Data + Intuition = Awesomeness

I used to read BusinessWeek religiously. And there are some great people there. But now it’s for sale and Bruce Nussbaum blames culture. He says that they lost touch with their readers. Oh, sure they tried to understand what their readers wanted… with surveys. Don’t get me wrong. Surveys have a place in market research– they’re great for confirming hypotheses. But they only give you answers to the questions you think to ask. And that is not how to be awesome.

All of this reminds me of a question I asked last year: at what point does a company shift from its original entrepreneurial culture to corporate incrementalism?

I think it happens when the company falls out of love with its customers.

Starting a business is hard. Really hard. And most new businesses fail. So, you’d better be really friggin passionate about that need you’re trying to fill in the marketplace, and you’d better understand the hell out of your customers. It’s a romantic comedy of sorts. The first few years are great! Passionate! You understand each other. Then, gradually (naturally) the passion fades. So does the understanding. And when you lose that empathy, that deep understanding, you lose your intuition. Intuition is what helped get your business started. But what got you started won’t keep you going. It won’t take you to the next level of awesome.

How can you avoid taking home the blue ribbon for being mediocre?

1. Understand the hell out of your customer. Talk to them (yikes!) in real life. Pick up the damn phone and call someone. Go where they are. But don’t be a stalker.
2. Take a stand. Be passionate about something. Nobody ever made progress by being well behaved.
3. Be balanced. You need data to inform your intuition. Neither is a valid substitute for the other. You need both. You need data and intuition.

So. Time for a new question: is it possible for Public companies to be truly passionate about their customers? I’m not sure. Ultimately, they serve Wall Street’s relentless, short-sighted demand for growth and profit. Public companies trade integrity for capital. What do you think? Fire away in the comments.

There’s a cultural shift underway, and this “Great Disruption” is acting as a catalyst to speed the change.

We work hard, we work long hours, and we earn ridiculous amounts of money. “We have generally taken the proceeds of our productivity in–you guessed it–increased consumption.” Big house. Big car. Big TV. But as our nest eggs get scrambled, we’re realizing that Stuff doesn’t matter as much as we thought it did. It’s people (and experiences) that matter: our friends and family that fill our big empty houses. But why? Why are we collectively realizing that now?

What if we’ve gotten so fast, so connected, so frenetic, that we’re burning out? We’ve been on a crusade to cram more and more activities into a finite amount of time. And in the tug-o-war between us and time, we lose. Unless someone does for time what the Manhattan project did for e=MC2. Anyway, we’re always out of time. Never enough.

So what effect does a perpetual time famine have on a society, and what does that mean for business? (Warning, this is about to get thick & crunchy) According to this study, we either view our time as limited or expansive. If we perceive time as limited, we tend to focus on the present– more specifically, we tend to avoid negative emotional experiences and use more schema-based decision making. Combine the present-focus with the natural tendency to protect (and desire to be protected during a crisis), and bibbidy-bobbidy-boo, we move away from “bettering” ourselves and collecting things.

We start to “simplify.” We start to focus on positive emotional experiences. We start to ask for quality over quantity. Great example in advertising: this VISA commercial asks the question “when was the last time you went to the aquarium with your daughter… on a Tuesday?”

If this is happening, it’s not enough to make the coolest gadget, or the nicest house, or the invisible hover car that grooms your dog while you eat pizza… although that last one would make for an interesting experience.

What do you think? Anyone have examples and/or counter-examples?

This post, over at The Planning Lab, reminded me of a sketch I did last year.

GM is hemorrhaging cash and wants to merge with Chrysler. Banks are buying and dying like lottery-winning centenarians.  GM and Chrysler say a merger would make for a stronger, more competitive company. The buying-banks argue that they’ll be in a better position to lend if they buy up all the dying-banks. Good strategic moves, all around, right? Bigger companies means fewer competitors and economies of scale– synergy. No. That’s not strategy.

Strategy isn’t arbitrage. Take the big record labels, for example. They exist because distributing a record to the market was expensive– and they controlled distribution. Because of economies of scale, they were able to get a lower unit cost. Low unit cost + wide distribution = music for the masses. Then, in the struggle between art and commerce, commerce won: they sucked the life out of the music biz. Bob Lefsetz puts it quite well:

“Major labels depended on Mariah Carey, who was built for a system that exposed product on MTV and Top Forty radio to a captive audience with few alternative media choices.  To try and sell a ubiquitous twit today is like selling Corvairs, it’s just not going to happen.” 

Then, to make matters worse, they went on a buying-binge and gobbled up all the traditional competition. But they didn’t create any value, they just moved some numbers around. And they missed a big strategic threat: I can record a song on my computer with a couple hundred dollars worth of gear and upload it to any number of places. Seriously low unit cost and wide distribution. The labels aren’t competing with each other, they’re competing with little ol’ me. Big is not necessarily a strategic advantage anymore.

