The Digital Enterprise and the Future of Work

Charles Araujo

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Why Distinction Bias May Undermine Digital Transformation

When selecting a new technology, you may unwittingly fall victim to distinction bias — and undermine your digital transformation

When I was a young boy, my father introduced me to a valuable decision-making tool. It was what he called “The Franklin T” (sometimes called Franklin’s Rule).

The premise is simple. When you have a difficult decision to make, take a piece of paper and make a large “T” to form two columns. In one column, list all the ‘pros’ related to the decision. In the other, all of the ‘cons.’ In this way, Franklin’s thinking went, you will present your mind with both sides of the decision equation at one time, and you will better understand what is most important to you and, thus, make the best decision for yourself.

It’s a simple, yet powerful tool that I have repeatedly used in my life when faced with difficult decisions.

When faced with selecting a new technology or approach to support their digital transformation efforts, business and IT executives often employ a seemingly similar approach when they compare vendors or options side-by-side. It would appear that they are using this side-by-side comparison to evaluate the pros and cons of each option.

This approach is most easily seen in the form of the various spreadsheets enterprise leaders use during the evaluation of a technology or vendor solution. These spreadsheets dutifully list all of the important elements of the technology or solution under evaluation with weightings and other decision-aiding criteria to help the leadership team compare and contrast the competing options.

But while this comparative approach may, on the surface, appear to be similar to using Franklin’s T, the results are quite different.

In fact, while Franklin’s approach, when used correctly, helps you find clarity of intent and purpose, comparing two solutions or vendors side-by-side is much more likely to create what psychologists call distinction bias — and undermine your digital transformation efforts.

The Problem with Choice

Distinction bias is “a tendency to over-value the effect of small quantitative differences when comparing options,” as described by Nir Eyal in his blog Distinction Bias: Why You Make Terrible Life Choices.

In practice, it means that when we try to decide by comparing two choices side-by-side, we are likely to put far too much value in minute differences between the options. During evaluation, we assess the alternatives quantitatively, but those criteria tend to have little value during the actual use of the technology or solution, during which, we tend to evaluate it qualitatively.

It is this shift in perspective between evaluation and use that causes the disconnect. When we are doing this type of side-by-side comparison, we are using what researchers Christopher K. Hsee and Jiao Zhang of the University of Chicago call joint evaluation mode. When we use the technology or approach, however, we are in what they call single evaluation mode.

Distinction bias is also the reason that having too many choices can lead to things such as dreaded ‘analysis paralysis’ and can leave us feeling less happy with our decisions overall.

When it comes to simple decisions, such as Nir Eyal’s TV purchase (from his blog), the consequences may be minimal. But when it comes to the bet-the-company type of decisions incumbent in digital transformation, the impact of distinction bias can be extremely damaging to the organization.

Overcoming Distinction Bias During Transformation

The big problem with comparing vendors, technologies or approaches when it comes to digital transformation efforts is that there is almost never a simple, direct comparison to make. As I discussed in my article Finding Transformational Success by Ignoring Labels, the labels that the major analyst firms and industry pundits love to assign to things tend to obfuscate rather than provide clarity.

While it may seem intuitive to compare vendors or solutions in a direct, head-to-head way, it actually undermines your efforts and leads you to make poor decisions because it causes distinction bias to kick in. When it does so, it causes you to shift your focus away from the business problems you’re trying to solve and instead to focus on those minute differences between the vendors or solutions you’re evaluating.

As hard as it may be, you must resist the temptation (not to mention long-standing habit and corporate policy) to do a bake-off and, instead, focus single-mindedly on the business problems you need to solve and the business outcomes you seek.

You must then determine the technical capabilities you need to achieve those outcomes and then independently evaluate every vendor or solution you encounter solely on its ability to help you create and sustain this capability.

Interestingly, when you go through this process, one vendor, technology or solution at a time, slowly evaluating the pros and cons in comparison to the outcomes you seek rather than some competing option, you will be employing the Franklin T precisely as Franklin intended it.

The Intellyx Take

At Intellyx we have a strict policy of not comparing vendors. That’s uncommon in a world in which industry analysts make most of their money and headlines doing just that.

While there are many reasons for this, the biggest is that we don’t believe that these comparisons help enterprise leaders make better decisions. Instead, these comparative assessments typically do just the opposite. They encourage and invite the exact side-by-side comparisons that lead to distinction bias and, ultimately, bad decisions.

Nevertheless, when we advise our technology vendor clients on their go-to-market strategies and messaging, we encourage them to understand and promote their unique differentiators. The challenge, of course, is that they must articulate them not in terms of technical features or comparison to their competitors, but instead from the perspective of how they help their enterprise clients uniquely meet their business challenges and build the capabilities they require.

Communicating value in this way is much easier said than done.

It’s a lot easier for a vendor to spell out a long list of technical features or to explain why their solution is better than a competitor’s in some small way than it is to describe how their solution can help you solve your most challenging business problems and achieve the outcomes you desire.

It’s also easier, at least on the surface, for you to choose your vendors this way. It can seem more defensible when you’ve employed a seemingly logical competitive analysis. But while it may be the natural path for both you and the vendors trying to sell to you, it’s a trap you must avoid.

Getting this focus right is, in itself, a critical capability for the modern enterprise leader. As the tsunami of emerging technologies continues to crash on the shore of the enterprise, the ability to make the right decisions will be essential.

You must separate those technologies that have the potential to be transformative to your organization from those that may be fabulous, but which will not provide your organization with a competitive advantage. You cannot do this if you fall into the distinction bias trap. You must stay focused on your business outcomes and the capabilities that will help you achieve them. Doing so will be a critical enabler of your success now and in the future.

Copyright © Intellyx LLC. Intellyx publishes the Agile Digital Transformation Roadmap poster, advises companies on their digital transformation initiatives, and helps vendors communicate their agility stories. As of the time of writing, none of the organizations mentioned in this article are Intellyx customers.

More Stories By Charles Araujo

Charles Araujo is an industry analyst, internationally recognized authority on the Digital Enterprise and author of The Quantum Age of IT: Why Everything You Know About IT is About to Change. As Principal Analyst with Intellyx, he writes, speaks and advises organizations on how to navigate through this time of disruption. He is also the founder of The Institute for Digital Transformation and a sought after keynote speaker. He is a regular contributor to CIO.com and has been quoted or published in Time, InformationWeek, CIO Insight, NetworkWorld Computerworld, USA Today, and Forbes.