Business leaders strategizing on a market chessboard

Decoding Market Moves: How Competitive Sensemaking Drives Business Strategy

Lena Kashyap in Business & Economy June 2025 • 3 min read.

"Go beyond basic analysis—understand how your company's interpretations shape success."

Ever wonder why some companies anticipate market shifts while others are caught off guard? Or why competitors in the same industry can have wildly different interpretations of the landscape? The answer lies in something called 'competitive sensemaking.'

Competitive sensemaking is the process through which companies perceive, interpret, and respond to the actions of their rivals and the broader market. It's a socio-cognitive skill that goes beyond simple data analysis—it shapes how businesses understand their relationships, spot opportunities, and ultimately create value.

This article dives deep into the concept of competitive sensemaking, drawing on research to explain the cognitive processes that drive strategic decision-making. Learn how to enhance your company's ability to 'read' the market and turn insights into a competitive advantage.

The Four Cornerstones of Competitive Sensemaking

Business leaders strategizing on a market chessboard

According to research, four key cognitive processes underpin effective competitive sensemaking:

Each of these components plays a crucial role in shaping how companies understand their competitive environment and make strategic decisions.

Mental Time Travel: It is the ability to analyze past trends and project them into the future.
Comparability: It involves identifying key similarities and differences between market actors and products.
Counterfactual Reasoning: It explores alternative scenarios and 'what if' possibilities.
Storytelling: Storytelling weaves these elements into a cohesive narrative that guides action.

Let’s explore each of these components:

Sharpening Your Competitive Edge

Competitive sensemaking isn't just an academic concept—it's a practical skill that can be honed and applied. By understanding these underlying cognitive processes, businesses can equip themselves to better anticipate market shifts, outmaneuver rivals, and create lasting value. Whether it's through scenario planning, war gaming, or simply encouraging more diverse perspectives, the key is to cultivate a culture of mindful interpretation.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.1287/stsc.2018.0069, Alternate LINK

Title: Competitive Sensemaking In Value Creation And Capture

Subject: Management of Technology and Innovation

Journal: Strategy Science

Publisher: Institute for Operations Research and the Management Sciences (INFORMS)

Authors: Gino Cattani, Daniel Sands, Joe Porac, Jason Greenberg

Published: 2018-12-01

Everything You Need To Know

What is 'competitive sensemaking' and why is it important for businesses?

'Competitive sensemaking' is how companies perceive, interpret, and respond to rivals and the market. It's vital because it shapes how businesses understand relationships, spot opportunities, and create value, going beyond simple data analysis. Without competitive sensemaking a company will likely be caught off guard from market shifts.

What are the four cornerstones of 'competitive sensemaking'?

The four key cognitive processes underpinning 'competitive sensemaking' are: 'Mental Time Travel,' which analyzes past trends to predict the future; 'Comparability,' which identifies similarities and differences between market actors and products; 'Counterfactual Reasoning,' which explores alternative scenarios; and 'Storytelling,' which weaves these elements into a narrative to guide action.

How does 'Mental Time Travel' contribute to a company's strategic decision-making?

'Mental Time Travel' contributes by enabling companies to analyze past market trends and project them into the future. This allows for anticipation of potential shifts and proactive strategic adjustments. This cornerstone of competitive sensemaking allows leaders to anticipate change with a future forward view by studying trends.

In what ways can 'Counterfactual Reasoning' benefit a company's 'competitive sensemaking' process?

'Counterfactual Reasoning' enhances 'competitive sensemaking' by encouraging the exploration of alternative scenarios and 'what if' possibilities. By considering different potential outcomes, companies can better prepare for a range of eventualities and make more robust strategic decisions. Without this, strategic decisions can be shortsighted and prone to disruption.

How can businesses sharpen their 'competitive sensemaking' abilities to gain a strategic edge in the market?

Businesses can sharpen 'competitive sensemaking' through scenario planning, war gaming, and encouraging diverse perspectives. These activities cultivate a culture of mindful interpretation, which enables companies to anticipate market shifts, outmaneuver rivals, and create lasting value. Encouraging open discussion of varied interpretations of market signals and competitor actions fosters a more nuanced and strategic approach.