J.C. Penneyโs $1B loss under a celebrated CEO wasnโt about strategyโit was about overconfidence. The DunningโKruger Effect shows up in change management more often than we admit: leaders underestimate complexity, teams assume theyโll โfigure it out,โ and culture gets sidelined.
In my new article, I explore how this bias derails transformationsโand what to do instead.
Another Cautionary Tale: The DunningโKruger Effect in Change Management โ When Overconfidence Derails Transformation
Consider J.C. Penneyโs 2012โ13 transformation under CEO Ron Johnsonโa proven executive from Apple and Target. He confidently rolled out โfair and squareโ pricing and drastically redesigned stores. But he underestimated how deeply customers valued coupons and markdowns. He moved fast, but without testing or aligning with the brandโs culture. Within 14 months, revenue had fallen 25%, the company lost nearly $1 billion, and thousands of jobs were cut.
This dismissal of core stakeholders and cultural dynamics is a textbook case of the Dunning-Kruger Effect in transformation initiatives.
What Is the DunningโKruger Effect?
At its core, it’s a cognitive bias: those with limited knowledge often overestimate their competence, while experts tend to underestimate it.
In transformation contexts:
- Leaders may assume change is simple: โjust tweak processes,โ or โeveryone will adapt.โ
- Teams may overload under the assumption that โweโll figure it out.โ
Why It Matters in Change Management
Change is complex, high-stakes, and fraught with resistance.
The DunningโKruger Effect manifests as:
- Ignoring stakeholder pushback
- Rushing without embedding governance or testing
- Overconfidence in โpatch-on-the-flyโ solutions
And the consequences? Delayed returns, broken morale, failed programs.
A Framework to Mitigate It
- Diagnose before you decideโuse structured interviews, quick diagnostic sprints to ground assumptions.
- Surface hidden risksโon culture, governance, stakeholder alignment.
- Bring in experienced leadership earlyโnot just internal availability.
- Test early, iterate fastโpilot first, scale later.
- Stay humbleโbe prepared to course correct mid-transformation.
Why Familiarity Matters
Transformations often fail not for lack of intent, but because theyโre treated like โchange on the side.โ The DunningโKruger trap lies in ignoring the hidden layersโculture, governance, resistance, and BAU alignment.
Skill, experience, and discipline are not optional. Without them, transformation becomes a mirage.