Blindspot Analysis In A Nutshell

A Blindspot Analysis is a means of unearthing incorrect or outdated assumptions that can harm decision-making in an organization. The term “blindspot analysis” was first coined by American economist Michael Porter. Porter argued that in business, outdated ideas or strategies had the potential to stifle modern ideas and prevent them from succeeding. Furthermore, decisions a business thought were made with care caused projects to fail because major factors had not been duly considered.

Blindspot Analysis	Description	Analysis	Implications	Applications	Examples
1. Identify Known Knowns (KK)	Blindspot Analysis begins by identifying the “Known Knowns” or aspects of a situation that are well-understood and recognized.	– List and describe the facts, information, or elements that are known and acknowledged by individuals or organizations involved. – Recognize the areas where there is clarity and certainty in the situation.	– Establishes a foundation of shared knowledge and understanding within the context of analysis. – Helps in acknowledging areas where information is clear and consensus exists.	– Identifying and documenting well-established market trends in a competitive analysis. – Recognizing widely accepted industry standards and regulations in a compliance assessment.	Known Knowns Example: Acknowledging the current market share and revenue figures for a product.
2. Identify Known Unknowns (KU)	Identify the “Known Unknowns” or elements that are recognized as gaps in knowledge or areas where uncertainty exists.	– List and describe the specific aspects or questions that are acknowledged as unknown but are considered manageable or solvable. – Recognize areas where further investigation or research is required to gain clarity.	– Acknowledges the limitations of current knowledge and understanding. – Highlights areas where focused efforts can be directed to gather more information or data.	– Identifying specific gaps in market research data that need further exploration. – Recognizing unanswered questions in a project planning context that require additional analysis.	Known Unknowns Example: Acknowledging that customer preferences for a new product feature are not yet fully understood.
3. Identify Unknown Unknowns (UU)	Identify the “Unknown Unknowns” or aspects that are not recognized or considered, representing hidden blindspots.	– Encourage brainstorming and open discussions to identify potential areas or factors that have not been previously recognized or considered. – Recognize the existence of hidden or unexpected blindspots that may impact the situation.	– Draws attention to areas that have not been explored or anticipated in the analysis. – Highlights the potential for unanticipated challenges or opportunities that may emerge from hidden blindspots.	– Conducting risk assessments to identify unforeseen risks that could impact a project. – Exploring market trends and customer behaviors that may not have been previously considered in strategic planning.	Unknown Unknowns Example: Realizing that emerging technologies in a specific industry could disrupt the market unexpectedly.
4. Perform Gap Analysis (GA)	Perform Gap Analysis to assess the discrepancies or gaps between the Known Knowns, Known Unknowns, and Unknown Unknowns.	– Compare and contrast the identified elements within each category (KK, KU, UU) to evaluate the extent of knowledge and understanding gaps. – Assess the potential impact of these gaps on decision-making and outcomes.	– Provides a structured evaluation of the overall knowledge landscape, highlighting areas of knowledge and awareness. – Offers insights into the potential risks and opportunities associated with existing gaps in information.	– Evaluating the knowledge gaps in a market research project to determine the scope of further investigation. – Assessing the potential consequences of unaddressed blindspots in a project’s risk management plan.	Gap Analysis Example: Comparing the extent of knowledge about competitors’ products (KK) with the unknown factors that could affect market dynamics (UU).
5. Develop Mitigation and Learning Strategies (MLS)	Develop strategies to address and mitigate the impact of blindspots, both known and unknown.	– Formulate plans and actions to fill knowledge gaps, reduce uncertainties, or monitor potential emerging factors. – Implement learning strategies to continuously improve awareness and understanding of the situation.	– Supports informed decision-making by proactively addressing blindspots and minimizing their potential negative consequences. – Facilitates ongoing learning and adaptation to evolving circumstances.	– Implementing market research initiatives to gather data on unknown customer preferences (KU). – Establishing early warning systems to monitor emerging trends and technologies (UU).	Mitigation Strategies Example: Creating a contingency plan for addressing unforeseen market disruptions (UU).
6. Monitor, Adapt, and Iterate (MAI)	Continuously monitor the situation, adapt strategies as needed, and iterate the Blindspot Analysis process over time.	– Regularly review the effectiveness of mitigation and learning strategies. – Adapt plans based on new information, changes in the landscape, or emerging factors. – Revisit the analysis to identify and address evolving blindspots.	– Supports agility and resilience in decision-making by staying responsive to changing circumstances. – Ensures ongoing awareness and adjustment to known and unknown blindspots.	– Monitoring market dynamics and customer behaviors to adapt marketing strategies (KK). – Iterating risk assessments to account for changing external factors (UU).	Monitoring and Adaptation Example: Adjusting product features based on customer feedback and emerging trends (KU).

