Tag

innovation

Three major obstacles for innovation: Lessons from running Behavioural Design Sprints

By Behavioural Science Insights, Customer Behaviour

In this blogpost I want to explore three organizational hurdles that that prevent innovation from happening.

Before we delve into the three hurdles, we need to establish what defines successful innovation. I think the best definition is that it’s about solving customer problems in new and better ways.

In my opinion, customer-centric innovation is, therefore, a pleonasm. It doesn’t make sense to innovate if it isn’t about solving a customer problem more smartly or cheaply. But when it comes to finding the right problems to solve and solving them right, every innovator has to deal with the following three hurdles:

Hurdle 1: We’re too much in love with our solution

We usually have no clue about what our customer needs. However, we have many assumptions. Most of them are simple projections of our prejudices and beliefs. Furthermore, we often are highly motivated to convince ourselves that the problem of our customers is precisely the problem that our solution solves. Customer-centric innovation, therefore, is often thought of as “the problem of the customer is that he/she hasn’t figured out yet how awesome our product is”.

We do this ‘thinking backwards’ from our solution all the time. We can’t help ourselves. And I think this is one of the most challenging habits to overcome. In a Behavioural Design Project, we always start by warning everyone in the project that it will pay off to avoid getting to solutions too fast. Instead, we always insist on taking enough time to fall in love with the problem.

A client of ours gave beautiful feedback last week on this. She said:

“When listening to your interviews, I was getting increasingly impatient about when you would finally start asking questions about our solutions. And you only spend the last 15% of the interview on this. But suddenly, it all made sense because we now understand that our solution is not properly solving the right problem”. 

 

Hurdle 2: Insight paralysis. What’s the killer insight?

Quite often, market research is boring and paralyzing. The more insights you get, the more you get paralyzed about what to do with them.

In a Behavioural Design Sprint, insight gathering is never a goal in itself. Instead, we treat them as an intermediate step for spotting opportunities. Behavioural Designers neatly map insights as forces that could boost or hinder behavioural change from happening. But more importantly: We don’t present insights; instead, we present opportunities.

Nothing is more powerful and inspiring than an insight translated into an opportunity. For instance, after interviewing blue-collar workers in an environment where there was a problem with social safety, we turned our understanding of the problem in the following briefing:

How might we help blue-collar workers at Company X address bullying as a behaviour that contributes to a pleasant working environment by taking away the anxieties that they could feel embarrassed as overreacting, turn colleagues into offenders, or feel like a snitch?

 

Hurdle 3: Stakeholders treat every change as a risk

Every time you want people in organizations to say yes to something new, you have to understand that you’re asking them to take a gamble. Doing something new is always a risk. And the bigger the organization, the less appetite for risk.

The interesting question is: How can you make people feel comfortable and remove their anxiety about the new solution? The answer is prototyping. Time and again, we learn in our Behavioural Design Sprints that prototyping and testing solutions with the end user not only provides you with a deeper understanding of what works and what doesn’t but, more importantly, it has a profound effect on persuading and convincing internal stakeholders to feel much more comfortable to say yes to the implementation phase.

In the last couple of months, I have learned to appreciate more and more that the actual value of running Behavioural Design Sprints is as much about giving creative and strategic confidence to do new things as it is about exploring and validating new ideas with the end user.

26/02/2023

Workers are massively firing their employers.

By All, Behavioural Science Insights
Currently, 67% of all salaried employees in The Netherlands are considering changing employers. Combine that with abundant job vacancies, and you realise that organisations face a huge behavioural challenge. After all, how do you retain your talented employees? Offering more money or a bonus is no longer enough. The key is behavioural expertise. If you understand how choices are made and behaviour is created, you can manage them. We can teach you how to achieve this during our in-company training. You will learn how to do this with a simple method and practical tools. In this article, I shed some light on why employees decide to leave and give three tips to help managers retain their talented employees.

The situation: we’re in the middle of The Big Quit

We recently conducted a behavioural survey of salaried employees. It showed that as many as 67% were considering them to step down to another employer. If we add to that the recent CBS data[1], which continues to show that for every 133 jobs, there are only 100 applicants, the challenge facing managers and executives becomes very clear. Because how do you keep talent in anymore? Indeed, many employees actually take action, also known as the ‘Big Quit‘ or the ‘Great Resignation‘. Well explained from behavioural psychology, because where normally change comes with a lot of uncertainty, confidence that a new job will be found in no time has also risen.

