Mark Blackwell, Arkaro
What I learned from the Newmarket races
In earlier years, I lived not too far from Newmarket, and would occasionally go to the races, placing a few pounds on a horse that looked promising. Now here’s an unexpected twist for some: do you know what could spoil a good day out? Winning on the first race of the day! Buoyed by newfound confidence, I’d assume I had a knack for picking winners, placing bets on each subsequent race with the belief my “skills” would shine again. More often than not, that initial success was short-lived, and the first race would be the last winner of the day. Overconfidence led me to skip proper analysis, losing the discipline of studying each horse’s form and knowing when to let a race pass by. In the end, it wasn’t nearly as enjoyable as taking a more cautious approach.
These memories remind me of something I learned later in life: the Dunning-Kruger effect. Once you understand this concept, it’s easy to spot in all sorts of business situations.
What Is the Dunning-Kruger Effect in Business?
David Dunning and Justin Kruger first described this cognitive bias in 1999. People with limited experience in a field often overestimate their abilities and feel overconfident. Conversely, those with substantial expertise in a field tend to underestimate their skills, sometimes appearing less confident than beginners. Those familiar with Imposter Syndrome may find this unsurprising.
You might recall instances from your own work. While this bias is common in early-career professionals, even seasoned individuals can fall into it when navigating new territory.
Examples of Dunning-Kruger Cognitive Bias in business
– An overconfident business leader pursues an acquisition in a new part of the value chain without fully understanding how market dynamics may shift with the change in position.
– A startup entrepreneur underestimates regulatory challenges or customer switching hurdles, leading to overly ambitious revenue projections.
– An inexperienced consultant, familiar with only one type of client issue, assumes that a one-size-fits-all solution applies universally.
– A manager dismisses the complexity of project implementation, as often seen in IT projects.
What other examples come to mind?
How can we reduce the risks of overconfidence in inexperienced leaders and improve decision-making?
Here are some ideas:
– Build diverse teams and encourage open feedback.
– Cultivate a psychologically safe environment where people feel comfortable sharing their knowledge limitations and mistakes.
– Promote a learning culture by offering regular training to encourage skill development.
– Implement “pre-mortem” sessions on projects to identify knowledge gaps, risks, and challenges upfront, allowing for early mitigation plans.
– Provide coaching and mentorship to develop managers with feedback that does not destroy confidence.
– Engage external experts and consultants for objective insights and lessons from experience. Examples of value adding work might include:
- Assess the team’s knowledge and understanding early in the project. Use tools like the Cynefin Framework(r) for a deeper appreciation of the nature of the challenge.
- Conduct cross-functional workshops to expose varied perspectives and curb overconfidence.
- Share “war stories” and hard-earned lessons.
- Provide feedback to stakeholders and bring visibility to observed good practices
- Offer insights on industry dynamics and changes.
How Arkaro's "Do It With You" Approach Addresses Cognitive Bias
Arkaro is a consultancy specialising in Strategy, Innovation Process, Product Management, Commercial Excellence & Business Development, and Integrated Business Management. With industry expertise across Agriculture, Food, and Chemicals, Arkaro’s team combines practical business experience with formal consultancy training to deliver impactful solutions.
You may have the ability to lead these transformations with your team but time constraints can often be a challenge. Arkaro takes a collaborative ‘do it with you’ approach, working closely with clients to leave behind sustainable, value-generating solutions—not just a slide deck. To learn more follow Arkaro on LinkedIn.
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Further Reading from Arkaro Insights
Strategy and Decision-Making
- Make Strategy Work: The Power of Integrated Business Planning (IBP) – Discover how IBP evolves from traditional S&OP to become the core consensus-driven managing process for business strategy implementation, moving beyond reactive planning to proactive decision-making.
- How to Bring Strategy Execution to Your Integrated Business Planning Process – Learn practical approaches to ensure your business planning processes actually execute strategy rather than simply reviewing past performance, including the critical question every management team should ask.
Change Management and Culture
- Arkaro’s Approach to Culture During Change Initiatives – Understand how experienced external perspectives can identify barriers to change that are below the surface, and discover why incorporating cultural and behavioural aspects is crucial for sustainable transformation.
Business Transformation Insights
- Independent B2B Consultants – Making Science Profitable – Explore Arkaro’s comprehensive approach to business transformation, covering commercial excellence, innovation strategy, and product management with real client testimonials and case studies.
Podcast Series
- Arkaro Insights Podcasts – Listen to in-depth discussions on business transformation, commercial excellence, innovation, product management and strategy with industry experts and thought leaders.
