A common strategic planning mistake that people make is overestimating their own capabilities. It’s easy to overestimate your organization’s capabilities because we tend to have a favorable view of how good we are. We also have blind spots related to weaknesses that we might have.
Think about how many market leading companies you’ve seen fail. The belief that they were better than others is often the root cause of this failure. Viewing your organization as superior to competitors can lead to a flawed strategy.
I worked with one startup who came in and said “We’re the best in the market. Here’s why our technology’s better. Here’s why our strategy’s better. Here’s why our people are better.”
The investors challenged them on that assessment and the company still maintained their position of why the investor’s concerns weren’t relevant and why their competitor wasn’t as good as they were. Eventually they were blindsided in the marketplace and they went under. They seriously overestimated their capabilities.
Some warning signs that you may be overestimating your capabilities include things like:
– people saying “Oh we have no competitors. We’re the only one in this market.” Everyone has competitors. That’s a huge blind spot to say you don’t have any.
– using your old SWOT analysis versus doing a new one where you’re more rigorous around what your strengths, weaknesses, opportunities and threats are.
– relying on internal market research versus going to an external objective third party. That internal research can be very biased.
Some fixes for these risks are:
– Seek objective sources of capability assessments. Go out and get some consultants. Bring those people in to look at your business. Find some advisors or members of your board of directors to give you an objective assessment of what your strengths and weaknesses are.
– Conduct a good rigorous Porter’s Five Forces analysis to assess competitive dynamics in your industry.
– Focus on the weaknesses section of your SWOT analysis. By the way, ask your customers and your suppliers what your strengths and weaknesses are. They’re going to uncover some blind spots you’re not aware of.
Having an accurate realistic understanding of your capabilities keeps you from getting blindsided from by someone who’s better than you are. Take the time to get objective perspectives and make sure you’re protecting yourself from the risk of overestimating your capabilities.
Misreading the Market