The problem: money is no longer enough to motivate employees

Managers and executives are tasked with understanding what motivates their talent. This sounds logical, but in practice it is not so easy. Because every employee is different and everyone needs something different. Combine that with the high workload of most managers. And the fact that hybrid working is the rule rather than the exception, literally making 1-to-1 contact with their team members more difficult, and you get the idea that managers have a very challenging task. Often, the ‘tool’ that managers get from the organisation to motivate their teams is to award a salary increase or bonus. But at present, that really no longer seems to be enough to motivate employees sufficiently. But what does work?

 

The opportunity: understanding your employees’ choice psychology  

The key to retaining your talent is understanding how they make choices and how their behaviour comes about. Really understanding what drives them and why they take (or don’t take) certain actions. Behavioural science offers many useful insights for this purpose. Only, these insights are often very theoretical. What can you do with them in practice? The work crisis is now and demands action from managers now. That is why this is the perfect opportunity for you to follow an in-company training with your team. You will receive all the essential insights from behavioural science translated into a simple method you can use to influence choices and behaviour in practice. You can use it right away to successfully retain your talent. And money and bonuses do not turn out to be the most effective at all.

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The solution: the real crisis is a crisis in appreciation and personal growth

A fundamental insight from behavioural psychology is that people do not work purely for the work itself, but what work brings them. What it helps them realise. This is the so-called job-to-be-done. The name is slightly confusing in this case, because here the ‘job’ has nothing to do with a function or set of tasks, but with the deeper motivation why people work. Often, employers try to retain their talented employees by offering higher salaries, bonuses or extra monetary fringe benefits. This is important because it allows employees to achieve their functional jobs-to-be-done, such as paying their mortgage, being able to afford holidays and buying goods. But employees’ emotional and social jobs-to-be-done are often forgotten and even more often underestimated.

There is, in fact, something interesting going on. If you ask employees about reasons for changing employers, higher salary is indeed cited as the number one reason. But this is closely followed by a better work-life balance, more challenge and more meaningful work. Asked about behaviour, “What would you actually leave your employer for?” very different factors emerged. A whopping 1/4 of ‘overachievers’ said they missed recognition. Followed by: ‘I am not happy in my current team’ (social), ‘I have no opportunities to grow’ (emotional) and ‘I want to learn something new’ (emotional). The major work crisis appears to be mainly a crisis in appreciation and personal growth. Yes, salary is absolutely important, but rather a prerequisite. It is an improvement in achieving the emotional and social jobs-to-be-done by which you, as a manager, are most likely to retain your talent. But how do you do that? Here are 3 tips.

Tip 1: Provide context and make personal impact clear

Zooming in on meaningful work, it becomes increasingly important for an employer to create a work context where employees can see their roles and contribution. Share what the company stands for, what contribution your employee and his team make to it, and make clear what success means. And above all, make time for your employee to experience the positive impact of his work. Something as simple as installing an ‘impact habit’, the behavioural routine of giving an employee time two weeks after completing a project to ask/see what his work has delivered, can boost motivation enormously.
 

Tip 2: Be mindful of commitment and express appreciation

Ultimately, as humans, we are all looking for recognition and appreciation. This does not mean that as a manager, you have to give compliments all day long, even though compliments are often forgotten, and successes are not celebrated enough. Recognition is also in trust. It is about allowing people to schedule their own time and not micro-manage. This can also fulfil the great need for a better work-life balance. This does require clear goals and behavioural routines that keep the employee’s visibility sufficient (also for the manager). But it is also about explicitly acknowledging work performance. Have goals been met or even exceeded? Has someone helped a colleague or customer exceptionally well? Has someone grown enormously in their role? Or, on the contrary, are there blockages that you need to help them remove so they can continue their personal development? This actively helps to overcome difficulties that come with work (both job-related and mental) and helps meet your employees’ need to grow, learn something new and retain job happiness. An employee wants to be seen, helped and appreciated. Again, simple behavioural routines can make a big difference.

