Brain Breach

Research has shown that we certainly possess risk aversion. Ambiguity aversion should be considered its hidden twin in the proliferate duo that is worth understanding for your business. An awareness of this principle is certainly important enough to add to Paradigms I Follow .

It is simply this: Being psychologically prohibited to expanding decision options because of ambiguity. See, you can have a two or more choices in front of you with greater/lesser/equal worth in the end. You will most likely choose the one which requires the smallest amount of thinking. Please check out the Thirteen.org video that inspired this post. What a neat show! Further:

Frisch and Baron (1988) emphasized that the subjective experience of missing information relevant to a prediction may lead to ambiguity aversion.
Keller

This has so many implications for business and brands. A great example of popular usage and profit from Ambiguity Aversion is the show Deal Or No Deal . Forward to the middle of a show and the decision usually looks like this: Take $300,000 right now, or possibly get $800,000. It’s silly really to choose the $800,000 because the chances are still 1 in 5 or 1 in 10. Since we are averse to ambiguity, it’s easier to calculate “hmmm, I want more money, and this could work”.

This opens up a whole new field of Neuroeconomics to us, which is definitively worth further brain breaching.

Interestingly, ambiguity aversion in pairs of users actually gets worse!

The majority of the dyads exhibited a cautious shift in the face of ambiguity, stating a smaller willingness-to-pay than the two individuals’ average. Our study thus confirms the persistence of ambiguity aversion in a group setting and demonstrates the predominance of cautious shifts for dyads.
Keller

Additional resources:
Four types of Ambiguity Aversion link

Evidently there are good and bad flavors of perfectionism. Learning this was eye opening because I always thought that perfectionism across the board was bad. Perfectionism that is based on what others think is mal-adaptive. In other words, it can’t adapt to your expectations of their expectations, ever.

Adaptive perfectionism(the good one) is the type that learns from others, and is continually improved by ones own vision of perfection, knowing that it will never be fully achieved, but always held as the target.

Resources:

The subject is interesting and merits more study. Here is a neat article on the subject

Here are my notes from Pfeffer’s eye opening talk . He is the Author of

This has really got me excited! Some great information and paths to study. I hate to just have recycled content on my blog, but it’s so good. Let the fairly disorganized notes begin.

Premise is that organizations are stuck in established traditions that mostly don’t make sense, and don’t make decisions based on facts.

Casual benchmarking is harmful

• doing something because folks better than you did it that way

We should examine why they made that decision, and understand the context rather than just blindly applying it.

Ideology and belief

• More than 200 studies prove that giving top management stock options has no effect on company/financial performance.
  
  

Don’t comprise on providing evidence to your team that can lead to them uncovering issues.

One manager did this by titling certain things “we do not have this information” in hopes of having the team find it. That forced management to find ways to that information. If he wouldn’t have done this, they wouldn’t have realized they even needed the information.

Devita CEO

When Pfeffer was consulting for him, he didn’t care about compliments, but cared about the problems.

Yahoo business guru is quoted as asking “why not customers what they want instead of debate about it”

*note: interestingly this comes from Yahoo which isn’t the greatest at useability

Time for reflection is important

Joe Benaducci- COO, Fireman’s Fund and Insurance company

“What makes you so successful?”

1. Read one book a week

2. Critiqued himself after every significant meeting on a notepad

Put your feet up on desk, close your eyes and think.

Debunking common myths

You need the all stars

• the system the company has, not the all stars determines quality and output
• GM operated a lousy plant in Fremont Ca. Low quality, productivity, and large amounts of drug and alcohol abuse.

• Toyota, under New United Motors, ( a toyota/GM partnership ) took over that company with the SAME people and had twice the productivity and quality.
  