Table of Contents

Understanding a Blindspot Analysis

The Blindspot Analysis starts with a question: how can a business identify these factors if they are, by all accounts, hidden?

The blindspot analysis is a systematic decision making evaluation process. While most decision-making frameworks favor rational and objective action, a blindspot analysis uncovers process flaws caused by bias or misinterpretation.

Blind spots typically manifest in 8 ways:

Invalid assumptions – such as corporate myths, corporate taboos, or other unchallenged assumptions.
Winner’s curse – or a belief that investment will always equal value.
Escalating commitment – when a company doubles down on a particular plan to its detriment.
Constrained perspective – where gains and losses are assessed individually, and not as part of a larger picture.
Over-confidence – encompassing confirmation bias, an illusion of control, or a belief that past performance is a predictor of future success.
Information filtering – where failure is not seen as a learning experience. This also occurs when a diverse range of opinions is not considered when making decisions.
Reasoning by analogy – or decisions based on a limited sample set or anecdotal evidence.
Groupthink or herd mentality – an effect where a group makes a safe and conservative decision that is sub-optimal.

How do blind spots occur in business?

Blind spots can only manifest in business in one of three ways, with management playing a key role in each:

Management is ignorant of strategically important issues.
Management is aware of strategically important issues but does not interpret them correctly.
Management is aware of the problem and how to address it correctly, but it is discovered too late. Any action, no matter how significant, is too late and ineffective.

Performing a Blindspot Analysis

Many businesses choose to simply run through the list of eight primary causes before making decisions.

For those who want a more methodical approach, however, psychologist and philosopher Benjamin Gilad developed a simple three step method.

Step 1

Look at a previous strategic decision from the organizational perspective. What was the context of the decision? How was the solution argued? Which factors played a primary role?

Businesses can use Porter’s Industry Structure (5 Force Analysis) to identify change drivers that have a structural effect on the five competitive forces. Is the company in question overlooking one or more important aspects?

Step 2

Look at an organization from the outside by researching publicly available information (preferably in a similar market or industry).

This so-called competitive intelligence can be found in interviews, speeches, public appearances, shareholder communications, and industry meetings. What inferences or assumptions do executives from these organizations make?

Step 3

In the final step, compare results. A potential blindspot occurs when the analysis of Step 1 is contradicted by the results of Step 2.

