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An Overview of Occam's Razor Theory and Its Application in Business Management

written by: N Nayab•edited by: Sarah Malburg•updated: 3/31/2011

Occam's Razor, also known as the law of parsimony, is a principle that advocates selecting alternatives that make the fewest assumptions, everything else being equal. Read on for an understanding of what is Occam's Razor, and the application of it in business and entrepreneurship.

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    What is Occams Razor?

    What is Occams Razor 

    Occam's Razor is a philosophical concept that advocates selecting the option with the least uncertainties or assumptions, and selecting the simplest assumption on the premise that the more perfect a nature, the less the means it requires to operate.

    The origins of Occam's Razor theory trace to William of Ockham (1284-1347), an English philosopher and theologian. This theory bases itself on his two principles: "Entities must not be multiplied beyond what is necessary," and “Plurality should not be posited without necessity."(William of Ockham). These statements, which make explicit what is Occam's Razor, trace back to the great Greek philosopher, Aristotle.

    One common mistake is considering Occam's Razor theory as "the simplest explanation being the best explanation" of a concept or theory. Occam's Razor principle does not hold the simplest explanation as the correct one or even the best one. It states that the best explanation of an unknown phenomenon is the simplest explanation, until evidence substantiates a more complex explanation, all other factors remaining equal. In other words, the best explanation for an unproven concept is the simplest explanation.

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    General Application

    Occam's Razor finds widespread application in many fields of knowledge. It is a guiding rule for scientists to develop theoretical models, and constitutes a basic principle in quantum mechanics, reaction mechanism and many other branches of physics. It also finds application in biology, medicine, and many other fields of research.

    Occam's Razor finds use in literature to measure simplicity of the text, and by extension the effectiveness and soundness of a plot. Occam's Razor also finds use in many religious and philosophical discourse.

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    Application in Business Management

    Occam's Razor theory finds widespread use in business management.

    Entrepreneurs and business managers apply Occam's Razor principle to improve the quality of their decisions. Any given set of observations or data has infinite possible solutions. The application of Occam's Razor helps in selecting the solution grounded in facts and with the least assumptions, or in the absence of evidence, the solution that offers the simplest explanation.

    The principle of “KISS" or “Keep it seriously simple" is a much-hackneyed phrase in business management. This principle advocates leveraging the power of simplicity, stating that the simpler the model or solution, the better it is. The "KISS" principle owes its origin to Occam's Razor.

    Occam's Razor also finds use in improving cost vs benefit analysis. Very often, decisions depend on assumptions or perceived benefits of an action. Application of Occam's Razor helps in removing such “assumptions" and is sued to make decisions based on solid facts.

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    Examples

    Some examples best illustrate what is Occam's Razor and its application in business.

    Developing additional functionality in Information Technology systems invariably entails additional cost. Very often, the costs to add functionality that serve a single business process make such addition unviable. Most business managers, nevertheless, decide to go ahead with the addition assuming that such functionality will find use in the future. Application of Occam's Razor principle in such scenarios would reveal the lack of hard data to substantiate that the functionality would find use in the future.

    Many entrepreneurs and business managers go in for automatic error-handling procedures. In reality, over-automating error handling results in needless complications, and the benefits rarely justify the cost. Application of Occam's Razor theory to select the simplest of alternative solutions would allow adoption of a simpler solution to detect and flag error and manual resolution, instead of the complicated, albeit fashionable automated error-handling process.

    One good real life example of applying Occam's Razor in business is that of 37 Signals, a company founded by Jason Fried and David Heinemeier Hanson, famous for its product "Ruby on rails." They adopt a policy of removing barriers and eliminating complexity to design for the web. For instance, they eliminate some navigational choices if it becomes too complex, remove a background image if it distracts a message, or provide instructions to guide users on where to click, all contributing to making web pages simple.

    The advantages of applying Occam's Razor theory seem obvious and common-sense, but the fact remains that many entrepreneurs and business managers overlook such simple and basic things under the spell of contemporary fashion and trends.

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    References

    • Phil Gibbs. “What is Occam's Razor?" http://math.ucr.edu/home/baez/physics/General/occam.html. Retrieved March 19, 2011.
    • Encyclopaedia Brittanica “Occam’s Razor." http://www.britannica.com/EBchecked/topic/424706/Ockhams-razor
    • Caganoff, Saul. "Cost vs Benefit – Occam’s Razor for the Enterprise Architect." http://www.soabloke.com/2008/01/13/cost-vs-benefit-occams-razor-for-the-enterprise-architect/. Retrieved March 19, 2011.
    • "Occam's Razor: A Great Principle for Designers." http://www.webdesignerdepot.com/2010/07/occams-razor-a-great-principle-for-designers/. retrieved March 27, 2011.

    Image Credit: Wikimedia Commons