4 behavioural techniques to debias your decision-making in 2021
The shock of 2020’s pandemic has raised big questions for business leaders and entrepreneurs. Is now the moment to pivot, or not pivot? Do you stay the course and carry on with business-as-usual products and services, or should you make a quick lateral move to take a new opportunity, or even just survive?
It’s a high-stakes choice that many are facing right now , and while pivoting can protect businesses from being ruined by seismic global events, it isn’t always the right move for every company.
Take X24 Factory, a Berlin-based operator of online European home-furniture marketplaces. They’ve found greater value in staying the course and functioning as usual during Covid-19 as more people work from home.
But then take a look at Spotify, the global leader in music streaming. They’ve made big bucks by pivoting to offer original podcast content during the pandemic and signing up popular podcast host Joe Rogan.
So which is right for you? Well it’s not easy. We humans we have a whole host of biases that can play havoc on our decision making – from representative bias, to status quo bias, to availability bias and more.
Question is, how can you debias your decision-making processes when you’re making that crucial call on to pivot or not pivot in 2021?
Here are four things that can help.
1. Not succumbing to sunk-cost fallacy.
Entrepreneurs who have invested large amounts of time and resources into projects and business models can easily get too attached to their existing ways of working.
Even when the writing was on the wall for Blockbuster as digital streaming services started to emerge, they kept on with the dvds and the blu-rays – because they’d just invested so much into the model and it’d worked for so long.
The result? They’ve gone from 9,000 stores in 2004, to 2 (two!) stores today.
The lesson is that past performance is not an indicator of future performance. Look at the trends around your organisation as coldly and rationally as you can. Will what’s worked to date stand up to the uncertain, potentially office-less future we face? Consider alternative strategies with an open mind and make the most rational, non-sentimental call you can.
2. Remembering that not everyone is Bill Gates or Jeff Bezos.
Our availability heuristic means we rely heavily on the information that is readily available to us. So we read about the latest shifts that Microsoft have made to a SaaS model, or how Amazon successfully pivoted to making original tv shows, and they become the most mentally available case studies when we’re taking our own business decisions.
Only these stories are not the norm. They’re just the most salient to us because we see these brands every day. This availability heuristic combined with survivorship bias (our tendency to focus on a successful subgroup and believe it to be representative of the entire group) can mislead us into thinking that all companies that pivot are successful.
But we need to remember that not all company founders are as successful as Bill Gates or Jeff Bezos (a.k.a. the survivors). We should be mindful of the true success rate of pivots in the specific industry, sector and market before making radical changes ourselves.
3. Using premortems to avoid overconfidence.
Overconfidence bias is people’s tendency to overestimate their capabilities and not stay objective in times of crucial decision-making. This can be detrimental in two ways:
- If a business leader has disproportionate confidence in the current strategy, they might shun the dissenting voices and with them the possibility of a pivot.
- If an entrepreneur is overconfident about a radical pivot they might execute it recklessly, without considering all its possible ramifications.
One way to avoid any overconfidence is to run a prospective hindsight method called a ‘premortem’. In a premortem you imagine that your pivot has already occurred, and over the next 3-5 years it has spectacularly failed. It’s put the business is in the red, your culture has taken a hit, redundancies are looming, and your reputation is through the floor.
Once you visualise this scene, you and your team can examine all the reasons that could contribute to the failure of such a pivot, and start to plan ways around them. If you can’t, and disaster seems inevitable, the pivot isn’t viable. However if there is a rational route to success, perhaps it’s the right choice – and you now know how to avoid the pitfalls as you make it.
4. Fighting confirmation bias.
Confirmation bias is that phenomenon where you’ve already made up your mind about something, and now only listen to information that agrees with it – and you ignore everything that competes with it. If you follow politics even in the slightest, you’ll know this is not useful!
In decision-making, awareness of confirmation bias is crucial. Invite criticism and competing ideas from inside and outside the business to get new perspectives, and actively listen to them, even if they compete with your original ideas.
By working this way, you’ll avoid the tyranny of ‘groupthink’, where committees all agree with each other without thinking critically – often leading to calamity. But even better, the ideas that stem from external feedback will be based on the best thinking there is, not just the best thinking your business has.
It’s not easy to push back against your own nature as you consider new directions for your business. But there are ways to structure the environment around the decision-making process that allow you to take the most rational, balanced choices available, even when gut instinct might be leading you in another direction.
So listen to your gut, absolutely, but just remember: your gut is a fallible thing. And when you’re thinking of pivoting, it pays to debias your first instincts and the behaviours that stem from typical corporate culture, before you go ahead and push that big red button.