The biggest cause of business failure: Ego

The way we protect our ego

Four in ten start-ups fail due to lack of customer demand and this is most common two to five years after founding.

The reason is most often a build-it-and-they-will-come mentality leading to lack of market research. The primary cause is cognitive dissonance.

This is the way we protect our ego from failure. We change the story to suit our purpose instead of changing behaviours to meet market realities. Everyone does it.

How we sleep at night

We make around 35,000 choices every day. Most are automatic emotional responses known as system one thinking. A much smaller number require careful consideration.

Has anyone ever asked how you sleep at night? The answer is the narrative we create to justify our decisions, whether good or bad.

We tell white lies when they result in a positive outcome. Cheaters on tests convince themselves of the good they’ll do with a qualification. Marc Andreessen justifies supernormal profits and an absence of government controls by the mass appeal of technology.

Most of us think we are of above average intelligence and morality. As such, it is easy to convince ourselves we are right and others wrong.

Cognitive dissonance in common business situations

Many companies conduct reviews when they lose a big deal. Most often this leads to a list of outside factors that made the customer’s choice inevitable and nothing is learned.

When people propose new ways of doing things, leaders offer lip service to change before concluding it’s too late to go back or we’ve always done it that way.

And a culture shift such as halving the number of meetings rarely lasts long before the familiar old ways creep back in.

I worked with an analytics company that spent millions of dollars over 18 months adapting its commercial consultancy business for the investment market. When the product did not take off the response was dissonance on three levels:

1. The customers don’t get it, but they will.

2. We can’t deliver the way the competition does due to a bad experience outsourcing.

3. We have invested too much to turn back.

How to Deal with Cognitive Dissonance

It’s easier to see faults in others and to address our bias we must put ourselves outside of the organisation. This is what being customer-first means.

Thereafter it’s necessary to address process bottlenecks and find a way to give customers what they want, how they want it. We cannot allow one voice to be a blocker, be it marketing, engineering or the boss.

Customers use dissonance when they say our product is nice-to-have and they can see how it works for others. I overcame this for the analytics company by:

1. Digging into the real customer pain.

2. Using co-creation to build with buyers.

3. Promoting referral programmes to boost emotional attachment to the product.

Final Thoughts

Cognitive dissonance is necessary for us to make thousands of decisions and sleep at night. But when ego gets in the way of business, remember to put the customer first.