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Tip 3: Recognise that you, as a manager, make the difference

Our research reveals, among other things, the critical role a manager or supervisor plays in employee retention. Humans are social creatures; we copy and follow the behaviour of others. How you appear in the workplace as a manager makes an impression and significantly impacts employee motivation. But the fact that you yourself are genuinely enthusiastic about the organisation or believe that you and your team can make a difference also makes you better able to motivate others. So also reflect on your own contribution. What makes you proud to work for the organisation? What successes have you already achieved with your team? How did you ensure that talent could grow? As a manager, you just as much need all the aspects we highlighted in our employee survey to be and stay motivated yourself. Realise that as a manager, you do make a difference. Motivation and enthusiasm are contagious.

Conclusion

If you want to influence choices and behaviour successfully, it is crucial that you understand the person behind the employee. The ability to think outside-in is indispensable. Understanding the psychology of the employee (but also of your customers, your decision-makers, your colleagues or budget holders) is the competence of the future for every manager. In my book ‘The Art of Designing Behaviour‘, I help you develop that competence and put the power of behavioural science to work for you in practice. Want to start right away? Book an in-company training.

The book is now available at Managementboek
Dutch: De Kunst van Gedrag Ontwerpen
English: The Art of Designing Behaviour

Published by Boom Publishers. 

 


Astrid Groenewegen
Co-founder SUE | Behavioural Design

23/09/2022

How obstacles are key for innovation

By All, Behavioural Science Insights, Personal Behaviour

I am continually fascinated to discover the importance of behavioural economics in solving the significant challenges of our time: eradicating disease and tackling climate change. After reading an interview with Susan Athey, I realised how robust and starting from choice psychology can be in solving these complex challenges.

How to save the climate and lives with behavioural psychology

Susan Athey is economics professor at Stanford Business School and the woman who managed to:

  • 700,000 lives by having pharmaceutical companies invest in the development and production of a malaria vaccine.
  • The development and worldwide distribution of the Covid vaccine will not take the normal R&D time of 10 years, but will be realised in 7 months (and millions of lives will be saved as a result).
  • Get the commitment (and a billion dollars) from big corporates to accelerate the development of technology for carbon removal from the atmosphere.

Shortlisted for the Nobel Prize, Athey is an econometrician and a specialist in market design. The challenge she tackles is how to get players in a market to invest more rapidly in solutions that save lives. She is not someone who explicitly starts from psychology, but what I find fascinating is that if you listen to her story through Behavioural Design glasses, you see that understanding choice psychology was an essential key in arriving at the solutions to all three challenges.

The Problem of the Mexican Standoff

Back to the 700,000 lives (it was the malaria vaccine) and the Covid vaccine. Athey describes that in both cases there was a deadlock. From her economic perspective, she describes this as a typical market problem. Developing vaccines requires billions in investment. For pharmaceutical companies, the decision to develop and produce vaccines is a very uncertain one. They have to take a gamble in the hope that 1) there will be a customer soon who 2) is willing to pay enough money to recoup that investment and turn it into a profitable business model. Pharmaceutical companies are often dismissed as ‘evil’. But the investments they have to make to develop a vaccine and the uncertainty as to whether there will be enough customers willing to pay a fair price make it extremely risky for them. Apart from the fact that ‘evil pharma’ marginalises the complexity of the healthcare issue, it is in any case not very constructive. It only creates a Mexican standoff situation, in which no party wins and certainly no one moves.

Outside-in thinking 1: Creating movement is about removing barriers.

If you look at it from a psychological perspective, a different picture opens up and opportunities open up. From our SUE | Influence Framework, the uncertainties about market demand are clear ‘anxieties’, or stumbling blocks that stand in the way of desired behaviour (producing vaccines). At the time, for example, there was a lot of uncertainty about Covid. How long would the pandemic last? Wouldn’t the virus die out quickly on its own due to mass immunity? It would take more than a year before a vaccine would be ready and that required huge investments in R&D and production capacity. Would governments be willing to pay a market price at all or would they simply demand the vaccines through legislation? In the US, for example, there is the Defense Production Act, which allows the American president to appropriate product capacity. In short, there were enough roadblocks to prevent the pharmaceutical industry from making decisions and behaving accordingly.

Athey describes what contributed to the solution as counterfactuals. In other words, what would be true under different circumstances? As Behavioural Designers, we always ask ourselves a similar question: what would be true if we were to remove barriers?

