In modern businesses, we tend to respect quick, confident decision-making. We like to think of our leaders as stalwart captains, navigating change with steadfast conviction. But in today’s dynamic environment, data, feedback and market trends can easily throw us off course, challenging long-held beliefs and generating complex reactions.
The resulting tension is known as cognitive dissonance. It’s that sensation of discomfort, angst, guilt or shame associated with the decisions we’re making. While often seen as an individual psychological phenomenon, its impact is actually much wider; it has become a pressing concern for businesses that can profoundly affect organisational results. It’s an increasingly challenging problem, and one that leaders need to tackle sooner rather than later if their organisations are to survive this period of intense unpredictability.
What is cognitive dissonance in the business world?
It’s easy to find examples of cognitive dissonance in our everyday lives. Even a casual act like picking up a glass of wine or a bottle of beer can invoke unease as we simultaneously enjoy an alcoholic drink while ignoring its recognised dangers.
But what might cognitive dissonance look like in a working environment? It could be something as simple as enforcing a minor administrative rule while privately questioning its validity. Or it could involve more serious decisions, such as authorising the release of a product you don’t believe is ready, approving a press release you suspect might be untruthful or signing off on a new hire you have reservations about.
The danger of fostering a “state of denial”
Consciously suppressing new information that contradicts your beliefs is one way cognitive dissonance can play out, Dr. Ashwini Nadkarni told Forbes recently. This leads to living in a “state of denial”, or burying one’s head in the sand, as the old adage goes.
This isn’t hard to imagine in real life. Take, for example, a tech company that invested heavily in an exciting new product backed by extensive research and development. Leadership are confident that its launch will be successful, but when the product is released, the reception is lukewarm — the market clearly doesn’t see it as the game-changer it was anticipated to be.
The company would usually face two options here: go back to the drawing board or double down on its marketing strategy, pumping more money into advertising, blaming external conditions, or even questioning the validity of the feedback. By choosing the latter, they may be putting good money after bad. Such reactions, fuelled by cognitive dissonance, can provide an existential threat to a company’s future.
Recent history is filled with examples of this, from Blockbuster to Blackberry. Most of us will remember Yahoo as one of the most popular websites of the early 2000s. It was focused primarily on email and traditional news media, undervaluing search, social networking and mobile devices until it was too late. They even famously passed on buying Google for $1m.
The upshot? Google became a trillion-dollar company while Yahoo’s value plummeted from $175bn to $5bn. Their singular focus on established services while ignoring major market trends could be seen as an example of cognitive dissonance.
Turning a blind eye to change
Digital transformation has led to acute cognitive dissonance in many fields, including communications, media, music and more. Despite clear evidence showing the benefits of going digital, many companies remain committed to the traditional methods that bore them success in the past. This resistance to change, fuelled by cognitive dissonance, can put organisations at a competitive disadvantage, especially in a fast-paced commercial environment.
Take Kodak, for example. There was once a time when Kodak was almost synonymous with photography, its distinctive yellow-and-red logo dominating high streets all over the world. It even developed the first digital camera in the 1970s but decided not to pursue the technology, fearing it would adversely affect its lucrative film business. As Harvard Business Review puts it, “spotting something and doing something about it are very different things.”
Other companies such as Canon, Sony and various smartphone manufacturers were not constrained by such concerns and invested heavily in their digital photography capabilities, positioning themselves as frontrunners in this new global opportunity.
At the same time, cloud-based platforms such as Flickr, Google Photos, and Apple’s iCloud became popular, allowing users to store, share and edit photos online. Kodak let both developments pass them by, neglecting to recognise the value of digital photography and cloud-based storage until it was almost too late; the brand faced bankruptcy in 2012. Although it has since restructured and diversified, Kodak’s failure to move with the times serves as a stark reminder of the dangers of resisting change in a dynamic market.
Navigating cognitive dissonance as a leader
For businesses to thrive in a competitive landscape, recognising and addressing blind spots is critical. In practice, this means developing a culture of continuous learning, balancing confidence with humility and encouraging diverse perspectives — vital for safeguarding against collective prejudice.
Diverse teams are more than just a checkmark on an inclusivity checklist; they constitute a strategic advantage. By bringing together individuals from a variety of backgrounds, industries and life experiences, businesses can avoid accidentally creating an echo chamber. A good manager will reduce the risk of cognitive dissonance by facilitating regular audits, cultivating open internal and external feedback and demonstrating a willingness to adapt.
We’re also fortunate to operate in the era of Big Data, which means we no longer have to make decisions on gut alone. We can now balance intuition with data analysis, ensuring that we make better-informed choices, backed up by clear and quantifiable evidence. Numbers, trends and patterns provide invaluable information, serving as a reality check against unfounded beliefs. Gartner recently reported that 79% of corporate strategists see AI and analytics as critical to their success over the next two years.
The fact that we can now access this data instantly means we are in a position to adapt faster than ever before. Markets, by their nature, are always volatile, consistently surprising even the most seasoned observer. Strong leaders will recognise that an adaptive business strategy is not a sign of weakness but an indicator of foresight.
While having a coherent vision is essential in any leadership plan, the methods of achieving it must be flexible and responsive to new realities. Only then will a business be able to ride the waves of change successfully, maintaining momentum no matter how challenging the journey.
Taking time to reassess and reevaluate
Cognitive dissonance is a complex phenomenon, presenting in myriad ways. Resolving it will require more than a raft of reactive measures. Instead, businesses should embark on proactive introspection. This can be challenging, as it involves leaders stepping back and questioning deeply held beliefs.
During this process, it’s vital for stakeholders to realise that growth often comes from discomfort and that any conflicting information is not a threat but an opportunity. In an age of rapid technological advancement, changing consumer behaviour and global connectivity, businesses cannot afford the luxury of ignorance.
This is where organisations like Ingenium can have a transformative effect, bringing fresh eyes to stale belief systems. Quite often, businesses don’t even realise they’re operating in an echo chamber driven by cognitive dissonance until they hear an outside voice. Using tried-and-tested methods and award-winning skills, our network of highly experienced management consultants can be that voice, revealing great truths and exposing even greater opportunities.
For our business leader clients, the mission is clear: face challenges head-on, incorporate feedback regularly and adapt continuously. Ready to take the first step to protect your company, clients and colleagues from cognitive dissonance? Reach out to Ingenium to get started.
