Why do 80% of the 30,000 consumer products launched each year and 70% of corporate transformations fail?

Often business leaders are blinded by cognitive biases, which seriously affect their decision-making – and, as a result, the revenues and welfare of their companies. It can be hard to see these biases from the inside.

Take, for instance, one of Britain’s largest food companies. The CEO and other senior leaders were looking to expand into a new market – in this case, the U.S.

I worked with them to gather data, conduct customer research and review every aspect of building a food business in the U.S., from distribution channels to marketing. A key part of the planning process was focus group research, to be held in five U.S. cities.

I’ll never forget sitting in one such city on the other side of a large one-way mirror with two senior leaders who were assigned to work with me and my team on the expansion strategy. Within minutes of the group’s start, I saw expressions of shock on their faces.

The facilitator was trying to get twelve American participants to taste steak and kidney pie, one of the most popular dishes all of the U.K. They saw with their own eyes that the Americans wouldn’t even taste it. I witnessed one senior executive scream at some of the participants, he was so frustrated. “Just taste it you idiots.” he yelled at the Americans from behind the sound-proof mirror.

This is an example of a cognitive bias I see all the time. Corporate leaders make the very common mistake of projecting their personal beliefs and experiences onto others. Stanford University social psychologist Lee Ross, first named this the False Consensus Effect after two studies showing that people assume that others make decisions based on how they would make their own decisions; and that if other people decide to do otherwise, they view them as “defective or unacceptable.”

The thinking goes, “If I love something, why wouldn’t everyone love it too?” In the corporate world, this can mean they start basing a corporate strategy on that biased belief. They assume other people believe what they believe. It happens all the time. They see an opportunity that just doesn’t exist. If I like steak and kidney pie, I think everybody likes it. Or, my husband says the house “isn’t cold” because he’s not cold; and meanwhile, I’m “freezing.”

The “difficulty” or “blind spot” is in imagining that other people can see the world differently from you. So, in the case of the food corporation’s leaders, they can’t believe people will hate the foods they love. It could be the music we love. Or the temperatures we love. We’re simply “blind” to thinking that differs from ours. Just imagine how this can seriously affect a company.

Or let’s say, the CEO is technologically inclined, and the company is trying to market a new product, in this case software. The CEO finds it easy and intuitive to use so she thinks, “well, of course! Everybody will find it easy and intuitive to use!” But for people who are less inclined or skilled, it’s highly complex and word gets around, “Oh! You don’t want to buy it. It’s too hard to set it up.”

In the meantime, the CEO, like so many in the grip of this “effect”, is sitting in her office thinking “this can’t true” because to her it’s so easy to set it up.

The British food company – now free of their “bias blinders” and with “eyes wide open” – chose to acquire a U.S. food retailer and use it as a vehicle for learning more about the U.S. food market. They decided to get that learning first, then gradually introduce new products into the market.

Very wise choice indeed.

The takeaway? A good dose of humility is never a bad thing. Be a learner first and then an investor.

Where might you be making assumptions based on your own beliefs? In the past, have you successfully discovered where customer preferences differ from your own?

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For more info on the False Consensus Effect, and to see a very clear and detailed explanation, CLICK HERE. 

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