Outside-in thinking 2: Fulfilling the Job-To-Be-Done of the market players

From the SUE | Influence Framework, try to present the desired behaviour (producing vaccines) as a better way to meet the goals and drivers (the Jobs-To-Be-Done) of the pharmaceutical industry, than the undesired behaviour of doing nothing. Their Job-To-Be-Done is to realise a healthy, profitable business model (which in turn allows investment in R&D for finding medication for other diseases).

How did this happen in both the production of malaria vaccine (which saved 700,000 lives) and the Covid vaccine? In both cases, the solution of Athey and her team was to realise so-called advanced market (or purchase) commitments.  By calculating from an economic perspective what the economic and social benefits would be -gains in the Influence Framework – if the world were up and running again quickly ($1,000 per person at relatively low cost of the vaccine), they managed to get governments to commit to purchase orders in advance. In short, it appealed to the Job-To-Be-Done of governments: the rapid stabilisation of society and the economy. And yes, the wealthy countries got the Covid vaccine first, but as Athey puts it, Covid was primarily a capacity problem. The wealthy countries invested in widening the production pipeline. They got the vaccines first, but without that investment there would have remained a narrow production pipeline and other countries would have been much slower to get the vaccine. From a Behavioural Design perspective, it is unfortunate framing that these investments were seen as the fight for the vaccines rather than the fight for capacity.

Breaking the Mexican standoff to accelerate carbon capture

Athey is now working on solving the problem of removing carbon from the air. This is another complex challenge, as it requires large investments and there is no real market demand. Who is the buyer? Governments move slowly and there is a freeloader problem that increases inertia. If the US decides to invest, Russia will benefit and vice versa. There is not yet (enough) legislation that obliges organisations to invest in carbon capture. No demand means no bank is willing to finance this technology.

But again, the same approach seems to work. By looking again at who it is desirable to remove carbon from the air (a Behavioural Designer would say: for whom is this a relevant Job-To-Be-Done?), she now works for Frontier. An organisation that grew out of the large financial corporate Stripe where employees and customers are committed to the climate issue. The Job-To-Be-Done Done of a corporate is twofold: 1) scoring well on environmental social and corporate governance (this is the extent to which an organisation contributes to social goals that go beyond the initial goal of maximising shareholder value) and 2) thereby attracting and retaining talent and customers. These Jobs-To-Be-Done Done are so relevant to corporates that organisations such as Meta, Shopify, Alphabet have together invested a billion dollars in Frontier (again advanced market commitments), making banks willing to co-invest (removing anxieties).

Recap

In short, a story that teaches us a number of things. First: any complex problem becomes simpler if we look at it from the Behavioural Design lens. By interpreting what is happening in other domains from the SUE | Influence Framework, it becomes much more understandable. And we can learn from their innovative solutions so that we can apply them to other challenges. Ultimately, everything can be traced back to a behavioural problem. If we understand Jobs-To-Be-Done and remove the obstacles that get in the way of that Jobs-To-Be-Done, innovation becomes not only much more interesting, but also much simpler.

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16/08/2022

Thoughts on psychological innovation and the badass honeybadger

By All, Behavioural Science Insights

I had the honour to do the opening keynote at the UBX19 conference in Munich a couple of weeks ago. The title of the keynote was “The future of innovation is psychological, not technological“.

In this talk, I wanted to make a case for a more pragmatic definition of innovation. In my view, innovation is nothing more or less than trying out new shit to generate growth. And when you approach the innovation challenge from this angle, it’s evident to me that we’re too obsessed with technology to look for new ideas. In my keynote, I argue that there’s massive untapped potential for “trying out new shit” when you look into psychology.

Here’s the video (30 minutes)

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The honey badger is pretty badass.

A couple of years ago, Robin Sloan launched “Fish, a tap essay“. The essay is a manifesto about the difference between liking something and loving something on the internet. The core idea of the piece is that reading or watching something twice is a radical act of love. There’s so much new content that tries to grab our attention, that we tend to forget that mastery and appreciation only start to emerge from second or third readings. This is a powerful idea that influenced me a lot.

Speaking of which, I honestly think that there hasn’t been a year gone by without me re-sharing the honey badger video through social media. In my opinion, it’s – hands down – the funniest thing ever on Youtube. A guy named Randall who does a hilarious voice-over of a documentary-fragment on the honey badger, the most fearless animal in the animal kingdom.

