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<\/a><\/p>\nTable of Contents<\/strong><\/p>\n <\/a> <\/p>\n <\/strong><\/p>\n The idea rose to prominence in WWII, when Allied forces were deciding where to add armor to the tattered planes that were barely returning from bombing missions over Europe.<\/p>\n Initially, engineers felt it was logical to add armor to the areas where returning planes had been shot the most \u2014 but statistician Abraham Wald pointed out the error in this thinking. Because the analysts were only able to look at the planes that had returned, Wald argued they should actually reinforce the parts of the planes that were relatively unscathed. If those parts had been hit, he reasoned, the damage would\u2019ve been fatal, and the planes wouldn\u2019t have made it back at all.<\/p>\n This phenomenon of survivorship bias refers to the human tendency to study successful outcomes while paying much less heed to the accompanying failures. Because of this, we adopt opinions, structure businesses, and make decisions without examining all the data, which can easily lead us astray.<\/p>\n Check out this TED Talk for more on the survivorship bias.<\/p>\n Missing what\u2019s missing: How survivorship bias skews our perception | David McRaney | TEDxJackson<\/a><\/p>\n So, how does survivorship bias apply to the world of sales?<\/p>\n <\/a> <\/p>\n Sales is a very dynamic field, which should be no surprise because sales performance is so closely tied to revenue. To keep growing (and keep those pesky shareholders happy), companies are constantly experimenting with ways to boost sales and generate more revenue at a relatively smaller expense.<\/p>\n Sales contributors often experience the pressure in the form of ever-increasing quotas or questionable new strategies decreed from on high, while sales leaders are frequently the ones in the alchemist\u2019s lab trying to replicate previous successes and find the next big source of closed deals. Unfortunately, the sales pressure cooker can regularly cause people to focus on the wrong things, which is why<\/strong> it\u2019s common for salespeople at all levels to fall prey to survivorship bias.<\/strong><\/p>\n You may recognize some of the following examples that I\u2019ve either experienced myself or heard of colleagues encountering.<\/p>\n <\/a> <\/p>\n A quick Google search of \u201cSuccessful founders who dropped out of college\u201d will yield some of the most well-known names in the world. Jobs, Gates, and Zuckerberg are all examples of entrepreneurs who had an idea, took a leap, and, miraculously, became successful.<\/p>\n Unfortunately, by equating all their success to hard work alone, we ignore a very important fact: For every highly successful college dropout, there are hundreds or even thousands who have a different experience. Graduates with a bachelor\u2019s degree make a median $77,636 compared to just $46,748 for those without according to U.S. BLS (Bureau of Labor Statistics) data<\/a>, and despite the growing price of higher education, a 2023 report from the Federal Reserve illustrates that a majority of college graduates still feel the investment was worth it.<\/p>\n Assuming a college degree isn\u2019t necessary to be successful is an example of survivorship bias. While it might not be right for everyone, it\u2019s important to look at all of the available facts before coming to a decision.<\/p>\n \u201cThe Morning Habits of Successful People.<\/em>\u201d \u201cThe Six Characteristics All Billionaires Have in Common.<\/em>\u201d \u201cThe One Thing Jeff Bezos Says Made Him Successful.<\/em>\u201d I\u2019ll admit falling victim to this clickbait every once in a while, and I bet you have, too.<\/p>\n We love to think that learning about our idols will enable us to emulate their success. The problem is that these articles \u2014 and even deep-dive biographies \u2014 don\u2019t present all the facts necessary to draw real conclusions. We overlook the variables the author didn\u2019t include, and even more importantly, ignore the hundreds of people who likely tried and failed to build companies like Amazon before Bezos did.<\/p>\n \u201cThe One Trait Almost All Billionaires Share?\u201d Probably a whale of an inheritance if we\u2019re being honest.<\/p>\n \u201cThe next Netflix.\u201d \u201cThe Uber of [fill in the blank of an industry].\u201d Survivorship bias in business leads many founders to try to fit their business into a model that just isn\u2019t right for the current market, their audience, or their growth stage.<\/p>\n 2024 data from the U.S. BLS<\/a> tells us 20.4% of businesses fail in year one, 49.4% fail in the first five, and 65.3% fail in the first 10. That\u2019s only two-thirds of all businesses survive two years, half of all businesses survive at least five years, and one-third of all businesses survive at least 10 years.<\/p>\n Can you succeed? Absolutely, but modeling your company after one that\u2019s been a success doesn\u2019t guarantee anything. When starting a new business, draw inspiration from the companies you admire, but assess the market to understand how you\u2019ll need to adjust to fit your own use case.<\/p>\n Here\u2019s one that salespeople know all too well. The reality is that most products on the market are about average (that\u2019s sort of the definition, right?), and it\u2019s easy to assume the grass is always greener and the competitor selling their solution with more features and better implementation has it easy.