5 cognitive behaviors that prevent experimentation in your company
Avoid these five common mistakes when validating a new business idea.
Every business needs to innovate. Ultimately, faster learning companies will keep up with the competition and win. But that’s much easier to say than to do. As strange as it may seem, many companies don’t know what to do. There are many causes for this: lack of tolerance for failure, decision-makers not taking risks, staff needing constant feedback, or nobody who knows how to start or keep up the momentum of innovation.
A new business model, a new product, and a way to make an impact is what we need to succeed in business. Business leaders and product development teams are often looking for the next big thing, but when it comes to experimenting with new ideas, they run into cognitive biases that become impediments.
The attribution bias
Have you ever heard of the attribution error? It is a cognitive bias that occurs in people when they try to explain why something has happened. More precisely, we tend to attribute responsibility for failure to outside parties (such as bad luck or other people) and credit for success to inside factors (such as our own work or skill).
And this affects the way we view business experimentation.
Using the attribution error, when our experiment failed, we can blame it on the fact that the experiment wasn’t really suited to our business in the first place. When it succeeds, we pat ourselves on the back for being so brilliant for thinking of it in the very first place! I mean, how smart were you?
But here’s the thing, if an experiment doesn’t work, it doesn’t mean it’s pointless. If it’scsuccessful…well, identify the elements that contributed to the achievement. In both cases, there are learnings and reflections that will improve your experience.
Confirmation bias
Confirmation bias is a natural instinct to search out and believe information that confirms your beliefs. When making business decisions, this tendency can be very risky, and it is the origin of the confirmation bias.
Business experimentation is an important way to ensure that innovation in your business works properly, but it can be difficult to determine accurately if something is not working when you are biased toward one outcome over the other.
Confirmation error occurs when you fail to gather and consider conflicting evidence because of your own personal biases.
This can lead you to overestimate the magnitude of an effect, or even ignore a problem in its entirety! This can lead to an ineffective product or service, or even complete failure.
The Kruger Dunning Effect
There’s a common prejudice that’s making the rounds in the business experimentation area and it’s high time we addressed it. The Kruger Dunning Effect is the idea that if you do a lot of experiments, your results will become increasingly unfavorable.
How does it work? Let’s say you’re testing a new message on your landing page. You run two experiments with similar message concepts, one after the other. The first test does not perform any better than the control test, but the second test shows a significant increase. How do we know what is going on? Is it because a different message worked better? Or is it because the second experiment didn’t reach all the people who had been feeling negative in the first test?
It’s hard to know for sure, but there are ways to control for this bias, including running multiple experiments at the same time or phasing them to allow time to analyze your data.
Optimism
Optimism is a cognitive bias that leads us to expect the best outcome in all situations, regardless of its probabilities. Optimism can be helpful in some circumstances, such as when we try to stay positive and optimistic about daily problems. However, in other cases, optimism can lead us to make decisions that are not based on fact.
For example, let’s say a company has spent the last three years working on a new product line. They have done all the research they can think of and are confident that their new product line will be a great success. But when the time came to release the products to the market, no one was purchasing them! The company did not receive any negative feedback from customers, on the contrary, everyone liked them! So why did the sales not work out?
The company was too optimistic about the success of their product. They were so sure that people would buy that they didn’t explore different opinions to challenge their value proposition. In addition, the company did not think about iterative methods to validate their value proposition even before trying to get their products into stores. So when customers didn’t buy their products, the company didn’t have any other hypotheses to test to correct the situation fast enough and have their product pivoted.
Commitment Theory
The commitment theory states that the more you invest in a particular project, the harder it is to give up on that project and to explore other opportunities.
This can be risky in the business world, where experimentation is essential to remain both competitive and profitable. One company that has demonstrated this risk is Kodak: it invented the first digital camera, but failed to capitalize on it because it was too focused on its film-based products.
Letting go of cognitive biases when experimenting with business is critical to a company’s growth. Having a neutral, evidence-oriented posture requires skills that cannot be learned overnight. However, the roadmap to innovation can easily be planned: it all starts with inculcating a mindset that promotes constant business agility and promotes the development of products that provide value to the user.
In this article, we looked at five cognitive biases that can affect your approach to business experimentation and we discussed when people may be experiencing them. Consult our business experimentation map! You will find a lot of free resources to support and accompany you in your daily business experiments.