I find great pleasure in the surprising effect of mixing two completely different genres: When you put the gay hairdresser-chitchat style on top of the nature-documentary genre, the result is, well, this:

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24/01/2020
Image depicting the idea of an extreme user

The importance of extreme users in research

By All, Customer Behaviour

The importance of
extreme users in research

Image depicting the idea of an extreme user

One of the biggest illusions of Market Research is that you need to interview “average consumers”. That’s absurd. What you’re looking for in qualitative research is interesting insights to fall in love with the problem. If you want to spot interesting opportunities for innovation, you will find those opportunities much faster when you interview extreme users. Extreme users are perfectly capable of telling you what they figured out, how they overcome barriers, what problems they needed to solve and how you can help them. Moreover: Roger’s  Law of Diffusion of Innovation – you know: innovators, early adopters, etc… – tells us that every new product or service aways needs to attract a first group of early adopters in the fringes, before it can spread to the masses. Without traction, hype or social proof from the mavericks, most people won’t move.

Scratching your own itch.

The history of innovation is packed with stories of extreme users who  launched a killer innovation by scratching their own itch. Did you know that the sandwich is named after the Earl of Sandwich. The man happened to be such an addict gambler, that he instructed his staff to serve his lunch in a way that he didn’t had to leave the game table. The rest is history.

A similar story unfolded in Antwerp. Back in 1951, a guy named Theo Maertens entered his favourite snackbar one night in a drunk state, asking for a sandwich with minced beef and topped with everything they had available. That happened to be pili-pili powder, tabasco, cayenne-pepper, pickles, salt, ketchup worchester sauce and chopped onions. The new sandwich was an instant hit. People liked it so much, one of his friends shouted: I want a sandwich, just like the one Martino had. Martino was Theo Maertens’ nickname. The snackbar owner decided that the new sandwich was going to be named after its first customer: Martino. Today there is no snackbar in Belgium where you won’t find a Martino. It’s one of the best sold sandwiches in the country.

broodje Martino

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Extreme users know their pain better than average users

Another great story is the success of the HITT-training (High Intensity Interval Training). Allegedly HITT was designed by an ultra-runner, whose marriage was about to burst, because his wife couldn’t cope anymore with the endless hours he was away from home training. So the guy went on a search for new ways to spend less time training, but with similar effects. He discovered that High Intensity Intervals training was as good – if not better – as long duration runs, but they only took a fraction of the training time.

Another example in the same category is Curves. One of the fastest growing and highly profitable fitness concepts in the world. They figured out how to connect with a large group of women, who felt very unfordable training in the gym. Lot’s of women feel being looked at, and lot’s of women feel shame about their bodies. Curves solved that problem: It’s a women only concept, no fancy fitness gear and women train in a circle, so everyone gets to see everyone, which quickly helps them to overcome shame and stress.

You’re not looking for validity, you’re looking for interestingness

If you want to come up with new value propositions: always talk to extreme users. For the simple reason that their pain is a magnified version of the average consumer pain. “Scratching your own itch”, is an innovation mantra that lot’s of innovators can relate to.

In the end, every successful innovation is nothing more than a better way to take  away pain in people’s life, a better way to solve their problems, or a better way to help people to achieve their goals and fulfill their dreams.  The big problem with market research is that it’s so obsessed with averages and validity, that it forgets that its real goal is to spot interesting human insights and opportunities for interventions. Extreme users will provide you with those.

More blogs on innovation and research:

How to design an innovation habit

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04/11/2019

How to design an innovation habit?

By All, Employee behaviour

This blog post touches upon the organisational habits that boost innovation and growth. Why are some companies more innovative than others? I want to argue that they have habits in place that produce more ideas and habits to get those ideas shipped. As Steve Jobs once famously said (paraphrasing William Gibson) : “Real artists ship”. In this blogpost I want to explore this innovation habit, based on our 8 year experience with collaborating with teams.

 

The habits that kill innovation.

Dozens of books have been written about this subject, but from our own experiences on running behavioural design sprints, these were the most common habits that kill innovation:

 

No research culture / a crisis of curiosity.
The bigger a company gets, the more out of touch it becomes with how real users think, feel and behave. Managers rely on abstract data, like market shares, sales volumes, etc. The more detached they become from the real customer, the less probable they will spot exciting opportunities.

