How did I lose!

At engage universe, we often hear stories where people have missed out on business, which they were convinced they would win.

These tales tend to go something like this:

The consultant or salesperson works in a market-leading organization, whose targets are facing important and common challenges, where they are likely to need outside help.  Their services and solutions successfully address these issues.

They had a useful initial discussion with senior executives focusing on these problems; followed a week later by a well-rehearsed presentation, supplemented by a detailed proposal document outlining the situation, and the major benefits of working with their firm.  They felt that they had more than demonstrated their professional expertise. 

A few days later, they received a short call from a director telling them that unfortunately they not been chosen.  The unsuccessful team was taken aback.  They later found out that a competitor had won the work, no doubt for a lower fee!

Your biases cloud your judgement 

The stories we tell ourselves, especially when we lose, prevent us learning from our mistakes.  Recognizing the biased stories we tell ourselves is the first step to managing our biases and learning from our mistakes. These cognitive biases result from systematic errors in the way people process information about themselves, others, and the outside world.  Cognitive biases have become influential in finance and behavioral economics over the past couple of decades and of the leading theorists researching their impact, psychologist Dr Daniel Kahneman of Princeton University, was awarded the Nobel Prize for Economic Sciences in 2002, for his work on for how these biases affect judgment and decision-making.

Useful in the past

Cognitive bias is the result of the mental shortcuts that our brain favors in order to make fast, focused decisions and conserve energy.  Imagine walking through waist-high scrubland to be then suddenly faced by a snarling tiger. You would act very quickly, and run as fast you could, with little thought of anything else; and in doing hopefully would survive for another day.

Survival aside, our bodies are also driven to be energy efficient.  Deep thinking takes energy.  Our brains prefer, when the option exists, to follow a familiar mental path because that involves less energy than creating new mental pathways.

A simple example.  As you read the numbers that follow here, calculate 3 x 2 + 4 = ?
The answer is easy and required minimal mental energy to compute.
Now calculate 7 x 8 – 16 x 5 = ?

How was the second calculation?  As easy as the first or more difficult?  Did your brain engage willingly, or did you feel some resistance?

Three common biases

In our opening scenario above, the team members have likely fallen prey to at least three common biases:

• Confirmation bias
• Curse of knowledge bias
• Self-serving bias

The narrow path – confirmation bias

When going to see the client, the team was aware of the challenges facing the industry.  This may have sub-consciously impacted the way they approached their conversations – focusing on these issues, as opposed to broader areas of interest and/or future opportunities – conversations which the prospective clients may have valued more.  This is an example of confirmation bias, which is the tendency to select or add extra weight to information that conforms to our beliefs or experience, and to play-down or ignore information that runs contrary to our beliefs and experience.  Focusing on these pre-identified challenges would lead the team down a narrow path, failing to gather a more complete picture of the client’s situation.  Despite being invited back to present at the next meeting, senior management may have felt that this presentation offered little longer of value.
“What the human being is best at doing, is interpreting all new information so that their prior conclusions remain intact.”
Warren Buffet

Arrogant and incomprehensible  – your knowledge is a curse

The advisors were convinced that they had presented effectively, and were surprised when they lost.  A second bias came into play – the ‘Curse of knowledge’.  This is a cognitive bias that occurs when an individual, communicating with others, unknowingly assumes that the others have the background to understand.  We know how our services solve their problems…and struggle to appreciate that they don’t have anything like our level of knowledge.  Often specialists use their own jargon, which they have picked up over the years, or make assumptions about the understanding of others.  This can leave people disengaged, and even confused.  While listening politely, these executives’ minds may have been focused elsewhere.
“Once we know something, we find it hard to imagine what it was like not to know it.  Our knowledge has “cursed” us.  And it becomes difficult for us to share our knowledge with others, because we can’t readily re-create our listener’s state of mind.”
Chip Heath, Made to STick: why some ideas survive and others die

It wasn’t me – self-service bias

When the team was told that they had lost the work, they blamed the fact that their price was too high.  However, while value for money is clearly important to people when deciding who to work with, price is seldom the deciding factor.  The reason advisors often blame price, ‘the great price lie’, could be that they are exhibiting a self-serving bias.  People use this bias to maintain their self-esteem: attributing positive outcomes and events, such as winning a proposal, to their own character, efforts and behavior; while attributing negative events to external factors, such as a competitor underbidding them, or more generally adverse business conditions.  This can prevent important lessons being learnt.  By undertaking a more honest and fuller review, you identify the real reasons and learning points that can be applied to this client and others.

Finally

Do you recognize any of these biases in the people you have worked with?
How about in yourself?

Well, one final bias to watch out for is the Bias Blind Spot.  This is the tendency to see the impact of biases on the judgement of others, while failing to see the impact of biases on one’s own judgment.  Most people appear to exhibit the Bias Blind Spot. In one study of 600 people in the United States, over 85% believed they were less biased than the average American, with only one person believing that they were more biased than the average American.

So perhaps, next time you miss out on an opportunity, consider carefully if your biases had any influence on the result.

Coming up

In our next article, we will look at the benefits of understanding your biases, as well as providing some practical advice on overcoming them to develop more rewarding relationships with your clients.