Matter over mind: How competitor benchmarking defeats cognitive biases

The speed of modern business has turned leaders into ‘decision machines’ who are under constant pressure to make the right calls rapidly, time and time again. However, against a stream of incomplete information, uncertain forecasts and evolving market dynamics, leaders may rely on feel to keep pace with the ceaseless need for direction from across their organisation. 

While personal intuition is often praised as a superpower in business, science suggests otherwise. The human brain, even at its most rational, is susceptible to cognitive biases – systematic errors in thinking that can lead to flawed judgments and misguided strategies. How best to override the natural urge to follow your gut? 

Competitive benchmarking is a good place to start, as it provides a powerful tool to overcome cognitive biases, ensuring leaders maintain a clear, objective view of the competitive landscape.  

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Recognising the signs of cognitive biases

The truth is that even the most experienced leaders are affected by cognitive biases. And they are totally normal and natural. It’s the way our minds function. So, rather than a weakness, they should be seen as a source of competitive advantage. In other words; by navigating biases better than your rivals, you will steal a march. 

Biases are most pronounced when assessing the qualities and failings of competitors, which then result in poor strategic choices. Here are four typical misreads that can lead to costly missteps. 

1. Observability to Vividness: Leaders may overemphasise highly visible competitor strategies while underestimating less apparent but equally important factors. A typical stumble is for leaders to focus on portfolio and price information, as that is what they see in the market, but then miss the less obvious warning signs (e.g. job postings ) that signal bigger strategic shifts such as that their competitor was about to launch in a new sector.
2. Authority Bias:  Leaders may unconsciously give undue weight to opinions or data from authoritative sources without proper scrutiny. For example, they might seize upon an industry report from their preferred publication or pundit, even though internal data points to different customer preferences. Their judgment is swayed, despite the external report’s lag in data and trends, or overgeneralisation across markets.
3. Causal Similarity:  In this scenario, leaders can readily assume that similar circumstances will yield the same outcomes across different competitors. Let’s say a rise in supplier costs impact the profitability of their business. It’s tempting to predict that competitors will endure an equal shortfall. However, one player may have greater scale to negotiate better prices while another can lean on a more geographically diverse portfolio of suppliers, where costs have in fact fallen. Assumption is the enemy of fact. 
4. Availability and Anchoring:  Finally, leaders may overestimate the likelihood of events based on the ease with which examples come to mind, such as a competitor's past success. For example, a viral marketing campaign from two years ago is now outdated, but it still influences current decision making. Likewise, an opinion of a competitor can become anchored by a first impression – which then governs all future choices. (If you find yourself thinking that such-and-such always acts in a certain way, then it’s worth revisiting your bias.)

Overcoming biases: competitive benchmarking to the rescue

Competitor benchmarking allows your business to systematically rate the performance, processes and strategies against those of your rivals. As mentioned above, leaders are often forced to make quick decisions – that are critical to the success of the company – using assumptions or incomplete information. The insights from competitive benchmarking are based on sound data, allowing CEOs to ground decisions in reality, rather than intuition.   

Here are some proven techniques to counteract cognitive biases:

A.  Stay objective and fact check 

By taking a panoramic view and collecting a wide range of data points – not just the most visible or vivid ones – leaders are more likely to ensure that all relevant factors are evaluated. If it’s too easy to second guess rivals, you’re maybe not trying hard enough. 

Outdated perceptions and old news will eventually prove misleading as the landscape continues to shift. Regular competitor benchmarking gives a snapshot of market realities right now, giving a greater chance of accurate decision making.

B.  Go beyond the obvious

Benchmarking provides a due diligence tool by forcing leaders to seek out a deeper understanding of the multifaceted reasons behind competitive outcomes. Rather than cherry pick the most easily accessible information to gauge a competitor’s success or failure, you must dig down to scrutinise performance across a wider range of factors. 

C.  Weigh up the probabilities

Competitor benchmarking encourages leaders to look beyond first impressions and instinctive impulses. Armed with the facts (not the feel), you can assess different competitive scenarios with a greater degree of accuracy.

D. Look outside the bubble 

Rather than mirror imaging their own business procedures and behaviours onto competitors, benchmarking ensures that leaders consider the strategies and actions of others. By regularly updating your benchmarks, you will stay aware of competitors’ innovations and changes, countering the bias of favouring the status quo. 

A 4-step checklist for better competitive benchmarking

Follow these four practical steps to harness the full power of competitor benchmarking in mitigating cognitive biases:

1. Have a clear burning platform: Identify the specific objectives or insights you want to achieve from benchmarking. Don’t just see where it takes you. 
2. Look in the right places: Carefully select those competitors that will provide information in the behaviours and processes most relevant to your own business.  (These could be companies outside your traditional sphere – and even beyond your sector.)
3. Mix up the data sources: You want to include a stretch of both quantitative (market share, ESG metrics, financial performance etc) and qualitative data (customer surveys, innovation culture, ex-employees etc) to paint a fuller picture.
4. Benchmarking never stops: The longer the gap between benchmarking, the more likely that new biases will crystalise. Conversely, regular updates will allow you to stay on top of what your competitors and the market is up to.

A potent weapon for bias busting

There’s a temptation to see competitor benchmarking as simply a comparison tool. How do we measure up against our rivals? While useful, such a mindset limits the power of benchmarking to eradicate the cognitive biases that could already be weakening your decision making. 

Our brains naturally look for quick links and simple causal explanations – but these can prove too easy to be true. Competitive benchmarking, with its objective fact finding and regular updates, provides due diligence for strategic decision making. It keeps your brain honest. 

Your competitors will employ different behaviours and processes that are inferior and superior to your own. As such, benchmarking is a useful exercise in self-assessment and self-improvement too. This proactive approach ensures that a company is always prepared to adapt to new market dynamics.

Above all, in a business environment like today, when speed of thought and clarity of mind are a competitive advantage, benchmarking does more than help you keep pace. Yours is the business that sets it.