Both businesses and individuals have a natural tendency in difficult moments to adopt an optimism or pessimism bias. There are so many examples of IT investments, big infrastructure projects and other business initiatives that have failed to deliver the expected results or suffered huge cost overruns (think most new airports). Even big businesses can suffer from optimism bias and convince themselves that their project will succeed and underestimate the risk factors. In my personal experience, this is particularly true of IT projects. But I also remember attending the opening of a major new Nokia factory in Cluj Romania in 2008, which closed permanently at the end of 2011 because Nokia failed to spot the rise of the smartphone.
A pessimism bias is no better. With the current level of global uncertainty and with new issues arising daily, it is understandable perhaps that some businesses are pausing investment plans, seeking to minimise risk and ride out the current turbulence. However, while a pessimism bias may be a safer bet right now, it is a flawed business strategy. Companies that remain too risk-averse may miss out on new markets, technological advancements, or strategic partnerships that could strengthen their position. Projecting excessive caution risks damaging both customer and investor confidence. If stakeholders perceive a company as uncertain about its future, they may withdraw investments, reduce orders, or switch to competitors. That can turn into long-term competitive disadvantage as firms fail to adapt. In dynamic markets, adaptability and optimism can help fuel innovation, while excessive pessimism can lead to stagnation and decline.
In my view, companies should make a conscious effort to adopt a balanced approach. Among other things, this involves fostering diverse perspectives, implementing structured decision-making processes, and relying on data-driven and factual analysis. Group think is risky. Employees may say what they think the CEO wants to hear rather than the reality. As a leader, I always tried to recruit a deputy, who had the qualities i lacked. And cross-functional teams can help provide much need challenge. Good instincts are key to business success but they need to be backed up by historical data, forecasting models, market trends, and performance analytics. And, in a world of disinformation campaigns, it is vital to select information sources that are objective as possible. That is not always easy at a time when views are becoming increasingly polarised and influencers are often valued above experts.
Having a balanced, agile strategy is critical. And a key element of that strategy should be a plan for protecting your business, your intellectual property and your employees, because regardless of optimism or pessimism bias, we live in a world where cyber and other threats are growing. And both businesses and individuals are sadly increasingly at risk.
Author: Robin Barnett – Strategy and Business Intelligence Adviser
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