Creative Memories (yes, I know there is a company that currently uses that name, but that is not the company I am talking about) suffered a painful collapse as it was unable to adapt to changes in the marketplace, including the switch to digital photography. The death spiral was dramatic. In a few short years, Creative Memories went from a vibrant, healthy company to an empty shell incapable of sustaining its own existence. With this background, here are the some cognitive biases that destroyed Creative Memories.
- Bandwagon effect – If we all believe that digital photography is unimportant then that must make it so.
- Blind-spot bias – No one at Creative Memories recognized that their cognitive biases might affect their decisions.
- Confirmation bias – Creative Memories paid more attention to information that confirmed its preconceived notion that digital photography was unimportant than to information that cast doubt on that fact.
- Conservatism bias – Creative Memories maintained the illusion that the traditional scrapbook was key to the future long after the market had decided otherwise.
- Information bias – The more we study digital technology, the less need there is to take action.
- Ostrich effect – “Don’t send me any more information on digital!” If you don’t want to hear information relevant to your business, you are likely to make poor decisions.
- Overconfidence – Creative Memories executives knew more than anyone else. Overconfidence results in a failure to consider the fact that you might be wrong.
- Stereotyping – The Creative Memories sales force will not be able to adapt to digital technology.
- Zero-risk bias – It’s risky to change a business model, particularly if that model has always been highly profitable.
The bias combined to create the “perfect storm” that destroyed Creative Memories. It was not that the storm was unpredictable, it was that Creative Memories chose not to predict it.
Note added April 22, 2016: We all saw certain aspects of Creative Memories demise. My view is that digital was a significant factor in the failure because it reduced the overall demand for traditional scrapbooking products. Creative Memories had built an organization with infrastructure that the market was no longer capable of supporting. I certainly agree that other factors affected Creative Memories, as well. The new Creative Memories should do well because it is sized for the much smaller market for traditional scrapbooking supplies that remains.