There is a specific moment most entrepreneurs recognise. A competitor announces they are moving to a freemium model, or launching a community feature, or expanding internationally. Within weeks, the question arrives internally: should we be doing this too? The pressure feels like strategic intelligence, yet the research suggests it is often something else.

Two reasons you conform — and why both mislead

Solomon Asch’s 1951 conformity experiments established something that has never been convincingly overturned: people conform to group behaviour through two fundamentally different mechanisms, and both operate simultaneously in strategic decisions.

The first is normative influence — conforming to avoid the social cost of being different. In a competitive market, not doing what competitors are doing feels like a signal of being behind. The second is informational influence — genuinely believing the group has better information than you do. If five competitors have made the same strategic move, the rational inference is that they know something.

Asch’s data established the magnitude of these effects precisely. Approximately 32% of participants conformed to a majority giving clearly incorrect answers across all critical trials. But one detail is more practically useful than the headline figure: the presence of even a single dissenting voice reduced conformity by approximately 80%. A unanimous majority is far more powerful than a majority with one dissenter — which means building a formal process for generating the contrary view is the single most effective structural intervention against conformity bias.

The entrepreneur-specific version of this is direct. Observing three to five competitors adopt a strategy activates both pressures simultaneously. Normatively: not following signals you are behind. Informationally: multiple companies making the same move must know something you do not. Neither inference is necessarily correct. But both feel compelling.

Why rational imitation produces collectively irrational outcomes

The more sophisticated account of why competitive imitation goes wrong comes from Bikhchandani, Hirshleifer, and Welch’s 1992 information cascade model in the Journal of Political Economy. The counterintuitive insight is that imitating competitors can be individually rational even when the outcome is collectively wrong.

The mechanism: when entrepreneurs make decisions sequentially and can observe what predecessors did, it becomes rational to weight the inferred private information of predecessors over your own private information. If enough companies have done X, the observed behaviour is itself evidence that X is correct — even if every company in the sequence was primarily relying on the behaviour of those before them rather than on independent analysis.

The result is a cascade where collective behaviour is systematically wrong despite every individual participant being rational. The information that would correct the error — each company’s private assessment — never surfaces because everyone is rationally imitating rather than disclosing.

For entrepreneurs: when you observe competitors adopting a strategy, you are observing actions, not signals. You cannot observe whether their private information actually supported the decision, whether they were following their own cascade, or whether their context resembles yours at all. The observed actions systematically overweight shared information and underweight your own contextual knowledge.

The competitor who launched a community feature may have done so because their investors expected it, because their team wanted to build it, or because three other companies did it first. The action tells you almost nothing about whether it was right.

Social proof substitutes for strategic analysis

The third mechanism is the availability heuristic operating in the strategic domain. Under uncertainty, the question “should we do X?” gets answered by asking “are our competitors doing X?” What is easily observable — competitor behaviour — substitutes for what is difficult to assess — whether X is appropriate for this company’s specific context, resources, and customer base.

Robert Cialdini’s social proof research established that the perceived prevalence of a behaviour functions as a validity signal — the more people are doing something, the more it feels like evidence that it is correct. In competitive markets, this produces systematic underinvestment in differentiation and overinvestment in imitation. Every company is validating their strategic decisions by pointing at each other.

The pricing dynamic is the clearest example. Entrepreneurs who set prices by observing competitor pricing are substituting social proof for analysis of their own cost structure, value proposition, and customer willingness-to-pay. The result is sector-wide price compression where every company converges on a modal price point that may be appropriate for none of them.

Feature development follows the same pattern. A product roadmap driven by “competitors have this feature” copies the output without any of the context — customer mix, funding level, technical architecture — that made the feature appropriate for the company that built it.

If the pressure to follow competitors feels persistent and anxiety-driven rather than genuinely strategic — if it is producing decisions you would not make independently — that is worth examining with someone outside the business. A business psychologist or trusted advisor can help separate genuine strategic insight from conformity pressure in ways that competitive analysis articles cannot.

The practical question

Before any strategic decision influenced by competitor behaviour, two questions break the cascade. First: what is the evidence, independent of what competitors have done, that this is right for our specific context? Second: what would we do if we had never seen what our competitors did?

The Asch finding that one dissenter reduces conformity by 80% has a direct structural application: assign someone the explicit role of making the best case against the competitor-influenced decision before it is made. Not to prevent the decision — to ensure it is being made on its own merits rather than on the social proof of what others did.

A book worth reading alongside this

The Innovator’s Dilemma by Clayton Christensen documents some of the most consequential cases of companies imitating established competitors into obsolescence while differentiated new entrants captured the market. His research maps directly onto the cascade mechanism — entire industries following the same strategic logic, collectively, into the wrong direction. For any entrepreneur navigating pressure to follow what competitors are doing, it is the most compelling empirical case for why imitation and survival are not the same thing.

This article discusses psychological patterns documented in research on social influence, conformity, and strategic decision-making. It is not designed to identify, diagnose, or assess any psychological condition, and it is not a substitute for professional support. The patterns described here are well-documented features of human cognition — recognising yourself in them is not a cause for alarm. If, however, you find that these patterns are significantly affecting your work, relationships, or wellbeing, speaking with a psychologist or therapist can provide personalised guidance that an article cannot.

This article is for educational and informational purposes only. It is not a substitute for professional psychological advice, diagnosis, or treatment. If you are experiencing significant psychological distress, please consult a qualified mental health professional.

Sources: Asch, S.E. (1951), in Groups, Leadership and Men, Carnegie Press. Deutsch & Gerard (1955), Journal of Abnormal and Social Psychology, 51(3). Bikhchandani, S., Hirshleifer, D. & Welch, I. (1992), Journal of Political Economy, 100(5). Banerjee, A.V. (1992), Quarterly Journal of Economics, 107(3).