“It Won’t Happen To Me”: Optimism Bias and Competitive Intelligence

I remember when my 16-year-old daughter got her driver’s license.  She took her lessons, practiced on the road, and passed the test.  Thrilled at her success and potential for independence, her demeanor about driving quickly changed.  The cautious girl behind the wheel that I gave lessons to only a few short weeks prior, suddenly, apparently, was granted knowledge of everything there is to know about safe driving.  “I don’t need to buy insurance because I won’t get in an accident!”  “I’m very careful so there’s nothing to worry about.”  Those of you with teenagers are probably familiar with this scenario.  All the warnings in the world about safe driving techniques and accidents couldn’t deter her. She had the “It won’t happen to me syndrome.”  Of course, several weeks later she got in her first fender-bender and was dumb-found on how it could have happened.

I was reminded of this story recently as I was having lunch with an old colleague.  He is a Senior Director of Competitive Intelligence at a large, publicly traded company.  He has done quite well there, building a reputation of really knowing about the competitors, and has earned a seat at the executive staff meetings.  For several months, my friend’s team had collected intelligence and built reports showing that a competitor was developing a new product and marketing strategy that would drastically alter the competitive playing field. The competitor developments essentially would nullify the current plans that my colleague’s company was working on. He presented the intelligence at meetings in the form of scenario analysis, competitor updates, and via other methods.  He had evidence to show the progress of the competitor’s events.  He had effective data showing the likely outcomes of the threat.

So what did his company do?  As anyone in the competitive intelligence field likely knows, the company did absolutely nothing.

Why?  Because the executive team took the “it won’t happen to me” approach.  This is simply basic human psychology.  When presented with a likely threat, it is much easier to say “I’m smart enough to prevent it from happening,” or “I’ll be able to avoid that situation.”  We do it every day, in and out of business.  It frequently is our default response to a threat.  There’s even a term associated with it: “Optimism Bias.

I hear the statement over and over again in the competitive intelligence field “My executives don’t listen to me!”  But that’s not quite right.  Your executives do listen to you.  They just choose to not act.  This is the comic flaw in the competitive industry: strategic competitive analysts spend their cycles doing research, producing reports, presenting evidence, and getting few results.

Don’t get me wrong—this doesn’t mean competitive efforts for strategic purposes is wasted.  There are countless examples of where competitive intelligence reports are very successful and executives do pay attention. It just means that it frequently is an uphill battle, and the competitive analyst should expect and plan for the optimism bias response.

So what –can- the competitive practitioner do? My suggestion is to ensure that your company has adequate competitive resources addressing sales. If not, then perhaps it would be an area better served with competitive efforts.  Sales tends to be a very willing consumer of competitive intelligence.  If it is done correctly, the competitive activities actually can help increase deal win rates and drive revenue for the company. In addition, it is an excellent area for competitive intelligence resources to get a real-world view of the competitive forces at work in their industries.  This real-world perspective adds to the analysis capabilities of the resource and builds more credibility for when the time comes to present strategic competitive reports to the executives.   With that little bit of extra backing, perhaps the executives can be encouraged to overcome their optimism bias.

Oh, and as for my daughter—after her third fender-bender, she now sees the value in having insurance.  Especially since she is now paying the bill for it.