  

Financial incentive work

• reward system signal what matters. (Is it money?)
• seems fair
  truth:
• we believe other folks are motivated by money, even though we aren’t
• pay incentives loose effectiveness after a month
• folks that are payed per piece rush through work

** garbage truck example: they got paid for 8 hours of work no matter how long it took. Turns out they just skipped trash cans to go home early

• other rewards must be more creative
  
  

Teacher incentive pay case
Paying teachers more for higher test scores

• it turns out it didn’t work, as you can assume. A study on 100 years of merit pay shows it.
• Teachers are interested in teaching not pay. They would have chosen different field if money was their goal.
• Incentives work on effort, not ability

60% of companies use the Forrester rating system

• This rating system allows the manager to subjectively judge/score every employee and hand out benefits accordingly
• a study showed that if the manager hired a employee, they were given a much hirer review
• this study showed this rating system doesn’t work

Results

• treat your organization as an unfinished prototype, always trying to change, optimize and challenge the norms
• It’s about being the master of the obvious and the mundane
• Test every assumption by its evidence

Resources:

Evidence based management webiste

Facts-Dangerous-Half-Truths-Total-Nonsense

Some things are in-your-face obvious: Finding great information quickly on the web is difficult; a tun of choices makes of lengthy research, and most of us would prefer just a few great ones; Myspace is visual mess.  Complexity and clutter server to alienate customers. 

Some brands see complexity as a bad thing, and profit by offering a simple alternative. Research proves that this could work:

one study shows that customers would pay an 8% premium for a simpler consumer experience, and 50% would switch brands for it. ref

This is where I find confidence in the direction we are taking ScreenBird.  Sure it has worthy competitors such as SlideRocket, PowerPoint and Keynote, but we are offering something that none of these are; utter simplicity.  This is my gamble, that allowing the customer to drop in text and media with clarity, in an uncluttered environment, will win the customer. 

Distribution, not product development is my largest hurdle coming up.

Also, see Lee’s article on Banner Blindness.  A good read for web interface developers or directors.

It’s not terribly common these days for managers and employees to have learning time built right into their job description. What if the paradigm was shifted a bit to allow this for huge company benefit?

My employees are allowed to study, on my clock, based on how expensive their decisions are. Managers make costlier decisions, and warrant more study time. See, folks that do a good job in management, don’t have to get a terribly large amount done day to day. Managers at a McDonalds, or other store front have a different situation, and don’t justify as much on going training in the theoretical. Folks in say, a lead architect position, or head of marketing shouldn’t be consumed with daily tedious tasks. When would their brain rest and provide me with those great breakthrough ideas?

The more theoretical, the more expensive the decision, the more they should be treated as scholars than janitors. This is in regards to study and brain rest time of course, not respect for the position or person.

This leads to problems though. It might not feel right to the CEO to see high paid managers or other C level folks reading with their feet up on the desk, or taking long walks everyday. “I just paid that guy $100 to get a sun tan!!!!!” are the words I imagine. It should be so clear to them.

Think of a decision that could cost the company $1,000,000, with the potential to make $2,000,000, or $0. Let’s say your head of marketing is making this decision, and has spend a total of three months of combined paid time walking or reading over the last year. That’s simple math! He or She is most likely going to make a much more informed decision with deep contemplation and study. So maybe his time and study materials costs $50,000. Wouldn’t that be a fair price to raise such odds?

Forcing this person to fill their time with menial work, just to keep busy is completely counter productive to bottom line of the business. Our best decisions come from little phrases we read in books, or something that comes up in thought or conversations. Put more of those tokens in the brain of you manager, and reap the rewards.

What could the benefit be with being able to get over and assesing our failures quickly, and handling our success with emotional intelligence?  Failures wouldn’t be devastating, but just lessons strongly learned.  Success wouldn’t ruin us and our kids, like we see so often, but simply spice our lives a bit.

Consider your success and failure not as a state you are in, but as events that are happening to you. Certainly you have much control over these events, but not complete.

