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Four cognitive biases that kill innovation

Last updated on 
July 14, 2020

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In our ever-changing digital world, it can be hard to stay ahead of the curve. Innovation is integral to success, and this relies on being able to adapt to the evolving digital landscape and put aside any biases. This is why adaptability quotient is one of the key predictors of success: individuals and companies alike must be able to see the bigger picture to constantly adapt their processes, tech infrastructure, ways of working and ways of thinking.

In practice, that means revisiting workflows, communication, company culture and approaches to problem solving, as well as adjusting to increasingly flexible and distributed work models. If you can’t adapt, you’ll get left behind. But in order to actually get there, we first have to scrutinize our deeply established behaviors and beliefs.

Left unchecked, the unconscious biases that drive our decision making can seriously harm innovation, outlook and creativity. Here are four of the biggest biases to watch out for and continually work to dismantle.

1. The competency trap

The competency trap occurs when a company’s entrenched knowledge ruins its ability to handle an ever evolving marketplace. A company is blinded by its prior success and past experiences and wants to stick with what they know, following a set way of doing something, without questioning it. This is also known as “cognitive rigidity”, where rigid processes hold a company back. Instead of changing with the times, the company digs its heels in and is unable to adapt – or even see that they’re holding themselves back.

“In order to be successful, a company has to develop efficient systems and processes,” says Warwick Business School’s Loizos Heracleous. “And over time, it leads to particular paradigms of what the organization’s identity and core business is and should be.” So, a company can feel reluctant to do anything that’s different, or to take a new risk. The competency trap can lead to blindness to new opportunities, and a failure for companies to capitalize on emerging trends.

2. Availability heuristic

Availability bias can also quickly kill innovation. It relates to our tendency to base our opinion on the information that’s most easily available to us, such as scientific studies and market research, while neglecting other factors. Often the most significant factors in problem solving and innovation are invisible – e.g. emotional ties and personal experiences – and so we don’t factor them into our decision-making process.

A perfect example of availability bias killing innovation is the New Coke case. Marketers at Coke performed extensive research for a new product and the results were very positive: testers preferred the new flavor of the drink and they were convinced the product would be a huge success. But it wasn’t, and there was actually a massive backlash against it. The reason was simple: the marketers had entirely overlooked the fact that many people felt emotionally connected to the “old” Coke. They simply didn’t want this new, unnecessary product; New Coke became known as one of the biggest marketing blunders ever and a perfect example of availability bias confusing opportunity and progress.

3. The sunk cost effect

The sunk cost effect relates to the tendency we have to feel reluctant to pull out of something if we’ve put effort into it. When we put time and effort into something and it gives us a return, we feel attached to what we’ve achieved, and even when the investment is no longer paying off, we don’t want to give up on it. One of the most common examples of this is when people continue to pump money into a business that’s making a loss. They dedicated so much to it that it can be painful to let go and admit defeat.

The sunk cost effect highlights how our past efforts impact our current choices – and this is a bias that can be pretty harmful in terms of making the right choices. One study showed that people were far more willing to forgo a better, more enjoyable opportunity in favor of a more expensive experience that wouldn’t give them half the amount of pleasure. In a sense, this shows how blinded we can be by money and cost, and how this bias can lead us to make bad decisions.

4. Psychological inertia bias

Psychological inertia is when people are reluctant to make changes, usually because they feel the perceived initial effort is too great. As the adaptability quota shows, those who can quickly adapt to a constantly changing digital landscape are best placed to stay ahead. But many companies put it off due to the perceived effort of researching and learning new tools, and their belief that prohibitively intense overhauls (e.g. for upgrading tech infrastructure) is just to big an ask.

Psychological inertia is very similar to the status-quo bias, where there's a tendency to want to maintain the default option, but the psychological inertia bias involves actually obstructing any new actions, rather than simply avoiding any changes that might be perceived as a loss. As a bias, psychological inertia can seriously limit innovation because it can lead to businesses becoming stagnant, being afraid to adapt because the initial price seems too high. Change is continually postponed and put off, causing companies to quickly gets left behind.

🧠 8 types of decision making bias

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