Examples of companies that were caught off-guard by markets’ blindspots

Blockbuster and Digital Streaming: Blockbuster failed to foresee the rise of digital streaming and online rentals, focusing instead on their brick-and-mortar rental model. This invalid assumption led to them missing an opportunity and ultimately being overshadowed by companies like Netflix.
Kodak and Digital Photography: Despite inventing the first digital camera, Kodak heavily invested in film technology. Their escalating commitment to traditional film and underestimation of digital photography’s potential led to their downfall in the camera market.
Blackberry’s Over-Confidence: At its peak, Blackberry was the leader in smartphone technology. However, due to over-confidence and confirmation bias, they failed to adapt to changing market demands quickly, leading to Apple and Android taking over the market.
Yahoo and Acquisitions: Yahoo had opportunities to acquire both Google and Facebook in their early days but passed on both opportunities. This winner’s curse, where they believed their current success would always translate to future value, cost them the chance to dominate the internet space.
Nokia and Smartphone Revolution: Nokia, once the world’s largest mobile phone manufacturer, had a constrained perspective. They were slow to adapt to the smartphone revolution, allowing competitors like Apple and Samsung to capture the market.
Groupthink at Enron: The Enron scandal is a classic example of groupthink, where the herd mentality and lack of diverse opinions led to unethical business practices, which ultimately resulted in the company’s collapse.
Sears and E-commerce: Sears, once a retail giant, failed to adapt to the rise of e-commerce and digital shopping platforms. Their invalid assumptions about the traditional retail model’s durability led to significant losses and eventual bankruptcy.
Car Manufacturers and Electric Cars: Many traditional car manufacturers were slow to invest in electric vehicle technology, allowing companies like Tesla to establish a significant market presence. This can be attributed to reasoning by analogy, where they relied on their past success with combustion engine vehicles.
Xerox and Personal Computing: Xerox developed the first graphical user interface, which is used in all modern computers today. However, due to information filtering and a lack of vision beyond their primary business of copiers, they failed to capitalize on this innovation.
HP and Tablet Market: HP’s TouchPad, launched to compete with Apple’s iPad, was discontinued after just seven weeks due to poor sales. Their over-confidence and failure to recognize the competitive landscape and consumer preferences led to this hasty withdrawal.
Toys “R” Us and E-Commerce: Toys “R” Us, once a toy retail giant, struggled with the rise of e-commerce. Their decision to partner with Amazon in the early 2000s instead of building their own online platform led to decreased brand visibility and reliance on a competitor.
Borders and Digital Books: While competitors like Barnes & Noble were developing e-readers and digital book platforms, Borders was slow to adapt to the digital revolution. Their inability to anticipate the shift from physical to digital books contributed to their bankruptcy.
Motorola and Smartphones: Motorola was once a leader in the mobile phone market with its Razr model. However, they were slow to shift to smartphones, and when they did, they couldn’t compete with the likes of Apple and Samsung.
Yahoo’s Diversification: Yahoo’s attempt to diversify its services led to a dilution of its brand and confusion among its user base. Instead of focusing on core strengths, they ventured into numerous areas without a clear strategy.
Netscape vs. Internet Explorer: Netscape, once the dominant web browser, failed to anticipate Microsoft’s aggressive strategy with Internet Explorer. Microsoft bundled IE with Windows, causing Netscape’s market share to plummet.
RadioShack’s Outdated Model: RadioShack stuck too long to its outdated business model, focusing on selling electronic components and accessories when the market was moving towards complete consumer electronics and online shopping.
Polaroid’s Digital Delay: Polaroid, a giant in instant photography, was slow to transition to digital photography. Their commitment to analog and delay in embracing digital technology led to bankruptcy.
Circuit City’s Customer Experience: Circuit City, once a top electronics retailer, made decisions that impacted customer trust, like firing their top salespeople to cut costs. They also failed to adapt to the changing retail landscape dominated by Best Buy and online retailers.
Myspace vs. Facebook: Myspace, the early social media giant, suffered from a cluttered interface and frequent changes that annoyed users. While they focused on music and customizability, Facebook offered a cleaner, more consistent user experience, ultimately overtaking Myspace.
Compaq’s Competitive Misjudgment: Compaq, a leading PC manufacturer in the 90s, was acquired by HP in 2002. They failed to anticipate the rise of Dell, which sold directly to consumers, and couldn’t adjust their business model in time.

Case Studies

1. Blockbuster and the Rise of Digital Streaming:

Step 1: Blockbuster was a leader in video rental services with physical stores. They believed in their brick-and-mortar rental model and invested heavily in it, seeing it as the primary way people wanted to rent movies.

