In 2022, after acquiring X for $44 billion, Elon Musk, CEO of Tesla Motors, laid off approximately 6,000 employees—about 50% of the company’s workforce. The layoffs were part of Musk’s cost-cutting measures and restructuring efforts following the acquisition. After analyzing Twitter’s low profitability, Musk identified high personnel costs, low advertising revenue, and fake content as primary issues. Believing that high personnel costs to be the root cause of X’s problem, Musk proceeded with mass layoffs. However, this decision backfired, the employees Musk let go had been instrumental in mitigating an increasing number of fake accounts and posts that advertisers wanted to avoid. Consequently, major companies withdrew their advertisements, further exacerbating Twitter’s financial decline. “The company’s revenue declined after firing 80% of its employees, and the company’s now worth only about a fifth of what Musk initially paid for the company,” said Dr. Chan Hyung Park, Senior Researcher at the Chair of Strategic Management and Innovation at ETH Zurich, during a Sasin Research Seminar. Dr. Park, along with Markus Baer of Washington University in St. Louis and Jackson Nickerson from Saint Louis University, co-authored a study titled “Avoid Root Cause Analysis: The Role of System-Based Thinking in Innovative Strategies.” Their research challenges the effectiveness of root cause analysis in solving complex strategic problems.Dr. Park emphasized that strategic challenges, such as declining market share, profitability, and technological disruption, are often complex and unique (Cammillus, 2008; Rumelt, 2012; Nickerson & Argyres, 2018). Traditional problem-solving approaches, including root cause analysis, are often ineffective in addressing such multifaceted issues. He argued that causes are interdependent, such that focusing on and solving a single root cause rarely yields the results that managers expect. Instead, solving complex challenges requires innovative strategies that are both novel and practical in solving the interdependent causes holistically. Instead of focusing a root cause analysis, researchers recommend a system-based view of strategic problems, identifying a comprehensive web of causes. “By developing a structured problem formulation, managers can avoid treating symptoms rather than underlying issues and potentially uncover hidden central causes,” said Dr. Park. He highlighted that problem formulation helps reveal overlooked factors, leading to more effective and sustainable solutions. A widely used diagnostic method for problem-solving is the MECE (Mutually Exclusive, Collectively Exhaustive) framework, which systematically categorizes problems into distinct, non-overlapping factors. While effective for decomposable problems, where causes can be addressed independently (Nickerson & Zenger, 2004), this approach falls short in addressing complex issues with interconnected elements. Attempting to isolate and solve individual causes in such systems can lead to unintended consequences, sometimes worsening the problem. Furthermore, unpredictable “black swan” events reinforce the need for an adaptive, holistic problem-solving strategy rather than a strict root cause analysis that addresses single causes while ignoring underlying interdependencies. To explore alternative approaches, Dr. Park and his research team investigated how integrative complexity can enhance strategic problem-solving. Integrative complexity research examines how individuals process and respond to complex phenomena (Kelly, 1955; Tetlock, 1983; Shao, Nijstad & Tauber, 2019). Dr. Park identified two key dimensions:

1. Comprehensiveness (or differentiation)—the number of alternative factors considered in problem analysis.
2. Conceptual integration—the recognition of interdependencies among these factors.

According to Dr. Park, conceptual integration alongside comprehensiveness fosters a system-based understanding of complex issues, leading to more innovative and effective strategies. To test this hypothesis, Dr. Park’s team conducted two field studies. The first study involved 96 decision-makers from Chinese agricultural firms (average age: 38.85) participating in a three-month executive program in Zhejiang province, China. They were tasked with developing novel strategies for their ventures (average revenue from the past year THB 200 million). Results showed that comprehensiveness and integration together allowed for both novel and useful solutions. The second study involved 198 decision-makers from the later cohorts of the executive program, who assessed the effectiveness of implemented strategies six months after problem formulation. Findings confirmed that comprehensive and integrative problem formulation led to tangible improvements in strategic outcomes, increasing their usefulness and novelty. In conclusion, Dr. Park emphasized that managers and CEOs should move beyond traditional root cause analysis. Instead, they should adopt an integrative and system-based approach to understanding strategic problems. While root cause analysis remains a useful tool, conceptual integration with comprehensiveness can lead to more novel and practical solutions. Business schools and companies that cultivate this approach can contribute significantly to strategic decision-making, fostering innovation and resilience in an increasingly complex business landscape.