Blindspots analysis

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Blindspots analysis (also blind spots analysis) is a method aimed at uncovering obsolete assumptions in a decision maker’s mental scheme of the environment.

The concept was first introduced by Barbara Tuchman, in her book, The March of Folly^[1], to describe political decisions and strategies which were clearly wrong in their assumptions. Michael Porter picked up on the theme and created the term blind spots as synonym with conventional wisdom which no longer holds true, but which still guides business strategy^[2].

The method for uncovering blind spots was first fully developed by Ben Gilad in his book, Business Blindspots^[3]. The method consists of three steps:

Step One: Conducting a Porter’s Industry Structure – aka 5 force analysis on a given industry or segment (market), augmented with identification of possible change drivers, which are defined as trends with the potential to have profound (structural) effect on the balance of power among the five forces^[4].

Step Two: Collecting competitive intelligence on the target company’s top executives assumptions regarding the same industry structure as in Step One. Sources may include annual reports' letters to shareholders, autobiographies, interviews in the press, public appearances and speeches, industry meetings, congressional testimonies, conference calls with security analysts (transcripts are publicly available), and all other statements regarding vision and beliefs. An alternative technique is known among competitive intelligence professionals as “strategy’s reverse engineering” which looks for the underlying assumptions which can rationalize existing strategy.

Step Three: Compare the results of Step Two with the analysis in Step One. Any contradiction with the analysis in Step One is a potential blindspot.

[edit] Assumptions underlying Blindspots analysis

Underlying Blindspots Analysis is an assumption about the inherent biases of decision making at the top of organizations (business or otherwise) exceeding those of their subodinates or outsiders. While top executives in business and government organizations are smart, capable people, they are also vulnerable to several decision biases that come with their powerful positions, from cognitive dissonance, motivated cognitions, to overconfidence and ego-involvement^[5]. The imparied ability of leaders to see reality for what it is, and the more objective (less ego-involved) analysis of analysts and mid level planners means that Step 3 of the Blindspots Analysis can be a powerful tool for pointing to potential blinders.

[edit] References

1. Tuchman, Barbara (1985). The March of Folly. NY: Ballantine Books (paperback edition).

2. Porter, Michael, E. (1980). Competitive Strategy. NY: Free Press.

3. Gilad, Ben (1998). Business Blindspots. UK: Infonortics. (First edition, Il: Irwin-Probus, 1994).

4. Gilad, Ben (2003). Early Warning. NY: AMACOM.

5. Colin Cramer, George Loewenstein and Drazen Prelec, “Neuroeconomics: How Neuroscience Can Inform Economics”, Journal of Economic Literature, XLIII (1), March 2005. pp. 9-64. In Maital, Shlomo (2007). Recent Developments in Behavioral Economics. UK: Edward Elgar.

6. Rosenzweig, Phil (2007). The Halo Effect. NY: Free Press.

7. Bossidy, Larry and Ram Charan (2004). Confronting Reality. NY: Crown Publishing.

8. “Optimism Puts Rose Colored Tint in Glasses of Top Execs.” USA Today, Friday, December 16, 2005, Money Section, p. B1.

9. Gilad, B. Business War Games (2008). NJ: Career Press, Ch. 3.

The main article for this category is Blindspots analysis.

Blindspots analysis is included in JEL classification codes: JEL:D41

See also Category:Competitions[[Category: Strategic management}}