other sequences to test your theory.
Most people guess “8, 10, 12” to confirm their theory that the rule is “even numbers increasing by two”. When told that sequence fits, they stop, convinced they are right. But they are often wrong. The rule might simply be “any ascending numbers”. You can only discover this by proposing a sequence that violates your theory, like “5, 2, 1” or “-10, 0, 546”.
Schoemaker applied this to his own consulting firm. His partners held a core belief that responding to RFPs (Requests for Proposals) was a waste of time and price-driven. To test this, they made a “deliberate mistake”. They submitted a bid for a contract they thought they had no chance of winning, with a budget of $200,000, assumed to be far too high.
To their surprise, the proposal was accepted. They billed the client over a million dollars eventually, proving their limiting belief was costing them a fortune.
The Lighthouse View
Capabilities are the engine of your business, but beliefs are the steering wheel. If your map is from 1712, it does not matter how fast your engine runs.
We recommend auditing your “sacred cows.” Look at the practices you assume are immutable laws of your industry. Ask yourself: Are we doing this because it adds value, or because we are paying a tax that was abolished a century ago?