One of the reasons for the spread of bias which then affects decision making is the dominance of the insider views. While estimating the success or failure and the financial implications of any project, team leaders and strategists tend to take in the data of only those factors within their control, while promptly ignoring extraneous factors beyond control. To get the ‘outside view’, one has to start by building reference classes. The purpose of this is to minimize the occurrences of surprises once the project hits the ground running. A good example of the inability to build such reference classes is with EMI’s foray in to the CT scanner. Since they only took in the internal view, which was all hunky-dory, by the time the product was launched, there were several competitors who had already launched theirs. This business intelligence needs to be collected on the market and competitors to develop a better market strategy. And contrary to popular perception, the time needed to build these reference classes isn’t so much.

Source:https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/bias-busters-taking-the-outside-view

Uploaded Date:13 November 2018