There is an important reason to taking this angle.  Your monetary success can’t bring ultimate fulfillment, and your failures shouldn’t be allowed to bring you ultimately down.  Success and failure should not be considered states that you are in or out of.  Being “in” failure implies a few things that might not be true:  You are a failure; you fail more often than others; you have lost.  Likewise, being in “success” implies some things that shouldn’t be considered true: You job is now finished; sit around; you have arrived.
Success and failure happen to you, they are not you.  React to them as you do with other things that happen to you, and fix them.

Thanks to Lawson for Sparking this idea.

Voice of the customer. Great companies listen to it, and mediocre companies try to listen to it.

The issue of truly hearing your customers isn’t as simple as just reading complaints and comments. If you don’t think it’s a tricky task, think of these issues:

• Who will analyze the problem?
• Who reports it to CEO/COO?
• How will the customer be notified problem is fixed to see if they are pleased?
• How to we effectively sift through the mounds of data to make sense of it all?
• Will the CEO see these as important money making resolutions?

A sound VOC system will take care of these issues and more. This is where it helps to thrive in ambiguity. It’s obvious that a great company needs to hear their customers. The real problem is how does that happen with piles of data and teams already swimming in tasks. Shall we make a system, outsource it, rent software (which one!), hire a consultant, train employees in house, etc.

Regardless of the attack, a great company must attack it.

Goodman, in a study of 100 companies over three years, identifies 8 problems that great companies have already fixed, and mediocre ones haven’t, when it comes to their VOC process:

1. Inefficient and costly data collection
2. Analysis in a vacuum
3. Inconsistent classification schemes
4. Old data
5. Analysis without priorities
6. Analysis that is not actionable
7. Ineffective presentation of data and findings
8. Failure to track the impact of corrective actions resulting
   from the VOC process

Another interesting observation is the need to reward the marketing department for their attention to the data:

While many companies have satisfaction related incentive systems for operations and service management personnel, they rarely exist for marketing and sales. This is a critical oversight;
TARP’s research has shown that 30% to 40% of customer problems are tied to marketing and sales.

Resources:

Stay Close to thy customers

EFM (enterprise feedback management) blog

Goodman, Depalma: Maximizing the Value of Customer Feedback

Scott Barttell (Director of World wide sales operations at Adobe) offered a tour of their headquarters. Are you kidding! Sign me up! So a couple weeks back I got to make the trip. Impressive.

Adobe one of the best technical companies of this generation, and their thoughtfulness and expertise in meeting needs/wants certainly translates over to their headquarters. Certainly the three towers are lavish where it counts. These towers host 3,000 well trained employees, and seem fit for them. Interesting the office spaces are humble. I signed a 3 page NDA twice about not giving away the Adobe secrets, or something, so, I hope I am not breaking that!

Lunch was great. There were a dozen gourmet chefs lined up waiting for our lunch time commands. It was fantastic! All the meals were $5-$9. The grass was beautifully trimmed, the seats comfy, the glass sparkling. Such thoughtfulness and good process management goes into all this, it’s amazing.

Well, I could go on, but I think you understand how impressed I was. I am inspired to care about the little things in the same way they did. It helps you recognize the big things!

This is best illustrated with a story.

ScreenBird Presenter was in its alpha stage, and had little traction in the presentation community, so I went to advertise on GoogleAdwords. What quicker way to get customers for my program? Having seen the effects good Adword campaigns, I know it was a sure bet. Sign up and registration was very straight forward, as was the actual process of setting up the campaign. There is however a learning curve to the whole program. In fact I have watched the creator of Adwords give a lecture, so I appreciated the complexity that goes into the whole program.

What do you know, it worked! For the paltry sum I put into the effort, I was able to show successful installs of ScreenBird. So now it’s time to spend a bit more cash elsewhere, and get a taste of the landscape. Thus we are lead to Yahoo!

