Nobel laureate Daniel Kahneman, professor emeritus of Psychology at Princeton University, is widely regognised as the father of the field of research known as “cognitive biases”.
In 2010 his work reached a wider audience with his popular a TED talk “The riddle of experience vs. memory” which is well worth watching if you’ve not seen it before.
Essentially, Kahneman’s studies showed that when people and organisations need to make complex decisions they typically use “rules of thumb” rather than rational analysis. There’s even a list of decision making biases which runs from A-Z.
Now, in and of itself, this isn’t a bad thing.
It’s called “learning” and it’s something that we humans have got very good at.
However, when it comes to developing business strategy there’s a potential problem, sometimes referred to as a “cognitive trap”.
As Eric Ries points out in The Lean Startup, every strategy is based on assumptions and acting as if these assumptions are true is a leap of faith because “the success of the entire venture rests on them”.
This is why it’s important to sense-check your strategy with others and pull out any assumptions that are baked in. Examples can be anything from market size, who your competitors are or planned pricing points.
A good place to start is to ask “what needs to be true for this strategy to work”?
Start by challenging every aspect and find the elements that, if they are not true, then the whole strategy starts to unravel.
And, remember, unless it’s something that you can measure right now – it’s not a fact, it’s an opinion.