The bad news? The 2018 cherry harvest here in Massachusetts is nearing its conclusion. The good news? If you work for a startup it’s always cherry picking time!
I refer to Confirmation Bias, the tendency to look for, favor, interpret, and utilize information in a way that confirms one’s pre-existing beliefs or theories. Startups, so often founded on a strong belief in a particular product, service or market, are hotbeds for this bias.
Why? I offer the following examples as explanation:
Founders are the “true believers,” the spiritual guides of their startup teams. In many instances, these entrepreneurs leave lucrative jobs to chase their dreams. They have such faith in their judgement that they are inclined to dismiss anything that challenges their core tenets, be it: Investor feedback; test market results; or team member suggestions.
Classic Product Feedback Timeline
I most often notice confirmation bias when startups interpret consumer feedback. The timeline is well established. Friends, family and fellow team members have lavished praise on the initial lab samples or prototypes. “Everybody loves it.” Later, when the company must venture beyond these nurturing supporters, the comments are less-than-universally positive: “I don’t like the packaging.” “The subscription price is too expensive.” Frequently, these dissonant notes are dismissed as sampling errors, simply because they clash with previously held assumptions.
Most startups are cash strapped. Too few employees are asked to accomplish too much. There is neither the time nor the money to conduct extensive market research. The result? Outdated, publicly available data are deemed acceptable, seldom revisited or challenged.
Startup employees disrupt markets, not company cultures. In the face of contrary viewpoints, the optimism that caused them to join in the first place can inhibit change.
There comes a time when all startups must face reality. “Maybe those potential investors do have a point.” “All the test data do suggest that we change the pack size.” Too often, these realizations come too late. Confirmation bias need not be an absolute; it can kill a small startup simply by delaying critical decisions.
I can offer no fail-safe method of combating confirmation bias. It is a common cognitive weakness, a recognized human behavior. Startups are best protected by sound corporate governance, with strong boards of directors and access to business coaches/mentors. Absent such checks and balances, founders can be left with little more than . . . pits.
Mr. Dragone has spent the past twenty years as an acting/consulting CFO for a number of start-ups in a wide range of industries. Peter’s prior experience is that of a serial entrepreneur, managing various start-up and turnaround projects. He was a co-founder of Keurig, Inc.