Transformation is no easy task. Though we like to think of ourselves as rational creatures, we are far from it (economics be damned). Nowhere is this irrationality more obvious than in the start-up world. Personalities clash, large amounts of capital are exchanged, political grandstanding clouds founders’ judgement… And the reasons for all this are most often unconscious.
This is often where consultants such as myself come in, to provide objectivity where it is most needed. This entails being aware of the classical innovation-linked biases and mental pitfalls. Having studied innovation for many years, I’ve been lucky enough to assist various executives and founders in avoiding these traps. With this in mind, below are 10 biases which I regularly warn my friends and clients about. Rest assured that there are many more out there, and that keeping an eye out for these in no way guarantees success. It is nevertheless a great place to start.
1. Anchoring Bias
“The latest iPhone’s screen is 6.1 inches. Ours shouldn’t be smaller than 6 inches.”
What is it?
The anchoring concept highlights the difficulty of fully ignoring the first information given when making a decision. Let’s take a simple example: you want to buy a car. The salesperson shows you a first option that costs €50K. That’s too expensive for you. Being a bit sleazy, the seller then shows you a car he’d be willing to sell for €20K, but asks for $25K. Since you clearly remember a car being twice as expensive, the new offer seems relatively cheap, and you buy the car, theoretically losing 5K in the process. Whatever the setting, the information you gather first will heavily influence the full range you’re able to think about.
When it comes to innovation, the anchoring effect is first and foremost a drag on the imagination; after a competitor comes up with a great initial offer, it is often difficult for an industry to drastically drift from it. This may work well for a few years (Samsung and Disney+ are doing pretty OK), but is not how disruptors should see the world. Change happens slowly, then suddenly; if you’ve been anchored to one way of doing things for a while, it may already be too late.
How can you overcome it?
Firstly, it’s important to acknowledge that your mind may be subject to such a bias. It is, and there are enough studies out there showing that no one escapes it. This applies to all the biases explored in this article.
What I generally do to circumvent anchoring bias is make my clients write their 10 best innovation ideas in a notebook. We then bin those, and write 10 more. At that point, they’re pretty upset. Even more when we bin these ideas, too. The frustration is worth it : the 21st idea is usually one that few have ever had, far from any previous innovation anchors.
Anchoring Bias’ brothers and sisters
Focalism
Common source bias
Conservatism bias
Functional fixedness
Law of the instrument
2. Risk Compensation / Peltzman Effect
“What’s the worse that could happen? I’ve got enough savings if the product launch fails.”
What is it?
The Peltzman effect refers to the tendency to take greater risks when perceived safety increases. This applies to all facets of life, from driving faster when wearing a seatbelt to washing your hands less regularly after receiving the COVID vaccine. Fun fact : risk compensation has led skydiving fatalities to remain stable even as gear has made giant leaps in safety.
In the world of entrepreneurship, this means that the safer you become personally, the more risks you will be willing to take, in an almost mathematical way. This may mean taking risks by over-innovating (if such a thing exists)… or by under-innovating and rest on your laurels as you’ll be well-off either way. In the business world, to do nothing is to take a risk. Sure, shareholders and employees may suffer as a consequence, but… who cares about them, right?
How can you overcome it?
That one’s easy : proportionally increase the costs of failure as safety increases. This is easy to do in large companies : boards usually correlate CEO salaries to company performance. For smaller start-ups, it means sharing the means of safety with employees so that failure impacts the top of the ladder more, and the bottom less. The whole organisation will then be willing to take more risk, without those risks becoming disproportionate, and innovation will thrive within the company.
3. Framing Effect
“This dude made a great presentation. Those slides looked great. Let’s invest.”
What is it?
You’ll be victim of the framing effect if you draw different conclusions from the same information, depending on how that information is presented. And you will, because that’s how the brain works. This is what happened to venture capitalists who were duped by the likes of Adam Neuman of WeWork and Elizabeth Holmes of Theranos. These con artists gave over-the top presentations, using all the right buzzwords and presenting their numbers in imaginative ways (wtf is Community Adjusted EBITDA, anyway?)… and VCs ate it up, continuing to invest well after the gangrene started to spread. Meanwhile, countless women and non-white founders are sidelined by an industry that values style over substance. It may not seem like it, but the framing effect is probably the worst offender in this list when it comes to constraining innovation. It’s easy to prioritise what is presented in a great slide-show, while ignoring a fantastic money-making opportunity because it comes from a boring-looking Excel file.
How can you overcome it?
