Can overconfidence be a good thing?

No! Well, yes in a few specific scenarios.

The way overconfidence works is that top management teams will start by setting overambitious goals or target scenarios on a very weak data foundation. How is it possible, that highly professional leaders will be so daring, you ask? Well, the way our mind works, what we see, is all there is – we simply take the data that we have and if we are able to construct a meaningful story around that, then it becomes the full story. The irony is that the less data, the easier it is to construct that story. You can probably see the Nokia management team, going: “Iphone will be a niche product at best”.

So now we have an overambitious goal. Well, did Michelangelo not say, that it is better set too high goals and fall short, than too low and make it? Sure, but the problem with overconfidence is that as soon as the story and the goal is set, we will start looking for confirming data, forget the details and take immense risks to get there. I wonder if there is a connection to the high growth R&D budget in Apple these days.

What is needed here in general is a culture of discipline and diversity – asking the tough questions, bringing in alternative views, playing devils advocate and simply taking the analysis a step deeper. Now that can be tough on a day to day basis, but companies should at least secure the more critical processes such as strategy. A great tool here can be scenario planning, where you analyze megatrends and identify likely scenarios to broaden the thinking before closing it up with for example a Playing To Win process – a favorite combination of ours.

So overconfidence is something to overcome. But there are exceptions, where it can be used, when managed with care: If you are building a growth strategy, then taking an overconfident view on what can be achieved, can bring exciting ideas to the table – before once again taking a more realistic look at what can be implemented. This typically will take you much further, than if you start with what you have.

That thought can also be generalized into priming: If you set the parameter right, you can prime any behaviour or process to get more ambitious and end up with more powerful choices. For example we recently primed a client with a scenario, where they were beating their much larger competitor by a factor 6 – a number related to a McKinsey study showing how companies with strong debiased processes outperform their competitors. This set the ideas lose for dramatic results. Now we are bringing the process back to reality – but at a much higher ambition level than before. Nothing great was ever achieved without passion and ambition.

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