Before Al Gore created the Internet, we needed big companies to sort through the myriad ideas, pick out the best for the most people, and distribute those good & services. We ended up with some pretty bland stuff from big faceless corporations that treat us like moo-ing masses. But I think we’ve crashed into the law of diminishing marginal returns– economically and socially. Now we want to know and be known. And with tools like Google, Facebook, and Twitter, we are the filter. With the help of our friends, we decide what’s best for us. I wonder if, as a society, we’re done with growth for growth’s sake. Leave it to a company like IDEO to lead the way (paraphrased): don’t limit your ROI measurement to dollars and cents. Ask “what’s your social impact?”

So, back to cars & banks.  I can’t make a car in my garage. But GM can’t make one profitably either. They should look at what Honda and Toyota have done: no unions, just mutual respect between management and labor. J.P. Morgan is now the largest U.S. bank… but if I call them, I still have to press 13 keys to talk to a real human being. It’s time to start measuring the human impact. Big does not make my life better. The small things, the micro-interactions, that build up over time are much stronger than big because they’re based on mutual respect and support.

As E.F. Schumacher said way back in 1973: “[I am] small, and, therefore, small is beautiful.”

Barack Obama tapped into the Groundswell during his campaign. He recognized that people were connecting with each other to get the things they need, rather than going to traditional institutions. He recognized the power of a bottom-up strategy and how an army of energized campaign partners–not just supporters– is infinitely more effective than the old way. Top down just doesn’t work like it used to!

Now they’ve won the election. What’s next?

Governing.

How will the Obama administration tap into the Groundswell when it comes time to govern? How will we be involved? How will we involve ourselves? What if you got an email or a Tweet or a text message from the President explaining why he needs your support for Project A? Telling you where to find more information, and asking you to act. To call, email, fax, and write to your Senators and Representatives. To go out canvasing, knocking on doors. Think about what that would do to the traditional seats of power in our nation– in the world! Asymetrical competition at its finest. 

So, what lessons can business learn from the Obama victory?

• Trade control for conversation. The idea of control is stupid anyway– you don’t own your brand, your customers do. No matter how big, how strong, how old you are, your customers actually hold the power. And they know it. So listen to them. Talk with them. And listen some more. If you’re authentic, they will embrace you and can become your most valuable marketing stewards.
• Segmentation sucks. We marketing types love to slice and dice the market and tell different stories to the different parts. And that still works. Sort of. Top-down strategy starts broad and progressively segments, targets and positions more and more. It gets so granular that you need a cheesecloth to collect the pieces. Bottom-up starts with the little bits and pieces, finds the common themes and molds all those disparate pieces into something much better, much grander, much more desireable than the pieces on their own. So focus on the common, not the differences. 
• Your competition isn’t who you think it is. Obama wasn’t even an underdog–by all traditional measures of advantage, he didn’t stand a chance against the Clinton political machine. He didn’t have traditional advantages, but he had new ones. He had a clear, compelling and consistent message: yes we can. He wasn’t selling anything; he was supporting us. New strategy isn’t about how well you can sell, or even how well you can market. It’s about how well you support your users. It’s about helping them be the change the wish to see in the world. That’s the company you should be. And that’s the kind of company you should watch out for.
• Block by block, brick by brick, calloused hand by calloused hand. The Obama campaign built a truly vast network of campaign partners, and they did it one conversation at a time, one micro-interaction at a time to spread that clear, compelling, consistent message. When you get people involved and emotionally invested, they’ll take ownership. Ownership = loyal customers.

There are exciting times ahead and I can’t wait.

Wall Street is a mess. Obviously. And amid all the fear and flagellation is a fight over appropriate CEO compensation. One side says they get too much, the other says they get what they’re worth. A frequently used “what they’re worth” arguments goes something like this: “Yeah, but what is $70M as a percent of net profit?!” That may be accurate—$70M is a small percentage of, say, $7B—but it’s not valid. It redirects attention away from the fundamental question: what is the purpose of business? (see number 9). The assumption in the “percentage” argument is that business’ primary purpose is to generate profit—as much as possible. To quote Michael Douglas in Wall Street: “Greed is good.”

But greed is not an effective, sustainable strategy—in the end, you’ll take too much and lose everything.

What if, instead, we got back to basics? “Business” began because someone was trying to make the world a better place. Trying to make life a little more live-able. And they were good at it: they could make their widget/service for less effort than the value we got out of it.

Profit! 

Then we got distracted by all that shiny money. Don’t get me wrong! There’s nothing inherently bad about money, or even wanting it. Profit is good. Greed is not.