I usually ask for the raw data behind key presentations, and try to ensure that when 2 options are given, they are compared through the exact same lens, using the exact same numbers. This takes more work, but allows for a more virtuous innovation process, wherein having great hair or wearing turtle-necks is not part of the decision-making process.
Framing Effect’s brothers and sisters
Contrast effect
Decoy effect
Default effect
Denomination effect
Distinction bias
4. Non-Adaptive Choice Switching
“We tried to launch a self-service option 3 years ago and it didn’t work. Let’s not spend any more time and energy on it.”
What is it?
After experiencing a bad outcome from having made a decision, we have a tendency to avoid said decision when faced with another problem, even though it was the optimal choice at the time. This is also known as the “once bitten, twice shy” or “hot stove” effect. For example, let’s say you tried to sell a product on Amazon, and that the product did very poorly. When you launch a new product, you might be less inclined to sell it on the platform, even though it was, and is, the best solution for both these products.
Innovation is hard work. You’re sometimes too early, sometimes too late with a launch. Sometimes you might even make all the right choices and still lose. That’s life. It does not mean that once an idea fails, it needs to be fully disregarded.
How can you overcome it?
This is the part of the article when I start being redundant. To avoid non-adaptative choice-switching bias, you should 1) acknowledge that you may very well be subject to that bias, and 2) make sure you get your hands on the data necessary to make an objective choice. Though nothing truly ever exists in a vacuum, it’s important to imagine making decisions about innovation untethered from the past.
5. Ingroup Bias
“The other founders at my weekly poker game said this was a great idea, so we’re implementing it.”
What is it?
You know it, you hate it. Ingroup bias refers to people’s tendency to give preferential treatment to others they perceive to be members of their own groups. That group may be defined in different ways : members of their own company, of their own industry, of their own national culture… Whatever the definition of an ingroup, it’s likely that you’ve already been more friendly to an idea that came from someone with a similar background, and acted more negatively to that of someone whose life story had fewer similarities with yours.
Either way, it’s not a good look. There’s a power in having ideas from a wide range of sources, and diversity makes us stronger. By innovating a product or a service using recommendations coming from a wide variety of sources, it’s likely you’ll be able to appeal to a larger audience, and reduce potential blind spots throughout the implementation process.
How can you overcome it?
This bias is one of the most difficult to overcome. What can I say, we just like people who look and smell like us. One way to overcome this is by keeping some sort of a mental quota (writing it down is problematic), and make sure you hear innovative ideas from all kind of people, not just people who are similar to you, be that economically, socially, or culturally. Forcing yourself to include an outgroup may be painful at first, but your brain will quickly adapt, and your company will thrive as a result.
Ingroup Bias’ brothers and sisters
Not invented here bias
Outgroup homogeneity bias
6. Empathy Gap
“Objectively, this new feature would be great for our customers.”
What is it?
We all think we’re great at controlling our feelings. We’re not. We just think we are because we know just how much we don’t let out, and that seems like plenty. But we still express more than we should, mostly unknowingly. This concept is called the Empathy Gap bias, which explains our tendency to underestimate the influence or strength of feelings, in either oneself or others.
When it comes to inventing or improving a new product or service, that means we’re likely to get attached to an idea, and favour it over others. You might thus hold onto an idea much, much longer than you need to, or hold a grudge when it is not prioritised. This also applies to how you view other people’s ideas : someone who insists on a solution to a problem may not be doing it because they believe it is the right choice, but because they came up with the idea.
How can you overcome it?
Firstly, it’s important to realise that it’s sometimes better to just give up and “kill your darlings” before they kill your company. Culling projects you’re fond of may hurt, but can be turned into a super-power as you’ll see yourself making increasingly good decisions. Secondly, always make sure you take a few days to make an important decision, as this will reduce the affect effect on your brain. If you don’t have a few days, at least take a few good deep breaths, it sometimes works just as well.
7. Confirmation Bias
“We did loads of simulations. Most of them showed there’s no problem”.
What is it?
Suffering from Confirmation Bias means searching for, interpreting, focusing on and remembering information in a way that confirms your preconceptions. You’ll see it a lot with conspiracy theorists, who will Google “Negative effects of vaccines” and scroll to the 10th search page to find something to validate their shameful ideas. The same can be said for racist and sexist ideologies, making them more venomous over time.
For better or for worse, not all confirmation bias is so obvious. If you truly believe that a service you launched is best targeted at men between the age of 25 and 35, it’s likely you will concentrate on their behaviour and uncover patterns that match what you expect to find. But you might then miss other customer personas that could be worth much more in the process. Being open to being surprised and made uncomfortable is a super-power when it comes to innovation.