<\/p>\n Most of us eventually find out that a better product doesn\u2019t necessarily produce a better business, and there\u2019s a lot more to success than the right bells and whistles. That product you have that\u2019s so great? There are probably several that have been created that were even better than yours, but you\u2019re not aware of them because the hopeful young startups behind them never took off.<\/p>\n Almost as prevalent as articles about successful people\u2019s morning routines? Articles telling you how one company made a single change and saw exponential returns \u2014 and how you can, too. But if survivorship bias in business teaches us anything, it\u2019s that we must consider the other businesses who tried the same fix and saw lackluster results.<\/p>\n Maybe the sales team in question really did see a 35% close rate by using these templates \u2014 but what might not be included in the article is the fact that they also brought on a new sales executive, changed their compensation structure, and happened to close a few big deals that quarter that had been stalled for months.<\/p>\n To assume their 35% close rate increase was due solely to generic outbound messaging, and to assume that messaging would work the same way for your business? You\u2019re likely headed toward disappointment.<\/p>\n If you\u2019re calculating annual recurring revenue (ARR) based on your current customer base alone, you may be poised for a harsh reality when your actual revenue comes up short.<\/p>\n While focusing on current clients is key to business planning, our knowledge of survivorship bias encourages us to study the customer churn rate of the same time last year and factor that into our ARR calculations.<\/p>\n This gives us a more accurate picture of what the company can expect to bring in and avoids disappointments or unexpected cash flow shortages down the line.<\/p>\n If you wait until an unhappy customer complains before engaging with them to reduce churn, you\u2019ve likely already lost their business. Don\u2019t assume everything is great with your customer simply because they\u2019re not actively sending angry emails. Instead, use tools like the Net Promoter Score\u00ae<\/a> (NPS\u00ae) to measure customer satisfaction and growth potential.<\/p>\n By taking the pulse of your current, happy clients, you can spot earlier signs of unrest and proactively address customer issues as they arise \u2014 instead of running to catch up to customers when they already have one foot out the door.<\/p>\n This one has a special place in my heart, and feature creep is a stumbling block most founders face during the lifespan of their company. It\u2019s what happens when you begin to build or implement features outside your company\u2019s scope simply because you\u2019ve received requests from your customers.<\/p>\n While it\u2019s important to keep a pulse on the market, your competitors, and the needs of your customers, it\u2019s equally important to stay focused on your core company mission. Everything has an opportunity cost, and if certain requested features distract your dev team from the growth of your core product\/service, they\u2019re not worth the time and effort they\u2019ll require or<\/em> the few clients they\u2019ll win over.<\/p>\n Now that we\u2019ve identified some of the most common assumptions founded on survivorship bias, I\u2019m going to outline a few strategies for avoiding it.<\/p>\n <\/a> <\/p>\n Survivorship bias in business can be sneaky, but it\u2019s preventable once you know how to approach decisions. Here are some techniques I use to ensure I\u2019m seeing the whole picture and not just the survivors.<\/p>\n In sales, we celebrate wins loudly, but losses often happen quietly \u2014 and it\u2019s no different when we\u2019re examining results after the fact. Want to avoid survivorship bias? Look at <\/strong>all<\/em><\/strong> the data instead of just the success stories.<\/strong><\/p>\n In practical terms, I force myself to review lost deals, missed opportunities, and failures with the same rigor as I do wins. Instead of quarterly reviews containing a highlight reel of our biggest sales, I also run reports on the deals that didn\u2019t close.<\/p>\n\n
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<\/p>\nSurvivorship Bias and Sales<\/strong><\/h2>\n
Examples of Survivorship Bias<\/strong><\/h2>\n
1. \u201c<\/strong>Steve Jobs, Bill Gates, and Mark Zuckerberg dropped out of college and became wildly successful \u2014 so I will, too.<\/em><\/strong>\u201d<\/strong><\/h3>\n
2. \u201c<\/strong>If I read the biographies of the world\u2019s most successful entrepreneurs, I\u2019ll understand how to be successful.<\/em><\/strong>\u201d<\/strong><\/h3>\n
3. \u201c<\/strong>If I pattern my company after Warby Parker, I\u2019ll be successful.<\/em><\/strong>\u201d<\/strong><\/h3>\n
4. \u201c<\/strong>My product is better than their product, so I\u2019ll succeed.<\/em><\/strong>\u201d<\/strong><\/h3>\n
5. \u201c<\/strong>Sales team X used these email templates to increase close rates by 35%. I\u2019ll use these templates and get the same results.<\/em><\/strong>\u201d<\/strong><\/h3>\n
6. \u201c<\/strong>I\u2019ll calculate ARR based on our current customers.<\/em><\/strong>\u201d<\/strong><\/h3>\n
7. \u201c<\/strong>If I focus on my unhappy customers, I\u2019ll be able to retain them and decrease my churn rate.<\/em><\/strong>\u201d<\/strong><\/h3>\n
8. \u201c<\/strong>Our customers are requesting these features, so we should add them to our product\/service.<\/em><\/strong>\u201d<\/strong><\/h3>\n
How to Avoid Survivorship Bias in Business<\/strong><\/h2>\n
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<\/p>\n1. Broaden your data lens to include failures.<\/h3>\n
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