Business Lessons from Groupthink Mistakes

As the investigation of Volkswagen’s emissions test cheating widens, the scandal has begun to look like a case of groupthink. Even more vehicles than previously acknowledged may have had engines with test-defeating software installed, the New York Times reported. Scientists estimate the software has contributed up to a million tons of extra pollution and over a hundred deaths. Volkswagen has blamed the scandal on a handful of rogue engineers, but it seems unlikely that the software could have been installed on millions of vehicles without wider complicity. Psychologist Marla Gottschalk sees this as a classic case of groupthink, where employees went along with poor executive decisions and discouraged critical dissent in order to avoid conflict. Case studies such as Volkswagen’s illustrate both the dangers of groupthink as well as the business lessons that entrepreneurs can learn to avoid making similar mistakes.

The Challenger Explosion: The Value of Dissent

A familiar groupthink tragedy is the 1986 Space Shuttle Challenger disaster, which killed seven crew members. Investigators identified the root problem as a design flaw which NASA and its contractor first failed to recognize, then failed to fix, and finally allowed to persist as an acceptable risk. The flaw left an o-ring in the shuttle’s right solid rocket booster vulnerable as a single point of failure without a backup. O-rings are very precise components, with manufacturers such as Apple Rubber producing thousands of different models designed for different size, material, temperature, and resistance specifications. When the Challenger blasted off, the o-ring failed to seal, causing a chain reaction that ended with the ship’s disintegration.

Psychologist Jacob Leonesio analyzed the Challenger disaster as a case study in groupthink, identifying one problem as the way NASA and its contractor Thiokol mishandled dissent. Thiokol engineer George McDonald wanted to postpone the flight, but NASA was concerned delay might diminish public confidence in the agency.

To handle dissent more productively, Harvard law professor Cass R. Sunstein and University of Chicago behavioral scientist Reid Hastie recommend that companies should encourage critical thinking. Allowing critical voices helps foster objectivity and protects companies from costly mistakes.

The 2008 K2 Disaster: The Need for Cooler Heads to Prevail

Another famous groupthink tragedy is the 2008 K2 disaster, which killed 11 mountaineers. As Michael Kodas recounts, the climb took its tragic turn after a pair of accidents claimed two victims. Following the accidents, veteran Everest sherpa Pemba Gyalje warned the climbers that it was getting too late to ascend safely. But mountaineer Marco Confortola gave a pep talk that convinced them to press on despite increasingly dangerous conditions.

Psychologist Jonathan Fader sees this fatal decision as symptomatic of a groupthink tendency to make dangerous choices motivated by false confidence in the group and fear of dissent. He recommends that every team should designate a member to question potential risks.

Theranos: Safety in Transparency

A recent groupthink case is medical technology company Theranos’ controversy over its finger-prick blood-testing platform. Theranos initially won widespread acclaim, attracting millions from investors such as Larry Ellison, securing celebrity endorsements from the likes of Henry Kissinger and Bill Clinton, and getting its finger-prick technology distributed to Walmart. But the company has now come under fire from the AMA, the FDA, and the Wall Street Journal for allegedly using its proprietary secrecy to skirt the medical peer review process and promote unsubstantiated effectiveness claims, an allegation the company denies.

Market Platform Dynamics CEO Karen Webster sees Theranos as a case of groupthink. She points out that the company has no scientific staff experts, has published no academic research, and was able to bypass normal FDA oversight because it did not sell equipment to other labs. Lack of transparency can discourage objective risk assessment. Cultivating transparency can protect both a company and its investors from bad decisions.