 

No ideation culture / a crisis of imagination.
Once an organisation outgrew its startup phase and entered its scale-up phase, the whole mindset of the organisation is focused on growing the business. Most businesses organise their process around building the existing product offering. Moreover, to achieve this growth mindset, a specialisation of roles is required. Everyone is expected to perform in their specific domain, from the product manager to marketing manager, digital manager, UX-er, and communication manager. This results in a decreased capability of the organisation to think out-of-the-box and to think outside-in. Nearly always, the exciting opportunity for innovation transcends the boundaries of the specific discipline.

 

No prototyping culture / a crisis of experimentation.
The more an organisation specialises, the more we expect those specialists to know what they are doing. This expert fallacy is a well-known organisational problem: Because we are expected to be experts, we are more inclined to act like experts. The more we think we know, the less alienated we become from discovering the truth. Not knowing is perceived as a weakness in these companies, while every successful startup knows that aggressive experimentation is one secret ingredient to growth.

 

Conflicting incentives / a crisis of management.
In most organisations, the problem with innovation is that everyone, including management, is hired to execute the strategy. Not only are they hired, but they’re also reviewed based on the execution of the strategy. When your promotion depends on hitting the targets, everything related to new ideas will be perceived as a distraction.

 

The net effect of these habits is total inertia.
Even in the context of declining market share, missing targets and aggressive competition, all the forces in the organisation seem to pull people towards repeating the same strategies repeatedly. The habit of keeping doing what we always do is just too strong.

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The habits that boost innovation.

Innovation is not a goal as such. Innovation is always a function of growth. Some organisations are far better than others to spot opportunities, come up with ideas, test them and succeed in actually shipping them. Whether they improve the product, marketing, process or campaign, the value of new ideas is that they succeed in contributing to growth.That’s why we need to study the innovative power of an organisation as a habit problem.

Innovative companies have habits in place that trigger more curiosity, ideation, and experimentation. Continuous improvement is their default mode.

We have facilitated sprints with many teams. Most of them don’t call themselves “innovation teams”. They’re product teams, or growth teams, or customer experience teams. The biggest challenge they all face is to improve their output to generate growth for the business. There are four team habits we came across that strongly correlated with the creative and innovative power of a team:

 

A deep love-relationship with customer problems.
Innovative teams are in love with the problem of the customer. They relentlessly talk to customers or observe them in the real world and try to spot opportunities for helping customer to overcome pains, break bad habits, take away barriers and achieve goals. They are always asking themselves the question: How might we help our customers to be more successful

 

A fast process for generating ideas.
Innovative teams have proper ideation sessions. They follow the core principles for group creativity (like brainwriting and dotmocracy) and treat every idea as an interesting hypothesis. In a well designed creative process, the individuals come up with as many ideas as possible and the group decides upon which ideas are worth experimenting.

 

A process and tools in place to prototype and ship.
Great teams have a maker-mentality. They always try to figure out ways to prototype their ideas and test them in the real world. This allows them to increase their learning curve and their success rate rapidly. An essential condition for allowing this to happen is to have an infrastructure that allows experimentation.

 

A cultural shift that promotes, rewards and celebrates braveness.
This is by far the most important habit. Very often, the problem is cultural. If the organisation is number-driven, then you’ll always end up with all kinds of triggers that incline people to believe that following the rules and reaching targets is what the organisation expects of them. However, if you want to create a culture of experimentation, then you’ll have to embrace failure, promote and rewards braveness. People need to experience that experimentation is being expected of them.

Incremental versus radical innovation

In the literature on innovation, quite often the distinction is made between radical and incremental innovation. Incremental innovation is the optimisation of the existing products and services, whereas disruptive innovation is the more radical ideas to transform the business.

To be honest: I think this distinction is a bit artificial. If you think about the innovation habits we described above, then they are about being radically customer-centred, about having a maker-mentality, and a culture of experimentation. Out of this habit, both incremental, as well as radical ideas can emerge. The only thing an organisation needs to have in place is a fund to invest in the rapid prototyping and testing of some of the more radical ideas.

What this means for innovation leadership.

When approaching the problem of innovation in organisations from this perspective, I think

The role of an innovation leader in a company should be to help to build the innovation habit.