Sign up first. Ok, simple, I have three Yahoo! id’s, so I will just use one of those. REJECTED! Hmmm, I will suffer, make yet another i.d. for some reason. With all the Google services I use, I have but one id. Now we go to setup the campaign. That wasn’t too bad, and I would say comparably nice to Google’s tools. I am on a roll now, and pause……. I get an error page during the very end of the process. Too many questions; did my new i.d. take, or do I start over again? Do I just wait for something magic to happen? Is my campaign live? I reload the page to get the same error.

Well bugs happen, but such a large one on your main revenue stream? Three days later I get an email welcoming me to the ad service.

That my friends, is righteously bad after-marketing!

The problem is the message took so long to arrive, and the processes of enrolling was just uncomfortable enough that I am reluctant. The experiential side of their after-marketing was the problem. I haven’t given them too much of a chance to try their other after-marketing techniques on me.

This is similar to buying a new product, and receiving a terribly written manual to jump start your experience. If Yahoo exercised great after marketing in this one little area, they would have my measly cash, and others that maybe shared my experience.

After-marketing happens after the buy-in or sale.  Experience can also be categorized under aftermaketing.  Aftermarketing one of those things that helps retain customers if done well. A 5% decrease on customer desertion can lead to 25%-80% revenue gains, depending on your industry.

There is such a great marketing opportunity after your customer has bought in, and it can be wasted with a bad experience and poor planning, or a great one with opportunities to pitch upgrade services.

A colleague at work suggested I read The E-Myth . After picking it up Friday, I couldn’t stop thinking about it, and finished it Saturday. It’s on my top 5 for business, so far. Here is what I learned.
The E is for entrepreneur. The E myth, which Gerber goes on to dispel, says entrepreneurs are super-human. Only these heroes have the right to start businesses. Really what goes on in the rest of the book is a intro to business development. But that would have made a terribly boring title. What’s so exciting about business development? It’s the fact that you didn’t know you needed it.

Gerber first starts with a bit of psychology. Inside of everyone involved in business, there are three personalities:

• Entreprener – This is the dreamer
• Manager – Likes order and predictability
• Technician – Likes the art of the craft, the end product.

According to Gerber, most folks start small businesses because they are a good technician. Technician meaning anything technical; baking pies, programming, styling hair etc. . They make a faulty assumption:

The Fatal Assumption is: if you understand the technical work of the business, you understand a business that does that technical work. pg 13

A clear difference from a bird’s eye view, but this misunderstanding is the most common reason small businesses fail. Each of these personalities has a vital role. For example, you inner technician should be the master of the product, documenting exactly how to reproduce it. You inner manager should implement that system, and be consistent. Your inner entrepreneur should always ask, “what would the customer want?”, and not be contented until they have it.

The enigma with a start up happens after your first couple of employees, when you hand off management by abdication, not delegation. For some reason, the widgets have scratches on the, or they come unglued all the time. In other words, your employees aren’t doing as good as you did when you wore every hat. It only gets worse as you get a larger workforce, until you get so stressed, that you throw your hands up and go back to a one man shop.

So why are the big guys big? The big guys had systems in place to control and reproduce everything worth doing right. Everything! They had a system to teach every employee that process. See, every time you are getting something done, you have to think how can this be reproduced exactly right, thousands more times. A franchise mentality! This is a major shift in thinking for a technician. Many folks start businesses because they don’t want their lame incompetent boss directing their life. The problem is technicians aren’t good at running businesses. Managers and Entrepreneurs are, so you must give them space to work.

My favorite idea found in the E-Myth is not to create a business to work at, but create a business that works. Every piece of your business should be perfectly documented, and adhered too. It should provide a structure for employees to flourish, a “game” for them to play. They can flourish and earn rewards by following the rules. It’s a rule of thumb to document the position well enough for the lowest skilled employee can become great under it. Money saver!

There are more tasty morsels that I didn’t mention, and some good insight on what your system should look like. Worth a read if you ask me.