Step 2: Looking at the broader industry, companies like Netflix were starting to offer online rentals. Signals from technology firms and consumer behavior suggested a growing preference for digital consumption of media.

Step 3: Comparing the two perspectives, it’s evident that while Blockbuster focused on physical rentals, the industry was moving towards digital. This blind spot resulted in them being overshadowed by companies like Netflix.

2. Nokia’s Smartphone Adaptation:

Step 1: Nokia, during its dominant era, focused on producing a wide range of mobile phones catering to all market segments. They believed in their hardware and the Symbian OS.

Step 2: Apple’s iPhone and later Android phones highlighted the industry’s shift towards smartphones with powerful OS capabilities, vast app ecosystems, and high-speed internet.

Step 3: The comparison reveals Nokia’s blind spot: not recognizing the importance of a robust OS and app ecosystem, which competitors were capitalizing on.

3. Toys “R” Us and E-commerce:

Step 1: Toys “R” Us focused on in-store experiences, believing that people preferred to buy toys after physical inspection. They entered a partnership with Amazon for online sales instead of building their e-commerce platform.

Step 2: Retail giants like Amazon and Walmart were heavily investing in their e-commerce platforms, indicating a significant shift in consumer shopping preferences towards online.

Step 3: The disparity between Toys “R” Us’s reliance on physical stores and the industry’s move towards e-commerce was a significant blind spot, contributing to the company’s struggles.

4. Kodak’s Digital Photography Delay:

Step 1: Kodak, a leader in film photography, believed in the continued dominance of film even after inventing the digital camera. They saw digital as a niche market.

Step 2: The broader photography industry showed rising interest in digital cameras due to their convenience, immediate results, and the growing personal computer market.

Step 3: Kodak’s focus on film and underestimation of digital’s potential, in contrast to the industry trend, was a major blind spot, leading to significant market share loss.

5. Blackberry’s Over-Reliance on Physical Keyboards:

Step 1: Blackberry believed its physical keyboard was a unique selling point, emphasizing security and email capabilities for business professionals.

Step 2: The emergence of touchscreen smartphones with vast app ecosystems indicated a broader industry trend towards versatile devices catering to both business and personal use.

Step 3: Comparing Blackberry’s commitment to physical keyboards with the industry’s shift towards touchscreens reveals Blackberry’s blind spot, contributing to its market decline.

Key takeaways:

The Blindspot Analysis helps businesses identify flaws in decision making and, in the process, improve strategic thinking.
The Blindspot Analysis is a systematic process that considers eight primary causes of blind spots in biased decision making.
Performing a Blindspot Analysis involves comparing the competitive drivers of change with the external processes of a company in a similar industry. Any contradiction in results represents a potential blind spot that must be investigated.

Key Highlights:

Blindspot Analysis: A method to uncover incorrect or outdated assumptions that can hinder decision-making in an organization, first introduced by economist Michael Porter.
Objective: The analysis aims to identify hidden factors that may affect decision-making, leading to flawed processes caused by bias or misinterpretation.
Blindspot Manifestations: Blind spots can manifest in several ways, including invalid assumptions, winner’s curse, escalating commitment, constrained perspective, over-confidence, information filtering, reasoning by analogy, and groupthink.
Management’s Role: Blind spots can occur in three ways with management involvement: ignorance of strategic issues, incorrect interpretation of important issues, or discovering problems too late for effective action.
Performing a Blindspot Analysis: Businesses can use a methodical three-step approach:
1. Examine a previous strategic decision from the organization’s perspective, considering context, arguments, and primary factors.
2. Research publicly available information about similar organizations or industries to gather competitive intelligence.
3. Compare the results of Steps 1 and 2; potential blind spots are indicated when there are contradictions.
Importance of Blindspot Analysis: The analysis helps businesses improve strategic thinking by identifying flaws in decision-making processes and assumptions. It supports informed and objective decision-making.