I don’t believe an innovation department – as the place where innovation is happening -is the solution. An innovation leader / or innovation tribe should be a group of people that facilitate and train teams to install the innovation habit. If new radical ideas come out of this process, they should be able to invest money in them to be able to hire a team to design, build, prototype and test the idea in the real world. If this experiment turned out to be successful, then it’s their job to convince the board to invest in the concept with ambition.

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25/08/2019
Pitcture depicting the Kock Brothers

The behavioural design of the economy. On incentives and rewards

By All, Citizen Behaviour

To get the rich and powerful to change their behaviour,
is the most wicked design problem of our time

Pitcture depicting the Kock Brothers

I have been thinking a lot lately about society’s inability to tackle the biggest challenges of our time. I don’t know about you but climate crisis, income inequality and radicalisation is scaring the hell out of me. We can’t seem to change the behaviour of those who are running the show. This is the most wicked problem of our time. I want to argue that the solution to change the course of history can be found in applying some Behavioural Design Thinking to this wicked problem.

The economy is a behavioural design

The best way to think about behavioural design is to think of it as the design of choices. The way you design a choice will largely determine the behaviour that follows from that choice. This simple and powerful first principle of Behavioral Designworks on all levels of human decision making, from small consumer decisions to big societal decisions. Let me illustrate this with a couple of examples:

  • If you want to sell an item, it matters a great deal if you give two or three options. You can change the value perception of a cake + coffee of € 5,- in comparison to a € 2,5 coffee instantly if you would introduce a decoy option of a € 4 cake in the middle. The introduction of the € 4 cake makes the € 5 coffee + cake suddenly look like a bargain.
  • You can change the value perpection of something if you don’t call it “cheap” but “great value for money”.
  • If you want to get a sales team to run like hamsters in a treadmill, introduce sales targets and continuously give them feedback on how they’re performing in comparison to their colleagues. With these simple interventions, you will have designed a choice system that triggers hyper-competitive game behaviour.

These applications of the lens of behavioural economics to human decision making is nothing new. What fascinates me is the idea that could also look at the economy through this lens. The economy is a behavioural design system that rewards particular behaviour with power and profits and punishes other behaviours with taxes and fines. If you want to transform the economy, you have to tweak the behavioural design in such a way that it rewards and incentives different behaviours.

(BTW: In this post we explore the concept of Behavioural Design in dept)

Behavioural Design is the missing layer

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It’s all about the incentives.

The problem with the current behavioural design of the economy is that it consistently rewards destructive behaviours, both with money, power and social status.

Society glorifies being rich and being powerful. To the extent that it rewards sociopaths like Donald Trump, Mark Zuckerberg, Jeff Bezos, Peter Thiel and Charles and David Koch (see picture above. BTW: David died this week) with power, prestige, admiration, etc.… The summit of social status in western capitalist society is “being rich”.

Society also rewards them with unlimited power to do whatever they want. Think about how Bezos played out communities against each other to fight for hosting the next HQ of Amazon. Amazon was offered 2.2 billions in tax cuts by the city of New York.

The third reward is financial. If you’re rich, you have access to all the tools to get even richer. The (capitalist) behavioural design of the economy offers unlimited financial rewards to people with capital. Every valuable thing in the marketplace is being sucked dry by the owners of capital. There’s so much cheap capital in the hands of investors that they can buy everything to help them to grow their wealth even further: They buy up houses in cities, they buy kindergartens, elderly homes, entertainment franchises, etc. They own more than 90% of all fortune 500 companies through the stock market, and instead of using profits to reinvest them in the companies, they use it to pay themselves high dividends.

This process is called the financialisation of the economy and explains why everything of value is rapidly becoming more expensive.

 

The solution: Change the incentives


If you want to understand the economy, understand incentives. If we’re going to change the economy, we’ll have to change the incentives. It’s as simple as that. If we want to fight inequality and climate catastrophe, we will need to change the social, financial and power rewards.

Governments and economist only tend to focus on tax incentives today, but I think we could have a far more significant impact if we work on the psychological rewards of social status and power.

We will need to challenge the social status of those who are destructing the planet and extracting wealth out of the economy. We will need to reward those with bold and brave ideas about the future with power.

A great example of this behavioural design change is the work that the Sunrise Movement in the US is currently doing. They are the movement that came up with the New Green Deal. They did a fantastic job of reframing the climate crisis story. Instead of talking about “saving the planet” and scaring the hell out of people, they turned climate action into a narrative about investing in wealth creation, job creation and the investment in thriving communities where kids have access to good education, clean water clean air and health care. That’s a story for which they’re getting bi-partisan support.

