blindspot-analysis

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A Blindspot Analysis is a means of unearthing incorrect or outdated assumptions that can harm decision making in an organization.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 Porter argued that in business, outdated ideas or strategies had the potential to stifle modern ideas and prevent them from succeeding.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.

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:

  1. Invalid assumptions – such as corporate myths, corporate taboos, or other unchallenged assumptions.
  2. Winner’s curse – or a belief that investment will always equal value.
  3. Escalating commitment – when a company doubles down on a particular plan to its detriment. 
  4. Constrained perspective – where gains and losses are assessed individually, and not as part of a larger picture.
  5. Over-confidence – encompassing confirmation bias, an illusion of control, or a belief that past performance is a predictor of future success.
  6. 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.
  7. Reasoning by analogy – or decisions based on a limited sample set or anecdotal evidence.
  8. 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:

  1. Management is ignorant of strategically important issues.
  2. Management is aware of strategically important issues but does not interpret them correctly.
  3. 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. 

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.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"