How can you overcome it?
After a certain age your brain fights new information, because changing a belief system is exhausting. But if you ever wish to become a great entrepreneur, you might want to get used to being exhausted. Ask questions, keep new information channels open, meet new people, get uncomfortable. I consistently read newsletters I dislike because knowing and understanding what a large part of the population believes is a super-power in business.
Confirmation Bias’ brothers and sisters
Backfire effect
Congruence bias
Continued influence effect
Observer-expectancy effect
Selective perception
Semmelweis reflex
8. Prevention Bias
“If we keep adding new features, the customers won’t want to switch to a competitor.”
What is it?
When investing money to protect against certain risks, decision makers tend to think that money spent on prevention buys more security than a dollar spent on timely detection and response, even when investing in either option is equally effective. Let’s say you fear cyber-attacks; if you suffer from prevention bias, you might try to spend a LOT of money on making sure an attack does not occur. It could however be just as effective, if not more, to concentrate on detection, response and recovery. If all your budget goes in preventing, what will happen if an attack does happen, despite all the steps put in place to avoid it? Similarly, a lot of companies have a tendency to continuously improve their product to prevent them from being over-taken by competition. It is however often more useful to prepare new products that may respond to a paradigm shift in the market, and launch them when the time is right.
How can you overcome it?
Prevention is useful, I’m not arguing otherwise. But it’s also good to have a continuous improvement mindset on all aspect of your business. That means looking at continuously staying ahead of the existing competition, while also staying ahead of future competition, while also creating things that present and future competition won’t see coming. Sounds difficult? Welcome to the party, pal.
9. Plan continuation bias
“We’ve invested $20M in R&D, we can’t give up now.”
What is it?
Has this ever happened to you? You start a new yearlong project, and dedicate your heart and soul it. 8 months in, you see new data that points to a customer trend that might make your project less effective when it goes live. But you’ve invested so much energy and time that you and your team forge ahead. And at the end of the year… the project is a complete failure. That’s a good example of plan continuation bias : the failure to recognize that the original plan of action is no longer appropriate for a changing situation or for a situation that is different than anticipated.
When the foundations are bad, the best you can often do is give up. And that applies to innovation. By abandoning projects that are no longer relevant, you can invest time and resources towards something more effective. Continuing ahead to try and salvage something useful from a zombie project is often a fool’s errand. Start clean; it’s often gut-wrenching, but that’s showbiz, baby.
How can you overcome it?
Let the past die. Kill it if you have to. In entrepreneurship, the only thing that matters is present data, and the riches it might unlock. As mentioned above, letting go of personal hang-ups is a super-power. As is remembering the bigger picture when the chips are down.
Plan Continuation Bias’ brothers and sisters (logical fallacies)
Berkson’s paradox
Gambler’s fallacy
Hot-hand fallacy
Illicit transference
Irrational escalation or Escalation of commitment
Subadditivity effect
Time-saving bias
Zero-sum bias
10. Pro-Innovation Bias
“We’re going to disrupt the entire banking industry with our AI solution!”
What is it?
We live in a world where everyone prays to the altar of innovation and disruption. Hell, we all but turned the likes of Elon Musk and Steve Jobs into modern-day messiahs despite their many, many flaws. The pro-innovation bias reflects this by describing a tendency to have an excessive optimism towards an invention or innovation’s usefulness throughout society, while often failing to identify its limitations and weaknesses.
But how does this stop innovation, you might ask? Well, because by always wanting to come up with new ways of doing things, one might drown great proposals in a sea of mediocre ones. Take NFTs for example — it’s a fantastic tool to link the purchase of digital products and experiences to real-world assets. But because everyone and their uncle is busy making dumb PNGs and saying they will revolutionise finance and art, it’s made a whole lot of people sceptical, setting back very real potential implementations.
How can you overcome it?
Sometimes, the best way to innovate is … not to innovate. Waiting it out and not making a big deal every time a cool little feature comes out will make the real, big announcements much more impactful.
Being an entrepreneur is a difficult job. It requires grit, blood, sweat and tears (unless daddy bought everything, as is too often the case). It’s even more difficult when you realise that you’re not just fighting the outside world, but also your own brain.
There are dozens, if not hundreds of biases we’re all subject to. Overcoming them is easy: recognise that you are human and flawed, and try to find as much objectivity as possible in a world that will do everything to provide none.
Good luck out there.
This article was originally written for Honeypot.io, Europe’s developer-focused job platform..