As a consequence, this broad support incentives politicians to embrace the New Green Deal, because it increases their chances of being elected. Meanwhile, they do a great job in glorifying business and community leaders who step up and take action and vilify those who are bringing the world on the verge of climate catastrophe.

Even the very rich are suckers for social status and recognition


In the end, no matter how rich we are, we all crave for recognition and social status. If we as a society succeed in taking those away from the current “heroes” of financial fame and instead reward the new heroes that bring society further through investing in a sustainable economy and a sustainable planet, we might succeed much faster in turning things around.  Saving the world is all about redesigning the incentives.

It’s as simple as that.

sue behavioural design

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sue behavioural design
25/08/2019
Nassim Taleb's great thinking on hedging against group-think

The psychological price of being rational is being unlikeable

By All, Customer Behaviour

Rational decision makers have to dare to
fight common sense and social norms.

Nassim Taleb's great thinking on hedging against group-think

This blogpost is about how being rational in organizations is actually pretty difficult. It comes at a high social cost. Because rational people need to defy groupthink, defy authority-based decision making and defy social pressure. That’s one of the reasons why innovation is so difficult to pursue.

When do you pull the Goalie?

Imagine you’re a coach of a hockey team. Your team is one goal behind and we’re approaching the end of the game. You know you need to take a gamble and change the goalie for a field player. Butthe question is when. When do you pull the goalie?

If you approach it rationally, the answer would be 5-10 minutes before the end of the game. That’s how you maximize the chance of making a difference. But no coach would dear to do this. Because if it goes wrong, everyone will blame the coach for the mad and unexpected move.

The example was told by Malcolm Gladwell in an episode of his podcast Revisionist History. It reminded me of another story, told by Nassim Taleb in the Black Swan. Before Taleb (see picture) turned philosopher, he used to work as a trader on Wall Street. His strategy was to bet against improbable events. He would take the money of his clients and he would put it all in insurance that would pay out in the case something unexpected happened, like a crisis. He knew the money would eventually pay out big time, he just never knew when the improbable “black swan” event would happen. But he just waited and did absolutely nothing.

It drove his managers and his clients mad. They expected him to work actively to make money for them. The idea that he would sit on his ass to wait for a crisis event to happen – which would pay out enormously – was just unbearable to them. It was a perfectly rational strategy, but Taleb had to develop a very thick skin in order to be able to stick to it.

Behavioural Design is the missing layer

Join our Behavioural Design Academy and learn how to positively influence minds and shape behaviour

To be rational is to be unlikeable

The problem with acting rational is that it very often clashes with social norms. You will get much less problems for failing by following a strategy everyone else would follow, then you would if you followed an unexpected path, even though it makes sense from a rational point of view.

My partner Astrid decided to stop working at the office a couple of months ago. She realized that being at the office prevented her from doing the things she should be doing to create value for SUE. The constant distractions were killing for her productivity and her mood. So she started working at home. It took her three months to stop feeling guilty about it.

Warren Buffett and Charlie Munger, the smartest investors in the world, spend most of their time in the office on reading. They figured that investing most of their valuable time in understanding more about the world, would eventually pay off in smarter decisions. Berkshire Hattaway made 242 Billion Dollars of profit in 2017.  Unlike most investors, they buy companies with the intention to hold on to them forever. They are in the business for the long run.

Corporate culture doesn’t like the crazy ones

The problem with acting hyper-rational is that you need to be able to deal with social pressure. Very often, people will not like you for breaking the social norm. And when your choice leads to failure, they will find it very easy to blame you for your stubbornness. I think that’s one of the reasons why it’s so difficult for corporations to innovate. Innovation needs stubborn people who don’t mind the social pressure to conform to corporate norms. “Think Different”, probably the best commercial ever made, actually pays tribute to those people with the following legendary quote:

“Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can’t do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do.”

sue behavioural design

Learn how to make the science of influence work for you

Join our Behavioural Design Academy and master the skills to shape minds and influence behaviour. We trained people over 30+ countries and have a 9,2 satisfaction rate. Check out our free brochure. Don’t miss out on making your growth a success.

sue behavioural design
19/08/2019