In business, everyone wants to be better than their competitors, but entrepreneurs are sometimes too focused on chasing their rival’s strategies. When we make decisions, we are often driven by the gut feeling that particular things are going to work, and by simply following your competitors. This is essentially copying their gut instinct.
The idea of copying what others are doing is natural and ingrained in our psychology. It even has a scientific name, ‘social proof’, also known as the wisdom of crowds. But while incorporating different opinions into your strategy is always valuable, there is a danger in going too far. The key is to recognize when you should rely on someone else’s opinion, and when to trust your own.
So, how can we recognize when to rely on someone’s opinion? There are two types of statements - those that describe reality, and those that create it. Let’s imagine an investment manager comes to you and says ’company X’ will make $200 million profit next year. This is purely descriptive, and can be either right or wrong. However, if the same manager says ‘shares in company X are good value at $10’, the manager and others who have been informed will then go and buy them because they are good value. This is how bubbles are created. In the first instance, the information is going to be useful in your decision-making process, the choice that the group of analysts made will be more useful.
The wisdom of crowds is not only about making business decisions, it can also provide inspiration when building your strategy. Sometimes, customers are not only consumers but an additional source of ideas. They often help to find new products and suggest improvements in the processes which are most important for them.
One example is Adidas Insiders, which started as a customer community in 2012. Consumers in the community are necessary for both the generation and testing of new ideas. Using your customer base as a daily source of inspiration is called crowdsourcing, and it helps to improve your relationships with consumers. Even negative social proof experience can be useful. It can kill brands and damage sales if not acknowledged, but it can also be exploited to become a powerful selling tool when you learn from it.
Ultimately, social proof exists because society is a group, and it functions best when it works as such. The group is an incredibly powerful force which influences our daily decisions, and companies would do well to recognize that without relying on it too much.
We hope you enjoy reading this issue, it has been created to spread new ideas within corporate strategy, so if you have any comments or if you want to submit an article, please get in touch with me at firstname.lastname@example.org.