Competitive strategy: building a mindset that reads data without bias, in order to prevail over competing brands

A competitive strategy is a strategy that lets a company read data in a way that makes it prevail, meaning more effective than its competitors. It therefore depends on how managers read data.

In a market that has evolved with the adoption of Artificial Intelligence (AI), it is necessary to check that strategies contain no bias (systematic distortions of judgement), and to reduce that risk as far as possible. Why? Because the risk is to confuse a clue with a proof.

This is why a good strategy often starts with an uncomfortable question:

What if the belief everyone shares is wrong?

For those who want to explore this uncomfortable question, I recommend Paul Arden’s book «Whatever You Think, Think the Opposite».

Innovation based on AI, and more generally the innovations of the second half of the 2020s, open large opportunities. At the same time they put decision makers under pressure. They produce a flow of data whose interpretation sometimes, and easily, falls into the trap of bias, haste and emotion.

In this article we deal in particular with confirmation bias, availability bias, anchoring and the bandwagon effect, which turn clues into false proof. A mindset for the age of AI is the subject of another article on this blog.

A telling case of hasty decisions: the redefinition of physical stores

The redefinition of physical stores (which boomed right after the pandemic) is a phenomenon that emerged with force during the fastest phases of digital acceleration, and above all after the lockdown. It was the heated debate on the future of physical stores.

Pushed by data on the boom of e-commerce and by lockdown trends, many decision makers, unfortunately, read those numbers with bias, as an unmistakable signal that customers were leaving traditional stores for good. This produced plans to downsize or close physical networks, imagining a purely digital future.

That reading ignored the complexity of buying behaviour and the need for an integrated customer experience. Soon after, many brands had to think again, because balance sheets never lie, and they had to rebuild what they had just dismantled: open new stores and regain know-how from new employees, since they had dismissed the previous ones, who had meanwhile moved elsewhere.

5 types of bias: identifying them avoids traps and wrong readings of data

There are five types of bias, cognitive and communicative, that help you avoid traps and wrong readings of data once you identify them. Every decision maker is exposed to these mechanisms, especially in a period of strong innovation such as the rise of AI:

1. Confirmation bias leads us to look for, and value, the data that confirm what we already believe.
2. Availability bias makes us overestimate the most recent or most easily available information.
3. Anchoring makes us rely too much on the first piece of information we receive, even when it is not the most relevant.
4. The bandwagon effect pushes us to follow a trend without a critical analysis of our own situation.
5. Communication bias, inside or outside the company, creates echo chambers (environments where you hear only opinions similar to your own) that reinforce partial readings.

When these biases are not recognised and managed, data that should be simple clues become «proof» for decisions driven by emotion or haste, and the clear strategic analysis disappears.

A strategic management mindset: from impulse to critical analysis

In my work alongside companies I analyse several points for a strategic mindset, and among them I mention three here:

• Analytical composure: examine data without being carried away by the emotion of the moment or by enthusiasm for a new technology such as AI.
• Separating trends: distinguish passing fashions from structural, lasting changes in the values and needs of your target.
• Understanding behaviour: behind every data point there is human behaviour. Here the approach of Martin Lindstrom in his book «Small Data: The Tiny Clues That Uncover Huge Trends» is useful: careful observation of qualitative and contextual clues is essential to read quantitative data correctly.

We address the other points together, on your own decisions, in the sessions of One-to-one Advisory & Decision Coaching.

Strategic consulting: an ally to recognise bias and build balanced scenarios

In this context of constant innovation and growing complexity of interpretation, strategic consulting becomes a valuable support.

In my individual coaching with decision makers, the first goal is to help them understand how to read data beyond the surface.

My work alongside decision makers does not consist in saying whether a choice is right or wrong. My role as a consultant is to train them to think about the possible scenarios that follow from that choice, analysing the potential consequences in the short, medium and long term.

Enrico Giubertoni

This process builds a mindset able to:

• Bring bias to light: an external consultant can more easily identify the cognitive and cultural biases that influence decisions.
• Encourage critical analysis: ask the right questions to support a deeper and less impulsive evaluation.
• Build multiple scenarios: explore different future developments based on different readings of the data and on possible changes in the context, including the effects of emerging technologies such as AI.
• Weigh decisions with data: provide a framework to evaluate strategic options on a solid understanding of their potential impact, instead of on fashionable assumptions.

This kind of support is essential to develop a competitive strategy that goes beyond reaction and positions the company for sustainable success.

Overcoming bias to build an effective competitive strategy: it can be done

In an age defined by exponential innovation such as AI, business leaders must read data with strategic clarity and see through the fog of cognitive and cultural bias.

The most resilient competitive strategies will come from the ability to separate real signals from noise, and to weigh the consequences of every action in the short, medium and long term.

The role of strategic consulting, as in the support I offer, is to provide the tools and the perspective this complex journey requires.

Helping decision makers build scenarios, recognise their own interpretive filters and decide on a deep understanding of the context is the key to turn today’s challenges into solid opportunities, and to define a competitive strategy that leads to real and sustainable success.

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References

• On the closure of physical stores after the pandemic, this article by Consumer Researcher.